EXHIBIT 10.4
RESTATED SECURITY AGREEMENT
RESTATED SECURITY AGREEMENT, dated as of September 24, 2002, made by
and among U.S. Plastic Lumber Corp., a Nevada corporation with principal offices
at 0000 Xxxxxx Xxxx, Xxxxx 000 Xxxx, Xxxx Xxxxx, Xxxxxxx 00000 (the "COMPANY"),
each of the undersigned wholly-owned subsidiaries ("SUBSIDIARIES") of the
Company with principal offices at the addresses specified by their respective
signatures and Halifax Fund, L.P., a limited partnership with offices at 000
Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 ("SECURED PARTY"). The Company and
the Subsidiaries are sometimes hereinafter referred to as the "GRANTORS".
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Exchange Agreement (as defined below).
WHEREAS, the parties hereto entered into a Security Agreement, dated as
of June 15, 2001 (the "ORIGINAL SECURITY AGREEMENT"), pursuant to which the
Grantors granted to the Secured Party a subordinate lien on all assets of the
Grantors for the purpose of securing the Company's obligations under the
Company's (i) 18% Debenture due July 1, 2002 (the "2001 DEBENTURE"), (ii) 5%
Convertible Debenture due February 2, 2005 (the "2000 DEBENTURE") and (iii) 15%
Series D Preferred Stock, (the "SERIES D PREFERRED STOCK");
WHEREAS, pursuant to an Exchange and Repurchase Agreement of even date
herewith (the "EXCHANGE AGREEMENT"), the Company and the Secured Party have
agreed to enter into an exchange and repurchase transaction whereby (i) the 2000
Debenture will be exchanged for (x) a 10% Convertible Subordinated Debenture
(the "SUBORDINATED DEBENTURE") and (y) a 10% Subordinated Note (the
"SUBORDINATED NOTE") and (ii) the Company will repurchase the 2001 Debenture and
Series D Preferred Stock for the consideration set forth in the Exchange
Agreement;
WHEREAS, pursuant to the Clean Earth Purchase Agreement, the Company
has sold all of the outstanding shares of common stock of Clean Earth, together
with the Clean Earth Intellectual Property, to the Clean Earth Purchaser;
WHEREAS, pursuant to a letter dated September 6, 2002, issued by the
Secured Party in favor of the Company and the Clean Earth Purchaser, the Secured
Party (a) consented to the Clean Earth Sale, (b) released its Liens on the
capital stock of Clean Earth, Inc., the Property of the Clean Earth Entities and
the Clean Earth Intellectual Property, (c) authorized the Grantors and the Clean
Earth Entities to file UCC termination statements (and any necessary "in lieu"
filings) to the UCC financing statements filed by the Secured Party against the
Grantors and the Clean Earth Entities, as applicable, in order to further
evidence such release and (d) agreed to cooperate with the Company and the Clean
Earth Purchaser to file and sign any other documents necessary to terminate
Secured Party's Liens of record in order to effectuate such release; and
WHEREAS, the Grantors and the Secured Party wish to amend and restate
the Original Security Agreement so that, effective as of the Closing Date, the
security interest granted thereby will no longer secure the obligations of the
Company under the 2000 Debenture, the 2001 Debenture and the Preferred Stock,
but will instead secure the Company's obligations under, among other things, the
Subordinated Debenture and Subordinated Note and the Subsidiaries obligations
under the Subsidiary Guarantee;
NOW THEREFORE, in consideration of the foregoing, each of the Grantors
hereby agrees with the Secured Party as follows:
SECTION 1. GRANT OF SECURITY INTEREST. As collateral security
for all of the Obligations (as defined in Section 2 hereof), each of the
Grantors hereby pledges and collaterally assigns to the Secured Party, and
grants to the Secured Party a continuing security interest (the "SECURITY
INTEREST") in its interests in the following (the "COLLATERAL"):
All assets of the Grantors, including without limitation all
presently existing and hereafter arising (i) accounts,
contract rights, and all other forms of obligations owing to
the Grantors from any source ("ACCOUNTS"); (ii) all of the
books and records of the Grantors, including ledgers, records
indicating, summarizing, or evidencing the assets or
liabilities of the Grantors, or the Collateral, all
information relating to the Grantor's business operations or
financial condition, all computer programs, disc or tape
files, printouts, runs or other computer prepared information,
and any equipment containing such information (the Grantors'
"BOOKS"); (iii) all of the Grantors' present and hereafter
acquired equipment, wherever located, and all attachments,
accessories, accessions, replacements, substitutions,
additions and improvements to any of the foregoing, wherever
located ("EQUIPMENT"); (iv) all of Grantors' present and
hereafter acquired general intangibles and other personal
property (including, but not limited to, contract rights,
rights arising under common law, statutes or regulations,
choses or things in action, goodwill, patents, trade names,
trademarks, service marks, copyrights, blueprints, drawings,
purchase orders, customer lists, monies due under any royalty
or licensing agreements, infringements, claims, computer
programs, discs or tapes, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims, as well as all
cash collateral that is hypothecated to secure letters of
credit or bonding obligations) ("GENERAL INTANGIBLES"); (v)
all present and future inventory in which any Grantor has any
interest, and all of the present and future raw materials of
the Grantors, work in process, finished goods, and packing and
shipping material, wherever located, any documents of title
representing any of the above ("INVENTORY"); (vi) all fixtures
of the Grantors; (vii) all of the following collateral of the
Grantors (whether or not negotiable): all of the Grantors'
-2-
present and future letter of credit rights, notes, drafts,
instruments, certificated securities, documents, personal
property leases (where any Grantor is the lessor), chattel
paper and the books and records of the Grantors relating to
any of the foregoing ("NEGOTIABLE COLLATERAL"); (viii) any
money or other assets of any Grantor which hereafter come into
the possession, custody or control of any Grantor; (ix) all
investment property of the Grantors, including, without
limitation, the stock of each of the Company's Subsidiaries
that is owned, directly or indirectly, by the Company or any
Grantor; and (x) the proceeds and products, whether tangible
or intangible, of any of the foregoing including proceeds of
insurance covering any or all of the Collateral, and any and
all Accounts, Equipment, General Intangibles, Inventory,
Negotiable Collateral, money, deposit accounts or other
tangible or intangible, real or personal, property resulting
from the sale, exchange, collection or other disposition of
the Collateral, or any portion thereof or interest therein,
and the proceeds thereof;
in each case howsoever the interest of any Grantor therein may
arise or appear (whether by ownership, security interest, claim or otherwise).
Notwithstanding the foregoing, the Collateral shall not include, while any
holder of Senior Debt has any continuing security interest therein, any rights
of any Grantor in or to the Quakertown Claim. For purposes hereof, "QUAKERTOWN
CLAIM" means the claim by the Company (as successor to Integrated Technical
Services) for payment pursuant to the Quakertown Foundry Site Agreement dated
April 16, 1998 between Integrated Technical Services and the Pennsylvania
Department of Environmental Protection.
SECTION 2. SECURITY FOR OBLIGATIONS. The Security Interest constitutes
continuing collateral security for the prompt payment by the Company or any of
its Subsidiaries, as and when due and payable, of all amounts from time to time
owing by it to the Secured Party under the Exchange Agreement, the 2002
Registration Rights Agreement, the Subsidiary Guarantee, the Subordinated
Debenture, the Subordinated Note or any other Transaction Document
(collectively, the "OBLIGATIONS").
SECTION 3. REPRESENTATION AND WARRANTIES. Each of the Grantors
represents and warrants to, and agrees with, the Secured Party as follows:
(a) The Grantors are and will be at all times the owners of
the Collateral free and clear of any other lien, security interest or other
charge or encumbrance except for the lien in favor of the Senior Lenders and
except for Permitted Liens (as defined in the Exchange Agreement).
(b) The location of each Grantor's principal place of business
and the premises on which all of such Grantor's Equipment and Inventory (other
than Inventory in transit) are stored or maintained are set forth on Schedule I
hereto.
(c) The state of incorporation of each Grantor is set forth on
Schedule II hereto.
(d) No Person other than the Company or its Subsidiaries that
are a party to this Agreement (and other than any Person that leases or licenses
equipment or Property, including Intellectual Property, to the Company or any
such Subsidiary) owns or possesses any Property that is used by the Company or
-3-
any of its Subsidiaries in the conduct of their respective businesses or
operations (other than the Property of the Clean Earth Entities and the Clean
Earth Intellectual Property that is used exclusively by the Clean Earth Entities
in the conduct of their respective businesses or operations).
SECTION 4. COVENANTS AS TO THE COLLATERAL. So long as any of the
Obligations shall remain outstanding, unless the Secured Party shall otherwise
consent in writing,
(a) FURTHER ASSURANCES. Promptly after request by the Secured
Party, each Grantor will at its expense, at any time and from time to time,
promptly execute and deliver all further instruments and documents and take all
further action that may be reasonably necessary or desirable (i) to perfect and
protect the Security Interest in all jurisdictions containing Collateral; (ii)
to enable Secured Party to exercise and enforce their rights and remedies
hereunder in respect of the Collateral (subject to the terms of the Restated
Intercreditor Agreement); or (iii) to otherwise effect the purposes of this
Agreement. Without limiting the generality of the foregoing, the Grantors agree,
promptly after request by the Secured Party, to take such further actions as may
be necessary to cause the Security Interest to remain valid and perfected after
any amendment to Article 9 of the Uniform Commercial Code.
(b) PROVISIONS CONCERNING THE COLLATERAL. Each Grantor will
(A) give the Secured Party prompt notice of any change in the Grantor's name,
identity or corporate structure, or the location of such Grantor's principal
place of business, state of incorporation, or premises where any Equipment
(other than Equipment located on the premises of repairmen performing ordinary
course maintenance or repairs) or Inventory (other than Inventory in transit) is
stored or maintained, (B) keep all originals of all documents relating to the
Collateral at such Grantor's principal place of business, and (C) keep adequate
records concerning the Collateral and permit representatives of Secured Party at
any time during normal business hours on reasonable notice to inspect such
records (provided the Secured Party agrees to keep all information that is
designated as non-public information strictly confidential, and provided further
that the Secured Party shall be entitled to perform such an inspection no more
frequently than on a monthly basis so long as no Default is outstanding).
(c) TRANSFER. The Grantors will not sell, assign, exchange or
otherwise dispose of any of the Collateral except (a) in the ordinary course of
business, (b) dispositions of worn or obsolete Equipment, provided the proceeds
thereof are being used to pay Obligations or indebtedness owed to the Senior
Lenders, (c) encumbrances in the form of Permitted Liens, (d) encumbrances in
favor of the other parties which are subordinate to the Secured Party's liens,
subject to the terms of a written subordination agreement reasonably
satisfactory to the Secured Party, (e) where the Senior Lenders and the Secured
Party have consented to such disposition and (f) dispositions expressly
permitted by the term of the Exchange Agreement.
(d) RELEASE OF LIEN. The Secured Party hereby consents to
release its lien on Collateral as to which (i) a sale or disposition (but not
encumbrance) has been approved by the Senior Lenders and (ii) the liens of the
Senior Lenders on such Collateral have been released; PROVIDED, HOWEVER, that
the Secured Party's lien on the proceeds thereof shall remain, consistent with
the terms of this Agreement and the Restated Intercreditor Agreement; further
-4-
provided that the Grantors may use and apply such proceeds in a manner permitted
by the Senior Lenders.
(e) PERFORMANCE. If a Grantor fails to perform any agreement
contained herein, the Secured Party may itself perform or cause performance of
such agreement or obligation, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by the Company pursuant to
Section 5(d) hereof.
SECTION 5. REMEDIES UPON DEFAULT. If the Company or any Grantor (a)
fails to perform its obligations under this Agreement in any material respect,
or (b) an Event of Default occurs under the Subordinated Debenture or the
Subordinated Note (each, a "DEFAULT"), and subject to any rights of the Senior
Lenders:
(a) The Secured Party may exercise in respect of the
Collateral, and in addition to other rights and remedies it may otherwise have,
the rights and remedies of a secured party under the Uniform Commercial Code in
effect in the states of Florida, Nevada or any other jurisdiction where
Collateral is located (the "CODE") and also may (i) require the Grantors to, and
the Grantors hereby agree that they will at their own expense and upon request
of the Secured Party forthwith, assemble all or part of the Collateral as
directed by the Secured Party and make it available to Secured Party at a place
that is reasonably convenient to both parties to be designated by Secured Party
and (ii) upon ten (10) days' (or such longer period as shall be required by law)
prior written notice, sell the Collateral or any part thereof, in one or more
parcels at public or private sale, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as the Secured Party may
determine (provided that all aspects of any such sale are commercially
reasonable). The Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and placed fixed therefor, and such sale may, without further notices, be made
at the time and place to which it was so adjourned.
(b) Any cash held by the Secured Party as Collateral and all
cash proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon, all or any part of the Collateral
shall be applied in whole or in part by Secured Party against, all or any part
of the Obligations in the following order: (i) reasonable costs and expenses
incurred by the Secured Party in connection with collection of the Obligations
and enforcement of this Agreement, (ii) unpaid interest due and owing by the
Company, (iii) unpaid principal due and owing by the Company as of such date and
(iv) any other outstanding Obligations. Any surplus of such cash or cash
proceeds held by the Secured Party and remaining after the payment in full of
all of the Obligations shall be paid over to the Company or to such person as
may be lawfully entitled to receive such surplus.
(c) In the event that the proceeds of any such collection or
realization are insufficient to pay all amounts to which the Secured Party is
legally entitled, the Company shall be liable for the deficiency, together with
interest thereon at Default Interest Rate (as defined in the Subordinated
Debenture), together with the reasonable costs of collection.
-5-
(d) The Company will upon demand pay to the Secured Party the
amount of any and all reasonable costs and expenses, including the reasonable
fees and disbursements of the Secured Party's counsel, which the Secured Party
may incur in connection with (i) the sale of, collection from, or other
realization upon, any Collateral, (ii) the exercise or enforcement of any of the
rights of the Secured Party hereunder, or (iii) the failure by any Grantor to
perform or observe any of the provisions hereof.
SECTION 5A. POWER OF ATTORNEY. Each Grantor hereby irrevocably makes,
constitutes, and appoints the Secured Party (and all of the Secured Party's
general partners, officers, employees, or agents designated by the Secured
Party) as its true and lawful attorney, with power to: (i) sign the Grantor's
name on any of the documents described hereunder or on any other similar
documents to be executed, recorded, or filed in order to perfect or continue
perfection of the Secured Party's security interest in the Collateral if such
Grantor has not complied with its obligations under Section 4(a) herein; (ii) at
any time that a Default has occurred and is continuing, execute, sign and
endorse the Grantor's name on any invoice or xxxx of lading relating to any
Account, drafts against Account debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account debtors; (iii) send requests
for verification of Accounts; (iv) at any time that any Default has occurred and
is continuing, execute, sign and endorse the Grantor's name on any checks,
notices, instruments, acceptances, money orders, drafts, warrants or other item
of payment or security that may come into the Secured Party's possession; (v) at
any time that a Default has occurred and is continuing, demand, collect,
receive, receipt for, xxx and recover all sums of money or other property which
may now or hereafter become due, owing or payable from the Collateral; (vi) at
any time that any Default has occurred and is continuing, file any claim or
claims or, following a Default, take any action or institute or take part in any
proceedings, either in its own name or in the name of the Grantor, or otherwise,
which in the discretion of the Secured Party may seem to be necessary or
advisable; (vii) at any time that a Default has occurred and following
acceleration of the Obligations, direct the Account debtors and other persons
sending mail to the Grantor to send all mail relating to the Collateral to the
Secured Party; (viii) at any time that a Default has occurred and is continuing,
make, settle, and adjust all claims under the Grantor's policies of insurance
and make all determinations and decisions with respect to such policies of
insurance ; and (ix) at any time that a Default has occurred and following
acceleration of the Obligations, settle and adjust disputes and claims
respecting the Accounts directly with Account debtors, for reasonable amounts
and upon reasonable terms, and the Secured Party may cause to be executed and
delivered any documents and releases which Secured Party reasonably determines
to be necessary. The appointment of the Secured Party as the Grantor's attorney,
and each and every one of the Secured Party's rights and powers, is coupled with
an interest, is irrevocable and shall remain in full force and effect until all
of the Obligations have been fully repaid and performed and the Secured Party
renounces such appointment.
SECTION 6. NOTICES. Any notice, demand or request required or permitted
to be given by the Company or the Secured Party pursuant to the terms of this
Agreement shall be in writing and shall be deemed delivered (i) when delivered
personally or by verifiable facsimile transmission, unless such delivery is made
on a day that is not a Business Day, in which case such delivery will be deemed
to be made on the next succeeding Business Day, (ii) on the next Business Day
-6-
after timely delivery to an overnight courier and (iii) on the Business Day
actually received if deposited in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed as follows:
to the Company and Subsidiaries:
U.S. Plastic Lumber Corp.
0000 X. Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
with a copy to:
Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
to the Secured Party:
Halifax Fund, L.P.
c/o The Palladin Group, L.P.
Investment Manager
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx/Xxxxxxx Xxxxxxx
with a copy to:
Xxxxx & Stachenfeld
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Any party hereto may from time to time change its address for notices
by giving at least 10 days' written notice of such changed address to the other
parties hereto.
SECTION 7. MISCELLANEOUS.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantors and the Secured
Party, and no waiver of any provision of this Agreement shall be effective
unless it is in writing and signed by Secured Party, and then such waiver or
-7-
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) No failure on the part of the Secured Party to exercise,
and no delay in exercising, any right hereunder or under any other document
relating hereto shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or the exercise of any other right. The rights and remedies of the Secured Party
provided herein and in the Exchange Agreement, the Subordinated Debenture, and
the Subordinated Note are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest
in the Collateral and shall (i) subject to the terms of Section 8 below, remain
in full force and effect until the payment in full or release of the Obligations
and (ii) be binding on the Grantors and their respective successors and assigns
and shall inure, together with all rights and remedies hereunder, to the benefit
of the Secured Party and their successors, transferee and assigns.
(e) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, except as required
by mandatory provisions of law and except to the extent that the validity and
perfection and the effect of perfection or non-perfection of the security
interest created hereby, or remedies hereunder, in respect of any particular
Collateral are governed by the law of a jurisdiction other than the State of New
York. The parties hereby consent to the non-exclusive jurisdiction of any New
York State or Federal court in New York City in any action or proceeding arising
hereunder.
(f) The actions of the holders of a majority-in-interest of
the Obligations shall be deemed the actions of the Secured Party for purposes of
giving any notice or enforcing any rights or remedies.
(g) This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.
SECTION 8. TERMINATION. This Agreement and the security interest
granted hereunder shall terminate and be deemed released upon payment in full of
all unpaid principal of, and all unpaid accrued interest and other amounts, if
any, on the Subordinated Debenture and Subordinated Note, respectively, together
with all amounts, if any, due and owing under the other Transaction Documents at
-8-
the time of such payment. Upon receipt of such payment, the Secured Party shall
(a) be deemed to have authorized the Grantors to file UCC termination and
partial release amendments, as appropriate, to the UCC financing statements
filed by the Secured Party against the Grantors, and (b) execute and deliver
such other collateral release documentation reasonably requested by Grantors in
order to further evidence the termination and release effectuated under this
Section 8. Notwithstanding the foregoing, the Obligations (including without
limitation all unpaid principal of, and all unpaid accrued interest and other
amounts, if any, on the Subordinated Debenture and Subordinated Note,
respectively), together with this Agreement and the security interest granted
hereby, shall be deemed to continue if the Company enters into any bankruptcy or
similar proceeding at a time when any amount paid to Secured Party could be
ordered to be repaid as a preference or pursuant to a similar theory, and shall
continue until it is finally determined that no such repayment can be ordered.
SECTION 9. INTERCREDITOR AGREEMENT. The parties hereto acknowledge that
the Security Interest is subject to the terms of the Restated Intercreditor
Agreement.
[Signature Page to Follow]
-9-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized,
as of the date first above written.
COMPANY:
U.S. PLASTIC LUMBER CORP.
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Secretary
SUBSIDIARIES:
U.S. PLASTIC LUMBER LTD.
0000 X. Xxxxxx Xxxx, Xxxxx 00000
Xxxx Xxxxx, Xxxxxxx 00000
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Secretary
THE EAGLEBROOK GROUP, INC.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Secretary
U.S. PLASTIC LUMBER FINANCE CORPORATION
0000 X. Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, XX 00000
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Secretary
-00-
X.X. XXXXXXX XXXXXX IP CORPORATION
0000 X. Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, XX 00000
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Secretary
HOLDER:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ Xxxxxxx Xxxxxxx
--------------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel
-11-
