exv10w3






Exhibit 10.3




JEFFER MANGELS BUTLER & MITCHELL LLP

MICHAEL A. GOLD (Bar No. 90667)

ELIZABETH A. CULLEY (Bar No. 258250)

1900 Avenue of the Stars, Seventh Floor

Los Angeles, California 90067-4308

Telephone:  (310) 203-8080

Facsimile:     (310) 203-0567




Attorneys for Plaintiff

AMERICAN CAPITAL MANAGEMENT, LLC




SUPERIOR COURT OF THE STATE OF CALIFORNIA




FOR THE COUNTY OF LOS ANGELES



	 	 	 	 

	American Capital Management, LLC

	 	 	CASE NO. BC447588
	 
	 	 	 
	Plaintiff,

	 	 	Assigned For All Purposes To:
	 

	 	 	Hon. Susan Bryant-Deason
	          v.
	 	 	 
	 

	 	 	ORDER APPROVING STIPULATION FOR SETTLEMENT OF
CLAIMS
	Converted Organics Inc. and Converted
Organics of Woodbridge, LLC and Does 1-10
Inclusive,




              Defendants.

	 	 	


Date:       October 18, 2010

Time:       8:30 am 

Dept:       52
	 
	 	 	 
	 

	 	 	Complaint Filed:     October 15, 2010
	 
	 	 	Trial Date:                None Set






     The Joint Ex Parte Application For Court Order Approving Stipulation for Settlement of Claims
(“Application”), jointly filed by Plaintiff American Capital Management, LLC (“Plaintiff”) and
Defendants Converted Organics, Inc. (“COIN”) and Converted Organics of Woodbridge, LLC
(“Subsidiary”), came on for hearing on October 18, 2010 at 8:30 a.m. in Department 52 of the
above-entitled court, the Honorable Susan Bryant-Deason, Judge presiding.



     The Court, having reviewed the Application, having been presented with a Stipulation for



 









 




Settlement of Claims (the “Stipulation”), a copy of which is attached as Exhibit K to the
Application, and after a hearing upon the fairness, adequacy and reasonableness of the terms and
conditions of the issuance of shares of the common stock of COIN (the “Common Stock”) to Plaintiff
in exchange for the extinguishment of the claims set forth in the Stipulation,




     IT IS THEREFORE ORDERED AS FOLLOWS:



     1. The Stipulation is approved in its entirety;



     2. In full and final settlement of Plaintiff’s claims against COIN and
Subsidiary in the total amount of $11,254,749.90 (the “Claims”), which Claims Plaintiff
purchased from third-party creditors of COIN, Airside, Inc. (“Airside”), Armistead Mechanical, Inc.
(“Armistead”), Hatzel & Buehler, Inc. (“Hatzel”), Recycling Technology Development, LLC (“Recycling
Technology”), and SNC-Lavalin Project Services, Inc. (“SNC”) (collectively “Creditors”), pursuant
to Claims Purchase Agreements between Plaintiff and Creditors, dated October 6, 2010 and October
14, 2010 (the “Claims Purchase Agreements”), and which Claims comprise the principal, interest,
fees, and other costs, plus additional interest that will accrue through the date of the Order,
COIN will, in accordance with Paragraph 3 below, issue and deliver, in total, to Plaintiff that
amount of validly issued, fully paid and non-assessable shares of Common Stock which equals (i) the
aggregate amount of the Claims plus the amount of Plaintiff’s legal fees (which includes a fixed
fee), expenses and costs incurred through the date of the Order, divided by (ii) the consolidated
closing bid price of the Common Stock on the trading day immediately prior to the date of the entry
of the Order approving the Stipulation of Settlement (the “Settlement Shares”).



     3. No later than 9:30 a.m. (New York time) on the business day immediately following the date
of this Order, COIN shall (i) issue irrevocable instructions to its transfer agent and any
subsequent transfer agent, in the form attached to the Stipulation as Exhibit M (the “Irrevocable
Transfer Agent Instructions”), to issue and credit Settlement Shares to Plaintiff’s balance
accounts at DTC in such amounts as specified from time to time by Plaintiff in each



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Issuance
Instructions, in the form attached to the Stipulation as Exhibit L (the “Issuance Instructions”),
and (ii) cause its counsel to issue a legal opinion to COIN’s transfer agent that the Settlement
Shares may be issued without any restrictive or other legend. COIN shall only issue Settlement
Shares to Plaintiff upon receipt of Issuance Instructions from Plaintiff. COIN shall immediately
upon each receipt of Issuance Instructions, whether via facsimile or otherwise, from Plaintiff
issue the number of Settlement Shares specified in such Issuance Instructions (which specified
number is subject to the Maximum Percentage limitation set forth below) to Plaintiff and
credit such specified number of Settlement Shares to Plaintiff’s balance account with The
Depository Trust Company through its Deposit/Withdrawal at Custodian system, without any
restriction on transfer or resale and without any restrictive or other legend.




     4. Notwithstanding anything to the contrary contained in this Stipulation, the Plaintiff may
not deliver Issuance Instructions at any particular time to the extent (but only to the extent)
that the Plaintiff or any of its affiliates would as of such time beneficially own in excess of
4.99% (the “Maximum Percentage”) of the Common Stock. No prior inability to deliver
Issuance Instructions pursuant to this paragraph shall have any effect on the applicability of the
provisions of this paragraph with respect to any subsequent determination. The Maximum Percentage
limitation contained in this paragraph and any other similar beneficial ownership limitation
contained in any other instrument held by Plaintiff or any of its affiliates that is convertible or
exercisable into Common Stock shall be coordinated so that the aggregate beneficial ownership of
Plaintiff (together with its affiliates) does not exceed the Maximum Percentage limitation. In
connection therewith, issuances hereunder shall take precedence over issuances of any shares of
Common Stock issuable to Plaintiff or any of its affiliates under any other instrument held by
Plaintiff or any of its affiliates containing similar beneficial ownership limitations that is
convertible or exercisable into Common Stock. For the purposes of this paragraph, beneficial
ownership and all determinations and calculations (including, without limitation, with respect to
calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the



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“Exchange Act”), and the rules and
regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a
manner otherwise than in strict conformity with the terms of this paragraph to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum
Percentage beneficial ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage limitation. The
holders of Common Stock shall be third party beneficiaries of this paragraph and neither Plaintiff
nor COIN may waive this paragraph without the consent of holders of a majority of the Common Stock.
For any reason at any time, upon the written or oral request of the Plaintiff, COIN shall within
one (1) business day confirm orally and in writing to the Plaintiff the number of shares of Common
Stock then outstanding.




     5. For so long as Plaintiff holds any Settlement Shares, neither Plaintiff nor any of its
affiliates will, or will seek to, influence control of COIN. The provisions of this paragraph 5
may not be modified or waived without further order of the Court.



     6. COIN shall, on or before 8:30 a.m., New York time, on the first (1st) business day after
the issuance of this Order (i) issue a press release (the “Press Release”) disclosing all the
material terms of the transactions contemplated hereby and (ii) file a Current Report on Form 8 K
describing all the material terms of the transactions contemplated hereby in the form required by
the Exchange Act and attaching all the material documents related hereto (including all
attachments, the “8 K Filing”). From and after the issuance of the Press Release, COIN shall have
disclosed all material, non-public information relating to the matters contemplated hereby and
Plaintiff shall have no material, non-public information relating to COIN or any of its
subsidiaries. In the event of a breach of any of the foregoing covenants by COIN, in addition to
any other remedy available to Plaintiff, the Plaintiff shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise, of such the matters
contemplated hereby without the prior approval by COIN, any of its subsidiaries, or any of its or
their respective officers, directors, employees or agents. The Plaintiff shall not have any
liability to COIN, any of its subsidiaries, or any of its or their respective officers, directors,
employees,



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stockholders or agents, for any such disclosure.




     7. This Order ends, finally and forever (i) any claims to payment or compensation of any kind
or nature which Plaintiff had, now has, or may assert in the future against
Defendants arising out of the Claims, and (ii) any claims, including without limitation for
offset or counterclaim, which COIN or Subsidiary had, now has, or may assert in the future against
Plaintiff arising out of the Claims. In this regard, and subject to compliance with this Order,
effective upon the execution of this Order, each party herby releases and forever discharges the
other party, including each of the other party’s employees, officers, directors, affiliates and
attorneys, from any and all claims, demands, obligations (fiduciary or otherwise), and causes of
action, whether known or unknown, suspected or unsuspected, arising out of, connected with, or
incidental to the Claims. Each party further waives, with respect to the matters released herein,
any and all rights and benefits conferred upon it by the provisions of California Civil Code
Section 1542 and any similar law of any state or territory of the United States.



     8. This action is hereby dismissed with prejudice, provided that the court shall retain
jurisdiction with regard to the Claims to enforce the terms of the Stipulation and this Order.



     9. The Stipulation and this Order may be enforced by any party to the Stipulation by a motion
under California Code of Civil Procedure section 664.6, or by any procedure permitted by law in the
Superior Court of Los Angeles County. Pursuant to the Stipulation, each party thereto further
waives a statement of decision, and the right to appeal from this Order after entry. COIN further
waives any defense based on the rule against splitting causes of action. Except as expressly
provided in Paragraph 2 above, each party shall bear its own attorneys’ fees, expenses and costs
with regard to the Stipulation and this Order.



     IT IS SO ORDERED.





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	DATED: 	By:  	 	 
	 	 	JUDGE OF THE SUPERIOR COURT 	 
	 	 	 	 
	 




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