<PAGE>
                                                                    EXHIBIT 10.1

                 THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
                         AND LIMITED WAIVER OF DEFAULTS

         THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LIMITED WAIVER
OF DEFAULTS (this "AMENDMENT") is entered into as of December 11, 2003, by and
between GUARANTY BUSINESS CREDIT CORPORATION, A DELAWARE CORPORATION ("GBCC")
and U.S. PLASTIC LUMBER LTD., A DELAWARE CORPORATION (the "COMPANY"), with
respect to the following:

                  A. GBCC and the Company have entered into that certain Loan
and Security Agreement dated as of December 19, 2002 (as amended, restated,
modified and supplemented from time to time, including by this Amendment, the
"LOAN AGREEMENT"). Capitalized terms used but not defined in this Amendment
shall have the meanings given to them in the Loan Agreement.

                  B. GBCC and the Company have entered into that certain Second
Amendment to Loan and Security Agreement and Limited Waiver of Defaults between
Company and Lender dated as of July 25, 2003 with respect to the Loan Agreement
(as amended, supplemented, and modified from time to time, the "SECOND
AMENDMENT") whereby GBCC established the Special Advance Subline (as defined in
the Second Amendment, the "SPECIAL ADVANCE SUBLINE") and consented to the
execution of the Junior Participation Agreement (as defined in the Second
Amendment) with Schultes, Inc., a New Jersey corporation (the "JUNIOR
PARTICIPANT").

                  C. The Company previously advised GBCC that: (i) the Company
intended, on or before October 31, 2003, to sell and transfer to a third party
(the "BUYER") certain assets of the Company commonly known as the Slipsheet
Division (the "SALE"); and (ii) that the proceeds of the Sale would be applied
to, and would be sufficient to, pay the Obligations in full, including the
Special Advances. For purposes of this Amendment, Obligations other than the
Special Advances shall be referred to as the "OTHER OBLIGATIONS".

                  D. The Sale was not consummated on or before October 31, 2003,
and the Obligations have not been paid in full (the "SALE DEFAULT").

                  E. The Company has advised GBCC that: (i) the Company intends,
on or before December 12, 2003, to consummate the Sale; and (ii) that the
proceeds of the Sale would be applied to the Obligations. However, the Company
has also advised GBCC that the proceeds of the Sale will not be sufficient to
pay the Obligations in full. The date of the closing of the Sale shall be
referred to herein as the "CLOSING DATE" and the documents effectuating the Sale
shall be referred to as the "SALE DOCUMENTS".

                  F. The Company has requested a waiver of the Sale Default,
GBCC's consent to the disbursement of a portion of the proceeds of the sale to
certain parties other than GBCC, and certain amendments to the Loan Agreement,
and GBCC has agreed to waive the Sale Default and to amend the Loan Agreement on
the terms and conditions set forth herein.



<PAGE>

                  NOW, THEREFORE, in consideration of the foregoing and the
terms and conditions hereof, the parties hereto agree as follows:

                  1. USE OF PROCEEDS FROM THE SALE. The Company agrees that
immediately available funds payable to the Company pursuant to the Sale
Documents shall be paid by the Buyer directly to GBCC on or before December 12,
2003 in an amount no less than Three Million Three Hundred Sixty Thousand
Dollars ($3,360,000) for application to the following Obligations: (a) all
outstanding fees and expenses due and payable; (b) all outstanding Revolving
Advances (other than Special Advances) and unpaid interest thereon; and (c) an
amount equal to Three Hundred Thousand Dollars ($300,000) for application (in
inverse order of payment) to the Term Advance (collectively, the "CLOSING
PAYMENT"). In addition, GBCC consents to the Borrower's request to distribute
funds from the Buyer as follows: (i) directly to Halifax Fund, L.P., of an
amount up to Three Hundred Fifty Thousand Dollars ($350,000); (ii) to General
Electric Capital Corporation, the CIT Group/Equipment Financing, Inc., and HSBC
Business Credit (USA), Inc., and People's Capital and Leasing Corp., each in the
amount of One Hundred Thousand Dollars ($100,000) in excess of the Nine Hundred
Thirty Five Thousand Ninety-Five Dollars And Ninety-Two Cents ($935,095.92) to
be received by the forgoing (in the aggregate) on account of their purchase
money security interests; and (iii) to Siemens Financial Services, Inc., in the
amount of Two Hundred Fifty Thousand Dollars ($250,000). This consent is a
one-time consent and not a continuing consent to any future transactions whether
or not similar to the foregoing and shall be limited as written above.

                  2. LIMITED WAIVER OF SALE DEFAULT. The Company hereby
acknowledges that the Sale Default has occurred and is continuing. Conditioned
upon consummation of the Sale on the terms and conditions of this Amendment,
GBCC waives the Sale Default. The waiver granted in this Amendment is a one-time
waiver only, is a waiver only of the Sale Default, shall be limited strictly as
written, and shall not be deemed to constitute a waiver of, or any consent to
noncompliance with, any term or provision of this Amendment, the Loan Agreement,
or any other Transaction Document whether or not similar to the Sale Default,
except as expressly set forth herein.

                  3. NEW SALE DEFAULT. If the Closing Payment is not paid in
full on or before December 12, 2003 (time being of the essence), then an Event
of Default (a "NEW SALE DEFAULT") shall have occurred, entitling GBCC to
exercise all of its default rights and remedies under the Transaction Documents
and at law, including without limitation, acceleration of the Obligations and
termination of the Loan Agreement.

                  4. TERMINATION OF ADVANCES. Without limiting GBCC's rights and
remedies under the Loan Agreement, the other Transaction Documents, and
applicable law, GBCC shall be relieved of any obligation under the Transaction
Documents to make any further Advances (or other financial accommodations
whatsoever) to the Company after December 12, 2003, PROVIDED that any such
further Advances or accommodations made by GBCC shall be in GBCC's sole and
absolute discretion.

                  5. RELEASE OF COLLATERAL. Upon receipt of the full amount of
the Closing Payment, GBCC shall release all of its liens in that portion of the
Slipsheet Division sold pursuant to the Sale Documents and shall, at the
Company's cost and expense, promptly execute and deliver to the Company,
authorize the filing of, and/or record with the appropriate governmental


                                       2
<PAGE>

authority all documents necessary to release all liens against and security
interests in such assets.

                  6. TERM LOAN. After the Closing Date, the Company shall
continue to make all payments of principal ($35,700 per month) and interest
required by the Loan Agreement with respect to the outstanding Term Advance,
PROVIDED, HOWEVER, that the unpaid balance of the Term Advance shall be due and
payable in full on May 31, 2004. The failure of the Company to indefeasibly pay
all Other Obligations outstanding in full and in cash on or before May 31, 2004
shall constitute an Event of Default.

                  7. INTEREST RATES. After the date hereof, interest shall
accrue on all Term Advances at a rate of interest equal to the lesser of: (a)
the Prime Rate in effect from time to time, PLUS five percent (5%) PER ANNUM;
and (b) the maximum rate permitted by applicable law. Interest shall continue to
accrue on all Obligations other than Term Advances at the Default Rate.

                  8. CASH RECEIPTS. After the receipt of the Closing Payment,
and provided that no new Default or Event of Default has occurred and is
continuing (including a New Sale Default), on a daily basis, GBCC shall remit to
the Customer all amounts collected through the lockbox established pursuant to
SECTION 9 of the Loan Agreement in excess of all Other Obligations that are due
and payable to GBCC.

                  9. REPORTING. In lieu of delivery of weekly Borrowing Base
Certificates, as required by SECTION 5.5 of the Loan Agreement, the Company
shall provide GBCC with a month-end Borrowing Base Certificate (including
information relating to Inventory and Accounts) on the tenth day following such
month-end, PROVIDED that if a new Event of Default has occurred, GBCC may
request, and the Company shall deliver, Borrowing Base Certificates on a more
frequent basis.

                  10. INCREASE IN SPECIAL ADVANCE LINE. Section 7(a) of the
Second Amendment is hereby amended by deleting the amount "Two Million Five
Hundred Thousand Dollars ($2,500,000)" and replacing it with the amount "Three
Million Two Hundred Fifty Thousand Dollars ($3,250,000)".

                  11. ASSIGNMENT OF FACILITY. Upon indefeasible payment of all
Other Obligations in full and in cash, GBCC shall assign the Transaction
Documents, GBCC's security interest and liens in and to the Collateral, and all
documents representing the same, including without limitation, the real property
mortgage in favor of GBCC recorded in Marion County, Florida and appropriate
UCC-1 financing statements with respect to the Collateral, without warranty or
recourse of any kind, to the Junior Participant, and without cost or expense to
GBCC.

                  12. AMENDMENTS TO LOAN AGREEMENT.

                        (a) The definition of "Facility Limit" contained in
         SECTION 1.1 of the Loan Agreement is hereby deleted in its entirety and
         replaced to read as follows:

                  "`FACILITY LIMIT' means Four Million Seven Hundred Fifty
                  Thousand ($4,750,000), LESS all payments made on the
                  outstanding principal amount of the Term Advance on or after
                  December 12, 2003."



                                       3
<PAGE>

                        (b) The definition of "Revolving Facility Limit"
         contained in SECTION 1.1 of the Loan Agreement is hereby deleted in its
         entirety and replaced to read as follows:

                        "`REVOLVING FACILITY LIMIT' means Three Million Two
                        Hundred Fifty Thousand Dollars ($3,250,000)."

                  13. APPRAISAL. Without limiting the rights granted to GBCC by
the Loan Agreement, GBCC shall have the right to conduct an audit and appraisal
of the Company's machinery and equipment (without further notice to the Company)
at the earlier of a new Event of Default or on or after March 15, 2004, at the
Company's cost and expense.

                  14. RELEASE AND WAIVER OF CLAIMS BY COMPANY. For good and
valuable consideration, the receipt of which is hereby acknowledged and in
consideration of GBCC executing this Amendment, the Company does hereby release
GBCC and its employees, officers, directors, attorneys, and agents from any and
all claims, demands, causes of action, now known or unknown, arising out of or
related to the Loan Agreement, any other Transaction Document, or the
transactions connected therewith. The Company does hereby warrant and represent
that no claims, demands, or causes of action arising out of or related to the
Loan Agreement, any other Transaction Document, or the transactions connected
therewith are now known or suspected to exist.

         The Company intends this release to cover, encompass, release, and
extinguish, among other things, all claims and matters which might otherwise be
reserved by California Civil Code Section 1542, which provides as follows:

         "A general release does not extend to claims which the creditor does
         not know or suspect to exist in his favor at the time of executing the
         release, which if known by him must have materially affected his
         settlement with the debtor."

                  15. CONDITIONS PRECEDENT. The obligations of GBCC hereunder
shall take effect only upon the satisfaction of the following conditions:

                        (a) Receipt by GBCC of a fully executed original of this
                  Amendment, the Fifth Amendment to Junior Participation
                  Agreement dated as of even date herewith by and between GBCC
                  and the Participant, and the Letter Agreement dated as of even
                  date herewith by and between GBCC and the Company;

                        (b) Other than the Sale Default and the financial
                  covenant defaults specifically referenced in paragraph 5 of
                  the Second Amendment, no Defaults or Events of Default shall
                  have occurred or be continuing; and

                        (c) GBCC shall have received such other documents,
                  certificates, opinions, and information that GBCC shall
                  require, each in form and substance satisfactory to GBCC in
                  its sole discretion.


                  16. MISCELLANEOUS.

                        (a) Reference to the Loan Agreement and the Transaction
                  Documents.



                                       4
<PAGE>

                        (i) Except as specifically amended by this Amendment,
                        the Loan Agreement and the other Transaction Documents
                        shall remain in full force and effect in accordance with
                        their respective terms and are hereby ratified and
                        confirmed.

                        (ii) The Company hereby warrants and represents to GBCC
                        that there does not exist a Default or an Event of
                        Default other than the Sale Default and the Company
                        reaffirms, as of the date hereof, that all of the
                        warranties and representations of the Company contained
                        in the Loan Agreement and in the other Transaction
                        Documents are true, complete, and correct.

                  (b) EVENTS OF DEFAULT. Any failure to comply with the terms
and conditions of this Amendment shall constitute an Event of Default.

                  (c) COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

                  (d) GOVERNING LAW. This Amendment shall be governed by and
construed according to the laws of the State of California.

                  (e) ATTORNEYS' FEES. The Company shall pay, on written demand,
all fees and costs incurred by GBCC in connection with the negotiation,
documentation, and execution of this Amendment, including the reasonable fees
and expenses of attorneys. If any legal action or proceeding shall be commenced
at any time by any party to this Amendment in connection with its interpretation
or enforcement, the prevailing party or parties in such action or proceeding
shall be entitled to reimbursement of its reasonable attorneys' fees and costs
in connection therewith, in addition to all other relief to which the prevailing
party or parties may be entitled.

                  (f) JURY TRIAL WAIVER. EACH OF THE PARTIES HERETO WAIVES ITS
RIGHT TO A TRIAL BY JURY, IF ANY, IN ANY ACTION TO ENFORCE, DEFEND, INTERPRET,
OR OTHERWISE CONCERNING THIS AMENDMENT.



                  [Remainder of Page Intentionally Left Blank]




                                       5
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first written above.

                                  U.S. PLASTIC LUMBER LTD., A DELAWARE
                                  CORPORATION



                                  By:      /s/ MICHAEL D. SCHMIDT
                                       ---------------------------------------
                                  Name:    MICHAEL D. SCHMIDT
                                       ---------------------------------------
                                  Title:   TREASURER
                                        --------------------------------------


                                  GUARANTY BUSINESS CREDIT CORPORATION,
                                  A DELAWARE CORPORATION



                                  By:      /s/ GREG CARASIK
                                       ---------------------------------------
                                  Name:    GREG CARASIK
                                       ---------------------------------------
                                  Title:   VICE PRESIDENT
                                        --------------------------------------



                                       6
<PAGE>


                  The undersigned hereby consents to and acknowledges the terms
and conditions of the foregoing Amendment and agrees that its Continuing
Guaranty and each other document executed in favor of GBCC remain in full force
and effect.

                         U.S. PLASTIC LUMBER IP CORPORATION



                         By:               /s/ MICHAEL D. SCHMIDT
                                  --------------------------------------------
                         Name:             MICHAEL D. SCHMIDT
                                  --------------------------------------------
                         Title:            TREASURER
                                  --------------------------------------------


                         U.S. PLASTIC LUMBER CORP.



                         By:               /s/ MICHAEL D. SCHMIDT
                                  --------------------------------------------
                         Name:             MICHAEL D. SCHMIDT
                                  --------------------------------------------
                         Title:            CHIEF FINANCIAL OFFICER
                                  --------------------------------------------


                         U.S. PLASTIC LUMBER FINANCE CORPORATION



                         By:               /s/ MICHAEL D. SCHMIDT
                                  --------------------------------------------
                         Name:             MICHAEL D. SCHMIDT
                                  --------------------------------------------
                         Title:            TREASURER
                                  --------------------------------------------




                                       7