Document:

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                                                                    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 2300 Glades Road, Suite 440 West, Boca Raton, Florida 33431 (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 195
Maplewood Avenue, Maplewood, New Jersey 07040 ("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,

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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'

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                  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

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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

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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.

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                  (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 bill 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, sue 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

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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.
                                    2300 W. Glades Road
                                    Suite 440 West
                                    Boca Raton, Florida 33431
                                    Facsimile: (561) 394-5335
                                    Attention: Bruce Rosetto

                           with a copy to:

                                    Blank Rome Comisky & McCauley LLP
                                    One Logan Square
                                    Philadelphia, Pennsylvania 19103
                                    Facsimile: (215) 569-5628
                                    Attention: Alan L. Zeiger, Esq.

                           to the Secured Party:

                                    Halifax Fund, L.P.
                                    c/o The Palladin Group, L.P.
                                    Investment Manager
                                    195 Maplewood Avenue
                                    Maplewood, New Jersey 07040
                                    Facsimile: (973) 313-6491
                                    Attention: Robert Chender/Maurice Hryshko

                           with a copy to:

                                    Duval & Stachenfeld
                                    300 East 42nd Street
                                    New York, NY 10017
                                    Fax: 212-883-8883
                                    Attn: Robert L. Mazzeo, 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

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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

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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]

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         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/ Bruce Rosetto
                                    --------------------------------------------
                                 Name: Bruce Rosetto
                                 Title: Secretary

                                 SUBSIDIARIES:

                                 U.S. PLASTIC LUMBER LTD.
                                 2300 W. Glades Road, Suite 44020
                                 Boca Raton, Florida 33431

                                 By: /s/ Bruce Rosetto
                                    --------------------------------------------
                                 Name: Bruce Rosetto
                                 Title: Secretary

                                 THE EAGLEBROOK GROUP, INC.
                                 2600 West Roosevelt Road
                                 Chicago, IL  60608

                                 By: /s/ Bruce Rosetto
                                    --------------------------------------------
                                 Name: Bruce Rosetto
                                 Title: Secretary

                                 U.S. PLASTIC LUMBER FINANCE CORPORATION
                                 2300 W. Glades Road, Suite 440W
                                 Boca Raton, FL  33431

                                 By: /s/ Bruce Rosetto
                                    --------------------------------------------
                                 Name: Bruce Rosetto
                                 Title: Secretary

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<PAGE>

                                 U.S. PLASTIC LUMBER IP CORPORATION
                                 2300 W. Glades Road, Suite 440W
                                 Boca Raton, FL  33431

                                 By: /s/ Bruce Rosetto
                                    --------------------------------------------
                                 Name: Bruce Rosetto
                                 Title: Secretary

                                 HOLDER:

                                 HALIFAX FUND, L.P.

                                 By:      THE PALLADIN GROUP, L.P.
                                          Attorney-in-Fact

                                 By: /s/ Maurice Hryshko
                                    --------------------------------------------
                                 Name: Maurice Hryshko
                                 Title: Counsel

                                      -11-<PAGE>
                                                                    EXHIBIT 10.5

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT ("AGREEMENT"), dated as of September 24,
2002, by and between U.S. Plastic Lumber Corp. (the "COMPANY") and Halifax Fund,
L.P. ("HALIFAX").

                              W I T N E S S E T H:

         The Company has issued and sold to Halifax (i) a warrant, issued on
June 15, 2001, exercisable into 250,000 shares of common stock, par value
$0.0001, of the Company ("COMMON STOCK") and (ii) a warrant, issued on August
16, 2001, exercisable into 250,000 shares of Common Stock (collectively, the
"WARRANTS"). The shares of Common Stock issuable upon exercise of the Warrants
are referred to herein as the "WARRANT SHARES".

         The Company and Halifax have entered into an Exchange and Repurchase
Agreement, dated as of September 24, 2002 (the "EXCHANGE AGREEMENT"), whereby
the Company has agreed to exchange certain securities held by Halifax for, among
other things, a 10% Subordinated Convertible Debenture (the "CONVERTIBLE
DEBENTURE"). In consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Exchange Agreement and
this Agreement, the Company and Halifax agree as follows:

         1. CERTAIN DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the respective meaning ascribed thereto in the Exchange
Agreement, the Warrants or the Convertible Debenture. As used in this Agreement,
the following terms shall have the following meanings:

                  "BUSINESS DAY" means any day other than a Saturday, Sunday or
any other day on which the New York Stock Exchange or commercial banks in the
city of New York are authorized or required to close.

                  "CLOSING" and "CLOSING DATE" shall have the meanings ascribed
to such terms in the Exchange Agreement.

                  "COMMISSION" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.

                  "DEFAULT PAYMENT RATE" shall have the meaning set forth in
Section 2(b)(i).

                  "HOLDER" and "HOLDERS" shall mean Halifax and any transferee
of the Convertible Debenture, Warrants, Warrant Shares or Registrable
Securities, other than any such securities that have been sold to the public
pursuant to an effective registration statement or pursuant to Rule 144 under
the Securities Act, or that have been sold in a private transaction and the
transferor's rights have not been duly assigned in accordance with paragraph 11
of this Agreement.

<PAGE>

                  "HOLDERS' COUNSEL" shall mean a single law firm, designated as
counsel for the Holders by the Holders of a majority of the aggregate number of
Registrable Securities then issued or issuable (without regard to any
limitations on such issuance).

                  "REGISTRABLE SECURITIES" shall mean: (i) the Warrant Shares
issued or issuable to a Holder upon exercise of the Warrants; (ii) any shares of
Common Stock issued or issuable to a Holder upon the conversion or exercise of
the Convertible Debenture or any warrant or other security that is convertible
or exercisable into shares of Common Stock (the Convertible Debenture and any
such warrant or other security being collectively referred to herein as
"CONVERTIBLE SECURITIES"), but only to the extent that such shares of Common
Stock are not freely saleable to the public by such Holder pursuant to Rule
144(k) under the Securities Act (or any successor provision) assuming that no
cash is paid by such Holder to the Company in connection with such exercise or
conversion; and (iii) any shares of capital stock issued or issuable from time
to time (with any adjustments) in replacement of, in exchange for or otherwise
in respect of (whether as a result of a stock split, stock dividend, or
otherwise) the shares of Common Stock described in (i) or (ii) above, the
Warrants or any Convertible Securities.

                  The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder (including without limitation Rule 415 thereunder), and
the declaration or ordering of the effectiveness of such registration statement.

                  "REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in connection with fulfilling its obligations under this Agreement,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, "Blue Sky" fees and
expenses, reasonable fees and disbursements of Holders' Counsel for a "due
diligence" examination of the Company and review of the Registration Statement
and related documents, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company);
PROVIDED that the Company shall not be obligated to pay fees and expenses of
Holders' Counsel in excess of $2,500 in connection with the due diligence
examination of the Company and review of the Registration Statement described
above.

                  "REGISTRATION STATEMENT" shall have the meaning set forth in
Section 2(a).

                  "REGULATION D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as subsequently amended.

                  "SECURITIES ACT" or "ACT" shall mean the Securities Act of
1933, as amended.

                  "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for the Holders not included within
"Registration Expenses".

                  "SUSPENSION NOTICE" shall have the meaning set forth in
Section 2(a)(v).

                                      -2-
<PAGE>

         2. REGISTRATION REQUIREMENTS. Subject to the terms and conditions
hereof, the Company shall use its reasonable best efforts to effect the
registration of the Registrable Securities (including without limitation the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable "Blue Sky" or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as would permit or facilitate the sale or distribution of all the
Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by a Holder. Such reasonable best efforts by the
Company shall include the following:

                  (a) The Company shall:

                  (i)      on or before the earlier to occur of (i) the
                           fifteenth (15th) day following the date on which the
                           Company becomes eligible to file a registration
                           statement on Form S-3; (ii) the thirtieth (30th) day
                           following a determination or acknowledgement by the
                           Company that Halifax (or any Affiliate of Halifax) is
                           an Affiliate of the Company; and (iii) April 15, 2003
                           (the "Filing Deadline"), prepare and file a
                           registration statement with the Commission pursuant
                           to Rule 415 under the Securities Act on, if the
                           Company is then eligible to use such form, Form S-3
                           under the Securities Act, or in the event that the
                           Company is ineligible to use such form, such other
                           form as the Company is eligible to use under the
                           Securities Act, covering the Registrable Securities
                           (such registration statement, including all of the
                           documents incorporated or deemed to be incorporated
                           by reference therein, is referred to herein as the
                           "REGISTRATION STATEMENT"), which Registration
                           Statement, to the extent allowable under the
                           Securities Act and the rules promulgated thereunder
                           (including Rule 416), shall state that such
                           Registration Statement also covers such indeterminate
                           number of additional shares of Common Stock as may
                           become issuable upon exercise of the Warrants or
                           conversion or exercise of any Convertible Securities;
                           PROVIDED, HOWEVER, that no Holder shall be identified
                           as an "underwriter" in the Registration Statement
                           with respect to the sale of Registrable Securities.
                           The number of shares of Common Stock initially
                           included in such Registration Statement shall be no
                           less than one and one-half times the number of
                           Warrant Shares issuable upon exercise of the Warrants
                           without regard to any limitation on a Holder's
                           ability to exercise the Warrants. Thereafter, the
                           Company shall use its reasonable best efforts to
                           cause such Registration Statement to be declared
                           effective as soon as possible, and in any event prior
                           to 90 days following the Filing Deadline (or, if the
                           staff of the SEC has informed the Company that the
                           Registration Statement will be the subject of a full
                           review, and the Company has used and continues to use
                           its reasonable best efforts in obtaining
                           effectiveness of the Registration Statement, one
                           hundred and twenty (120) days). The Company shall

                                      -3-
<PAGE>

                           provide each Holder and Holders' Counsel reasonable
                           opportunity to review any such Registration Statement
                           or amendment or supplement thereto, or any response
                           to comments of the staff of the SEC, prior to filing
                           or submission. Without limiting the foregoing, the
                           Company will promptly respond to all SEC comments,
                           inquiries and requests, and shall request
                           acceleration of effectiveness at the earliest
                           possible date. If the Company is not initially
                           eligible to use Form S-3 on the Filing Deadline, it
                           will amend its Form S-1 or Form S-2 to a Form S-3 (or
                           file a new Registration Statement on Form S-3, as
                           appropriate) at such time that it becomes eligible to
                           do so. The Company shall notify the Holders in
                           writing (A) within one day following each of the
                           SEC's clearance to request acceleration of
                           effectiveness of the Registration Statement and the
                           Company's request for such acceleration of
                           effectiveness and (B) immediately upon the SEC's
                           declaration of such effectiveness.

                  (ii)     Prepare and file with the SEC such amendments and
                           supplements to such Registration Statement and the
                           prospectus used in connection with such Registration
                           Statement as may be necessary to comply with the
                           provisions of the Act with respect to the disposition
                           of all securities covered by such Registration
                           Statement and notify each Holder of the filing and
                           effectiveness of such amendments or supplements.

                  (iii)    After the Registration Statement is declared
                           effective, furnish to each Holder such numbers of
                           copies of a current prospectus conforming with the
                           requirements of the Act, copies of the Registration
                           Statement, any amendment or supplement thereto and
                           any documents incorporated by reference therein and
                           such other documents as such Holder may reasonably
                           require in order to facilitate the disposition of
                           Registrable Securities owned by such Holder.

                  (iv)     Use its reasonable best efforts to register and
                           qualify the securities covered by such Registration
                           Statement under such other securities or "Blue Sky"
                           laws of such states and jurisdictions as shall be
                           reasonably requested by each Holder; provided that
                           the Company shall not be required in connection
                           therewith or as a condition thereto (a) to qualify to
                           do business or to file a general consent to service
                           of process in any such states or jurisdictions or (b)
                           to subject itself to taxation in any such state or
                           jurisdiction if it is not now so subject.

                  (v)      Deliver to each Holder a written notice (a
                           "SUSPENSION NOTICE") immediately of the happening of
                           any event as a result of which the prospectus
                           (including any supplements thereto or thereof and any
                           information incorporated or deemed to be incorporated
                           by reference therein) included in such Registration
                           Statement, as then in effect, includes an untrue
                           statement of material fact or omits to state a
                           material fact required to be stated therein or
                           necessary to make the statements therein not
                           misleading in light of the circumstances then
                           existing, and use its reasonable best efforts to
                           promptly update and/or correct such prospectus, and
                           immediately notify each Holder in writing when it has
                           done so.

                                      -4-
<PAGE>

                  (vi)     Notify each Holder immediately of the issuance by the
                           Commission or any state securities commission or
                           agency of any stop order suspending the effectiveness
                           of the Registration Statement or the initiation of
                           any proceedings for that purpose. The Company shall
                           use its reasonable best efforts to prevent the
                           issuance of any stop order and, if any stop order is
                           issued, to obtain the lifting thereof at the earliest
                           possible time.

                  (vii)    Permit Holders' Counsel to review the Registration
                           Statement and all amendments and supplements thereto
                           within a reasonable period of time prior to each
                           filing, and shall not file any document in a form to
                           which such counsel reasonably objects.

                  (viii)   Use its reasonable best efforts to list the
                           Registrable Securities covered by such Registration
                           Statement with all securities exchange(s) and/or
                           markets on which the Common Stock is then listed or
                           traded and prepare and file any required filings with
                           the National Association of Securities Dealers, Inc.
                           or any exchange or market where the Common Stock is
                           then listed or traded.

                  (ix)     Take all steps necessary to enable Holders to avail
                           themselves of the prospectus delivery mechanism set
                           forth in Rule 153 (or successor thereto) under the
                           Act.

                  (b) Each of the following events shall be deemed to be an
"INTERFERING EVENT" hereunder:

                  (i)      DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT. In
                           the event that such Registration Statement has not
                           been declared effective within ninety (90) days from
                           the Filing Deadline (or, if the staff of the SEC has
                           informed the Company that the Registration Statement
                           will be the subject of a full review, and the Company
                           has used and continues to use its reasonable best
                           efforts in obtaining effectiveness of the
                           Registration Statement, one hundred and twenty (120)
                           days), or an amendment thereto or new Registration
                           Statement filed pursuant to paragraph (g) below has
                           not been declared effective within ninety (90) days
                           from the date on which the notice specified in such
                           paragraph is received by the Company, then the
                           Company shall pay in cash to each Holder a default
                           payment at a rate (the "DEFAULT PAYMENT RATE") equal
                           to two and one half percent (2.5%) of an amount
                           determined by multiplying (x) the number of
                           Registrable Securities issuable or issued and then
                           held by such Holder (such number of issuable
                           securities to be calculated without regard to any
                           limitation on the exercise or conversion of the
                           Warrants or any Convertible Securities) by (y) the
                           Market Price for the Common Stock on the date such
                           Interfering Event first occurs (the product of (x)

                                      -5-
<PAGE>

                           and (y) being referred to herein as the "AGGREGATE
                           MARKET VALUE"), for each 30-day period (or portion
                           thereof) during the period from and after the last
                           day of either such 90-day period (or 120-day period,
                           as provided above) until such Registration Statement
                           or amendment thereto has been declared effective.

                  (ii)     NO LISTING; PREMIUM PRICE REDEMPTION FOR DELISTING OF
                           CLASS OF SHARES. In the event that the Company fails,
                           refuses or is unable to continue the listing or
                           quotation of the Common Stock on or with an Approved
                           Market at any time during the period ("LISTING
                           PERIOD") commencing on the date hereof and continuing
                           thereafter for so long as any Registrable Securities
                           are outstanding, then the Company shall pay in cash
                           to each Holder a default payment at the Default
                           Payment Rate times the Aggregate Market Value of the
                           Registrable Securities issuable or issued and then
                           held by such Holder (such number of issuable
                           securities to be calculated without regard to any
                           limitation on the exercise or conversion of the
                           Warrants or any Convertible Securities) for each
                           30-day period (or portion thereof) during the Listing
                           Period from and after such failure, refusal or
                           inability to so list the Common Stock until the
                           Common Stock is so listed or quoted.

                  (iii)    BLACKOUT PERIODS. In the event any Holder is unable
                           to sell all of its Registrable Securities under the
                           Registration Statement, other than during (A) a
                           Permitted Suspension Period (as defined in paragraph
                           2(f) below) or (B) in addition to any Permitted
                           Suspension Period, any Post-Effective Amendment
                           Period (as defined below), including without
                           limitation by reason of any suspension or stop order
                           with respect to the Registration Statement or the
                           fact that an event has occurred as a result of which
                           the prospectus (including any supplements thereto)
                           included in such Registration Statement then in
                           effect includes an untrue statement of material fact
                           or omits to state a material fact required to be
                           stated therein or necessary to make the statements
                           therein not misleading in light of the circumstances
                           then existing, or the number of shares of Common
                           Stock covered by the Registration Statement is
                           insufficient at such time to make such sales, but
                           excluding any general suspension of trading of all
                           securities on the market where the Common Stock is
                           traded, then the Company shall pay in cash to each
                           Holder a default payment at the Default Payment Rate
                           times the Aggregate Market Value of the Registrable
                           Securities issuable or issued and then held by such
                           Holder (such number of issuable securities to be
                           calculated without regard to any limitation on the
                           exercise or conversion of the Warrants or any
                           Convertible Securities) for each 30-day period (or
                           portion thereof) from and after the date on which
                           such Holder is unable to sell its Registrable
                           Securities under the Registration Statement (after

                                      -6-
<PAGE>

                           giving effect to any Permitted Suspension Period)
                           until such Holder is able to sell all of the
                           Registrable Securities under the Registration
                           Statement. For purposes hereof, "POST-EFFECTIVE
                           AMENDMENT PERIOD" shall mean a period, not to exceed
                           thirty (30) consecutive Business Days or ninety (90)
                           calendar days in any twelve month period, that occurs
                           while the Company is ineligible to use Form S-3 and
                           during which the Company is required, on the
                           reasonable advice of its outside counsel, to file a
                           post-effective amendment to the Registration
                           Statement in order to correct or supplement an untrue
                           statement of material fact or an omission to state a
                           material fact required to be stated therein or in the
                           related prospectus or necessary to make the
                           statements therein or in the related prospectus not
                           misleading in light of the circumstances then
                           existing or otherwise to comply with applicable
                           securities laws and regulations.

                  (iv)     CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION FOR
                           CONVERSION DEFICIENCY. In the event that the Company
                           does not have a sufficient number of shares of Common
                           Stock available to satisfy the Company's obligations
                           to a Holder upon receipt of a Conversion Notice (as
                           defined in the Debenture) or is otherwise unable or
                           unwilling to issue such shares (including without
                           limitation by reason of the limit described in
                           Section 10 below) in accordance with the terms of the
                           Warrants or any Convertible Security upon the
                           exercise or conversion thereof, then the Company
                           shall pay in cash to such Holder a default payment at
                           the Default Payment Rate times the Aggregate Market
                           Value of the Registrable Securities issuable or
                           issued and then held by such Holder (such number of
                           issuable securities to be calculated without regard
                           to any limitation on the exercise or conversion of
                           the Warrants or any Convertible Securities), for each
                           30-day period (or portion thereof) that the Company
                           fails or refuses to issue such shares in accordance
                           with the terms of such exercise or conversion; and

                  (v)      DEFAULT PAYMENT TERMS; STATUS OF UNPAID DEFAULT
                           PAYMENTS. All default payments (which payments shall
                           be pro rata on a per diem basis for any period of
                           less than 30 days) required to be made in connection
                           with the above provisions shall be paid in cash at
                           any time upon demand, and whether or not a demand is
                           made, by the tenth (10th) day of each calendar month
                           for each partial or full 30-day period occurring
                           prior to that date. Until paid as required in this
                           Agreement, default payments shall be deemed added to,
                           and a part of, the Obligations (as defined in the
                           Security Agreement).

                  (vi)     CUMULATIVE REMEDIES. Each default payment triggered
                           by an Interfering Event shall be in addition to each
                           other default payment triggered by another
                           Interfering Event; PROVIDED, however, that in no
                           event shall the Company be obligated to pay to any
                           Holder default payments in an aggregate amount
                           greater than the Default Payment Rate times the
                           Aggregate Market Value of the Registrable Securities
                           issuable or issued and then held by such Holder (such
                           number of issuable securities to be calculated
                           without regard to any limitation on the exercise or
                           conversion of the Warrants or any Convertible
                           Securities) for any 30-day period (or portion
                           thereof). The default payments provided for above are
                           in addition to and not in lieu or limitation of any
                           other rights the Holders may have at law, in equity
                           or under the terms of the Exchange Agreement, the

                                      -7-
<PAGE>

                           Warrants, this Agreement or any other Transaction
                           Document, including without limitation the right to
                           specific performance. Each Holder shall be entitled
                           to specific performance of any and all obligations of
                           the Company in connection with the registration
                           rights of the Holders hereunder.

                  (vii)    CERTAIN ACKNOWLEDGMENTS. The Company acknowledges
                           that the occurrence of an Interfering Event will
                           cause the Holders to suffer damages in an amount that
                           will be difficult to ascertain, including without
                           limitation damages resulting from the loss of
                           liquidity in the Registrable Securities and the
                           additional investment risk in holding the Registrable
                           Securities. Accordingly, the parties agree that it is
                           appropriate to include in this Agreement the
                           foregoing provisions for default payments in order to
                           compensate the Holders for such damages. The parties
                           acknowledge and agree that the default payments set
                           forth above represent the parties' good faith effort
                           to quantify such damages and, as such, agree that the
                           form and amount of such default payments are
                           reasonable and will not constitute a penalty.

                  (c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by investment bankers
reasonably satisfactory to the Company. The Company shall only be obligated to
permit one underwritten offering, which offering shall be determined by the
Holders of a majority of the Registrable Securities then issued or issuable.

                  (d) If the Registrable Securities are to be sold in an
underwritten offering, the Company shall:

                  (i)      make such representations and warranties to the
                           Holders and the underwriter or underwriters in form,
                           substance and scope as are customarily made by
                           issuers to underwriters in secondary offerings;

                  (ii)     cause to be delivered to the sellers of Registrable
                           Securities and the underwriter or underwriters
                           opinions of independent counsel to the Company, dated
                           the date of delivery of any Registrable Securities
                           sold pursuant thereto, which counsel and opinions (in
                           form, scope and substance) shall be reasonably
                           satisfactory to the Holders and the underwriter(s)
                           and their counsel and covering, without limitation,
                           such matters as the due authorization and issuance of
                           the securities being registered and compliance as to
                           form with federal securities laws by the Company in
                           connection with the authorization, issuance and
                           registration thereof and other matters that are
                           customarily given to underwriters in underwritten
                           offerings, addressed to the Holders and each
                           underwriter;

                  (iii)    cause to be delivered, at the time of delivery of any
                           Registrable Securities sold pursuant thereto, a
                           "comfort" letter from the Company's independent
                           certified public accountants addressed to the Holders
                           and each underwriter stating that such accountants

                                      -8-
<PAGE>

                           are independent public accountants within the meaning
                           of the Securities Act and the applicable published
                           rules and regulations thereunder, and otherwise in
                           customary form and covering such financial and
                           accounting matters as are customarily covered by
                           letters of the independent certified public
                           accountants delivered in connection with secondary
                           offerings;

                  (iv)     enter into an underwriting agreement which shall
                           include customary indemnification and contribution
                           provisions to and from the underwriters and
                           procedures for secondary underwritten offerings; and

                  (v)      deliver such documents and certificates as may be
                           reasonably requested by the Holders of the
                           Registrable Securities being sold or the managing
                           underwriter or underwriters to evidence compliance
                           with clause (i) above and with any customary
                           conditions contained in the underwriting agreement,
                           if any.

                  (e) The Company shall make available for inspection by each
Holder, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all financial and
other records customary for purposes of the Holders' due diligence examination
of the Company and review of any Registration Statement, all SEC Documents (as
defined in the Exchange Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such Registration Statement, provided that such parties agree in writing to
keep such information confidential.

                  (f) Subject to Section 2(b) above, in connection with a
proposed or pending merger, acquisition, financing or similar transaction, the
Company may, for a period of not more than ten (10) consecutive Business Days or
a total of not more than thirty (30) calendar days in any twelve (12) month
period (a "PERMITTED SUSPENSION PERIOD"), delay the disclosure of material
non-public information concerning such transaction the public disclosure of
which at the time would not be, in the good faith opinion of the Board of
Directors of the Company, in the best interests of the Company and which may,
based on the written advice of outside counsel, be delayed under applicable law
or regulation (a "DISCLOSURE DELAY"). The Company will use its reasonable best
efforts to cause each Disclosure Delay to terminate at the earliest possible
date.

                  (g) In the event that, subsequent to the date on which the
initial Registration Statement filed hereunder is declared effective, a Holder
wishes to include for resale under such Registration Statement Registrable
Securities held by such Holder that were not included on such initial
Registration Statement, the Company shall either amend such Registration
Statement to include such securities, or file a new Registration Statement, or
both, upon receipt of written notice to such effect from such Holder. The

                                      -9-
<PAGE>

Company shall promptly file such amendment or new Registration Statement, as the
case may be, within ten (10) Business Days of receiving such notice, and shall
use its reasonable best efforts to (i) cause any such amendment or additional
Registration Statement, when filed, to become effective under the Securities Act
as soon as practicable thereafter, and (ii) keep any such additional
Registration Statement effective during the period described in Section 5 below.
All of the registration rights and remedies under this Agreement shall apply to
the registration of such newly reserved shares and such new Registrable
Securities, including without limitation the provisions providing for default
payments contained herein.

         3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.

         4. REGISTRATION ON FORM S-3; OTHER FORMS. The Company shall use its
reasonable best efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms, or in the event that the Company is
ineligible to use such form, such form as the Company is eligible to use under
the Securities Act. Halifax acknowledges that, as of the Closing Date, the
Company is ineligible to use Form S-3.

         5. REGISTRATION PERIOD. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its reasonable best
efforts to keep such registration effective until the earliest to occur of the
date on which (i) all the Holders have completed the public sales or
distribution described in the Registration Statement relating thereto, (ii) such
Registrable Securities may be sold under Rule 144(k) (provided that the
Company's transfer agent has accepted an instruction from the Company to such
effect) or (iii) there are no Registrable Securities outstanding.

         6. INDEMNIFICATION.

                  (a) COMPANY INDEMNITY. The Company will indemnify each Holder,
each of its officers, directors and partners, and each person controlling such
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls such underwriter, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document prepared by or on behalf of the Company (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such

                                      -10-
<PAGE>

case to a Holder to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or the underwriter
(if any) therefor and stated to be specifically for use therein, and provided,
further, that the Company shall not be liable for any claim, loss, damage,
liability, or expense (i) arising from an offer or sale made under the
Registration Statement occurring after such Holder has received a Suspension
Notice, or (ii) if the Holder fails to deliver at or prior to delivery of the
securities being sold, a prospectus that is amended or supplemented, and such
prospectus, as amended or supplemented, would have corrected the untrue
statement or omission or alleged untrue statement or omission of a material fact
contained in the prospectus delivered by the Holder, so long as the prospectus,
as so amended or supplemented, has been delivered to such Holder at least one
(1) Business Day prior to the date on which it delivers such securities to the
purchaser thereof. The indemnity agreement contained in this Section 6(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent will not be unreasonably withheld).

                  (b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s), against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document prepared by or on behalf of the Company, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, and
will reimburse the Company and such other Holder(s) and their directors,
officers and partners, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and provided that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).

                                      -11-
<PAGE>

                  (c) PROCEDURE. Each party entitled to indemnification under
this Section 6 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, is reasonably satisfactory to the Indemnified
Party , and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Article except to the extent that the Indemnifying
Party is materially and adversely affected by such failure to provide notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. No
Indemnifying Party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld). Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.

         7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying each of such Indemnified Parties, shall contribute to the amount
paid or payable by each such Indemnified Party as a result of such losses,
claims, damages or liabilities as between the Company on the one hand and any
Holder on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of such Holder in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of any Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or by such
Holder.

                  In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.

                  The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by PRO
RATA allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately

                                      -12-
<PAGE>

preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

         8. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Exchange Agreement or any
underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.

         9. INFORMATION BY HOLDERS. Each Holder shall furnish to the Company in
writing such information regarding such Holder and the distribution and/or sale
proposed by such Holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in this Agreement within ten (10) Business Days of any
such request. The intended method or methods of disposition and/or sale (Plan of
Distribution) of such securities as so provided by such Holder shall be included
without alteration in the Registration Statement covering the Registrable
Securities and shall not be changed unless specifically requested in writing by
such Holder.

         10. REPLACEMENT CERTIFICATES. The certificate(s) representing
Registrable Securities held by a Holder may be exchanged by such Holder at any
time and from time to time for certificates with different denominations
representing an equal aggregate number of such Registrable Securities, as
reasonably requested by such Holder upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.

         11. TRANSFER OR ASSIGNMENT. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to Halifax or any
other Holder by the Company under this Agreement may be transferred or assigned
(in whole or in part) to a transferee or assignee of Warrants or Convertible
Securities, as long as any such transfer or assignment is effected pursuant to
the applicable provisions of the Exchange Agreement; provided that the Company
must be given written notice by such transferring Holder at the time of or
within a reasonable time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned; and
provided further that the transferee or assignee of such rights agrees in
writing to be bound by the provisions of this Agreement applicable to a Holder.

         12. MISCELLANEOUS.

                                      -13-
<PAGE>

                  (a) REMEDIES. The Company and each Holder acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.

                  (b) JURISDICTION. The Company and each Holder (i) hereby
irrevocably submit to the non-exclusive jurisdiction of the federal and state
courts sitting in New York County, New York for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement and (ii) hereby
waive, and agree not to assert in any such suit action or proceeding, any claim
that it is not personally subject to the jurisdiction of such court, that the
suit, action or proceeding is brought in an inconvenient forum or that the venue
of the suit, action or proceeding is improper. The Company and each Holder
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other manner permitted
by law.

                  (c) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:

                  to the Company:

                           U.S. Plastic Lumber Corp.
                           2300 W. Glades Road
                           Suite 440 West
                           Boca Raton, Florida 33431
                           Facsimile:       (561) 394-5335
                           Attention:       Bruce Rosetto

                  with a copy to:

                           Blank Rome Comisky & McCauley LLP
                           One Logan Square
                           Philadelphia, Pennsylvania 19103
                           Facsimile:       (215) 569-5628
                           Attention:       Alan L. Zeiger, Esq.

                                      -14-
<PAGE>

                  to Halifax:

                           Halifax Fund, L.P.
                           c/o The Palladin Group, L.P.
                           Investment Manager
                           195 Maplewood Avenue
                           Maplewood, New Jersey 07040
                           Facsimile:  (973) 313-6491
                           Attention:  Robert Chender/Maurice Hryshko

                  with a copy to:

                           Duval & Stachenfeld
                           300 East 42nd Street
                           New York, NY 10017
                           Attn: Robert L. Mazzeo, Esq.
                           Fax: 212-883-8883

         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.

                  (d) WAIVERS. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.

                  (e) EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.

                  (f) PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Holder without
its express written approval, unless and until such disclosure is required by
law or applicable regulation, and then only to the extent of such requirement.
The Company agrees to deliver a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
to each Holder and any public announcement including the name of a Holder to
such Holder, prior to the publication of such announcements.

                  (g) ENTIRE AGREEMENT. This Agreement, together with the
Exchange Agreement, the Warrants, any Convertible Securities and the other
Transaction Documents, contains the entire understanding and agreement of the
parties with respect to the registration of Registrable Securities, and may not
be modified or terminated except by a written agreement signed by both parties.

                  (h) GOVERNING LAW. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York applicable to
contracts executed and to be performed entirely in such State.

                  (i) JURY TRIAL. Each party hereto waives the right to a trial
by jury.

                                      -15-
<PAGE>

                  (j) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

                           [Signature page to follow]

                                      -16-
<PAGE>

           In Witness Whereof, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.

                            U.S. PLASTIC LUMBER CORP.

                                            By: /s/ Bruce Rosetto
                                               --------------------------------
                                                     Name: Bruce Rosetto
                                                     Title: Secretary

                                            HALIFAX FUND, L.P.

                                            By:  THE PALLADIN GROUP, L.P.,
                                                 Attorney-in-Fact

                                            By: Maurice Hryshko
                                               --------------------------------
                                                     Name: Maurice Hryshko
                                                     Title: Counsel

                                      -17-

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