Exhibit10.1 RestructuringAgreement

TEKNI-PLEX, INC.

By: /s/ James E. Condon

Name:  James E. Condon

Title:   Chief Financial Officer

SUBSIDIARIES:

PURTEC CORPORATION

NATVAR HOLDINGS, INC.

TRI-SEAL HOLDINGS, INC.

PLASTIC SPECIALTIES AND TECHNOLOGIES, INC.

BURLINGTON RESINS, INC.

PLASTIC SPECIALTIES AND TECHNOLOGIES

INVESTMENTS, INC.

DISTRIBUTORS RECYCLING, INC.

TPI ACQUISITION SUBSIDIARY, INC.

TP/ELM ACQUISITION SUBSIDIARY, INC.

By: /s/  James E. Condon

Name:  James E. Condon

Title:   Chief Financial Officer

Dr. F. Patrick Smith

Name:  Dr. F. Patrick Smith

Tekni-Plex Partners LLC,

by its Managing Member

Tekni-Plex Management LLC

By: /s/ Dr. F. Patrick Smith                                                             

Name: Dr. F. Patrick Smith

Title: Managing Member of

Tekni-Plex Management LLC

MST/TP Partners LLC,

by its Managing Member

Tekni-Plex Management LLC

By: /s/ Dr. F. Patrick Smith                                                             

Name: Dr. F. Patrick Smith

Title: Managing Member of

Tekni-Plex Management LLC

WESTON PRESIDIO SERVICE COMPANY LLC

 

By:  /s/ David Ferguson        

Name:  David Ferguson

 

 

 

 

WESTON PRESIDIO CAPITAL III, L.P.

 

WPC ENTREPRENEUR FUND, L.P.

 

By: Weston Presidio Capital

Management III, LLC

 

Their general partner

 

By:  /s/ David Ferguson        

Name:  David Ferguson

 

 

WESTON PRESIDIO CAPITAL IV, L.P.

 

WPC ENTREPRENEUR FUND II, L.P.

 

By:  Weston Presidio Capital Management

IV, LLC

 

Their general partner

 

By:  /s/ David Ferguson    

Name:  David Ferguson

 

 

Company

 

ABL Facility

Company will continue to honor the Amended and Restated Credit Agreement dated as of February 14, 2008 among Tekni-Plex, the lenders party thereto, Citicorp USA, Inc. and General Electric Capital Corporation (the “ABL Facility”).

 

Company shall obtain a new credit facility, on terms satisfactory to the Consenting Noteholders (as defined below) and the Company, to refinance the ABL Facility in the event the existing lenders thereunder do not agree to finance the Company on substantially identical terms to the ABL Facility, or on terms otherwise acceptable to the Company and the Consenting Noteholders.

 

First Lien Notes

Company will continue to honor the 10 7/8% Senior Secured Notes due 2012 issued pursuant to the Indenture dated as of June 10, 2005 (as supplemented from time to time, the “First Lien Indenture”) among Tekni-Plex and HSBC Bank USA, National Association (the “First Lien Notes”) and the 8 ¾%

Senior Secured Notes due 2013 issued pursuant to the Indenture dated as of November 21, 2003 (as supplemented from time to time, the “Second Lien Indenture”) among Tekni-Plex and HSBC Bank USA, National Association (the “Second Lien Notes”).

 

Certain Consenting Noteholders shall provide a take-out facility/tender process to replace, redeem or repurchase, as necessary, any First Lien Notes that are put in connection with the occurrence of a Change in Control (as defined in the First Lien Indenture).

 

Subordinated Notes

Subordinated Notes held by noteholders consenting to the Restructuring (the “Consenting Noteholders”) will be exchanged for 100% of common stock in reorganized Tekni-Plex (the “New Common Stock”), subject to dilution by the Management Incentive Plan (defined below) and exercise of the Warrants (defined below).

 

Any party (each a “Party”, and collectively the “Parties”) to the Restructuring Agreement to which this term sheet is exhibited, that holds Preferred Stock or Common Stock and holds Subordinated Notes shall exchange Subordinated Notes on the terms set forth herein.

 

General Unsecured Creditors

General unsecured claims will be paid in the ordinary course by the Company.

 

The Second Amended and Restated Employment Agreement dated May 13, 2005, by and between Tekni-Plex, Inc. and Dr. F. Patrick Smith (as extended, amended, or supplemented prior to the Effective Date, the “Smith Employment Agreement”) shall be terminated (including its non-competition provisions but excluding confidentiality provisions) and all claims thereunder waived by all Parties; provided, however, (i) the Company shall continue to pay ordinary course benefits and business expenses (excluding golf club membership or any other extraordinary expense) to Dr. F. Patrick Smith accrued up to and including the Effective Date and (ii) until the first anniversary of the Effective Date, Dr. F. Patrick Smith shall be obligated to comply with the covenants restricting solicitation of employees of the Company in accordance with Section

10(iv) of the Smith Employment Agreement.  The Company shall pay all reasonable costs and expenses of Tekni-Plex Partners LLC and MST/TP Partners LLC arising in connection with implementation of the Restructuring.

Series A Preferred Stock

Preferred Stock will be exchanged or redeemed on the Effective Date for a distribution of the following warrant securities, which shall be exercisable into New Common Stock and subject to dilution by any equity issuances other than the warrants themselves, subject to anti-dilution protection as described below (the “Warrants”):

 

·  Series A Warrants:  four year warrants exercisable into 2.5% of the post-exercise New Common Stock (not subject to dilution for the issuance of other Warrants) with a strike price of 75% of the Pre-Investment Equity Value;

 

·  Series B Warrants:  five year warrants exercisable into 5% of the post-exercise New Common Stock (not subject to dilution for the issuance of other Warrants) with a strike price of 100% of the Pre-Investment Equity Value; and

 

·  Series C Warrants:  five year warrants exercisable into 5% of the post-exercise New Common Stock (not subject to dilution for the issuance of other Warrants) with a strike price of 110% of the Pre-Investment Equity Value.

 

“Pre-Investment Equity Value” means the sum of: (1) the aggregate principal amount of the Subordinated Notes exchanged for New Common Stock, (2) all accrued and unpaid interest due under the Subordinated Notes exchanged for New Common Stock through and including the Effective Date (which, for the avoidance of doubt, shall be the date on which such exchange is consummated), including additional interest due on any missed interest payments to the extent provided for under the Subordinated Note Indenture and (3) total restructuring related fees and expenses of the Company and advisors to the Consenting

Noteholders, in an amount not to exceed $10,000,000.

 

The definitive documentation for the Warrants shall contain customary terms and protections, including:  (a) cashless exercise rights upon the occurrence of a liquidity event, (b) anti-dilution protection for stock splits, stock reclassifications, dividends in kind and other “organic” changes, (c) information rights (subject to customary confidentiality provisions) and notice of certain corporate events and (d) Preemptive Rights (as defined below) on an as-converted basis.  The Warrants will be transferable by each holder (it being understood that affiliated funds or entities constitute a single consolidated holder) in a single transaction, subject to a right of first refusal by any entity that together with affiliates, holds more than 30% of the New Common Stock.

 

Upon the exercise of the Warrants, the holders of Warrants will be required to enter into a shareholder agreement (the “Shareholder Agreement”), which shall contain customary terms and conditions, including: (a) tag-along (such that the holders of the Warrants are entitled to exit on a pro rata basis along side the other holders of New Common Stock on any transaction in which the holders of New Common Stock are offered tag-along rights) and drag-along rights, (b) proportionate piggyback registration rights (such that the holders of the Warrants shall be included in any offering on a pro rata basis if other holders of New Common Stock are allowed to participate), (c) Preemptive Rights (on any equity issuance or other transaction in which the holders of New Common Stock or any affiliates thereof are offered the opportunity to participate) (the “Preemptive Rights”), and (d) information rights (subject to customary confidentiality provisions) and notice of certain corporate events.  The holders of the Preferred Stock shall be consulted with in good faith on the Shareholder Agreement, and shall be given a reasonable opportunity to review it, prior to its execution, to ensure that it contains the provisions set forth in clauses (a) through (d) above and that the basic protections customarily associated with such provisions are included therein, it being understood

that the holders of Preferred Stock shall not be permitted to negotiate cutbacks, percentages, notice or exercise periods and other similar provisions with respect to clauses (a) through (d) above (clauses (a) through (d), subject to the limitations above, collectively, the “Basic Protections”) and it being further understood that so long as the Basic Protections (which shall not discriminate against the holders of the Warrants) are provided therein it shall not be a condition precedent to the Restructuring that such holders are satisfied with the Shareholder Agreement.  For the avoidance of doubt, it is understood that the Shareholder Agreement will not have lesser protections for holders of New Common Stock received upon exercise of Warrants than other minority shareholders.

Common Stock

On the Effective Date, Common Stock will be cancelled, redeemed or purchased, and each holder will receive its pro rata distribution of $250,000.  The form of this distribution will be structured to comply with the terms of the ABL Facility, the First Lien Indenture, the Second Lien Indenture and the Subordinated Notes Indenture.  The Restructuring documentation will provide that upon receipt of its pro rata share of such distribution, each member of Tekni-Plex Partners LLC and MST/TP Partners LLC shall be deemed to have consented to the Restructuring and to have waived all claims in connection therewith.

 

Existing options, warrants or similar instruments convertible, exchangeable or exercisable into the Common Stock will be cancelled.

 

The Company will indemnify Dr. F. Patrick Smith, acting within the authority granted to him, and solely in his capacities, as Managing Member of Tekni-Plex Management LLC, Managing Member of Tekni-Plex Partners LLC (indirectly, as Managing Member of Tekni-Plex Management LLC) and Managing Member of MST/TP Partners LLC (indirectly, as Managing Member of Tekni-Plex Management LLC) for any claims and causes of action asserted against him by members of Tekni-Plex Management LLC, Tekni-Plex Partners LLC or MST/TP Partners LLC solely in connection with actions taken in connection with

approving and implementing the Restructuring Agreement.  For the avoidance of doubt, the foregoing indemnity shall not cover any claims or causes of actions based on (i) facts or circumstances occurring or arising prior to the date on which the Company’s Board of Directors approved the Restructuring Agreement, (ii) Dr. F. Patrick Smith’s actions or inactions as an officer or director of Tekni-Plex or any of its subsidiaries or (iii) any payments or benefits received by Dr. F. Patrick Smith and his affiliates from Tekni-Plex or any of its subsidiaries.

Senior management to be satisfactory to Consenting Noteholders.

 

To be appointed by Consenting Noteholders.

 

A management incentive plan providing for awards of options/restricted stock to be implemented in connection with the Restructuring.

 

Mutual releases of claims and causes of action assertable (whether directly or derivatively) against the Company, the Board of Directors (including its members acting in their capacity as officers, where applicable), Weston Presidio and its related funds that hold Preferred Stock or LLC interests in entities owning Common Stock, and the general partners of each such fund (together with Michael F. Cronin, the “Weston Presidio Entities”), other holders of Preferred Stock who consent to the Restructuring and/or holders of Common Stock (including those who hold LLC interests in entities owning Common Stock) who consent to the Restructuring and the Consenting Noteholders, in each case in their capacity as such.

 

The release shall apply, without exception or limitation, to all claims and causes of action in connection with, arising from or related to (i) the Restructuring (other than for actual fraud), (ii) infusions of capital by a Party (other than the Company) into the Company including the Common Stock (directly or indirectly through Tekni-Plex Management LLC, Tekni-Plex Partners LLC or MST/TP Partners LLC) and the Preferred Stock and (iii) all payments and transactions set forth on any

Party’s Disclosure Schedule (as defined below).  The release shall also apply to all other claims and causes of action not included in clauses (i)-(iii) above, provided, however, that solely as to such other claims and causes of action not included in clauses (i)-(iii) above, the release shall not apply to (A) any claims and causes of action for payments or economic benefits that are unlawful, in violation of any legal duty or recoverable under any statute, received by the releasee or an affiliate of the releasee directly from Tekni-Plex or any of its subsidiaries since May 1, 2002 (with respect to the Weston Presidio Entities and Dr. F. Patrick Smith) or January 1, 2007 (with respect to each other Disclosing Party) or (B) any claims or causes of action for, actual fraud, intentional misconduct, conscious disregard of duty or knowing violation of law; provided however, for the avoidance of doubt, the foregoing exclusions in clause (B) shall not include any claims or cause of action for which the Company’s officers and directors are currently indemnified or exculpated.  The Parties that hold Subordinated Notes hereby represent that (i) they do not currently intend to prosecute any claims or causes of action against any Party, in each case of the type described in the immediately preceding sentence and (ii) they are aware of the significant deficiencies in the Company’s internal controls (which have been described in various of the Company’s public filings).

 

In connection with the release contained herein, (a) the Weston Presidio Entities shall deliver a schedule (the “WP Disclosure Schedule”) setting forth any payments or any economic benefits received by any Weston Presidio Entity or any affiliate thereof directly from Tekni-Plex or any of its subsidiaries, in each case since May 1, 2002, (b) each of the members of the Board of Directors (other than Michael F. Cronin and Dr. F. Patrick Smith) shall deliver a schedule (the “Board Member Disclosure Schedule”) setting forth any payments or economic benefits received by such member or any affiliate of such respective member directly from Tekni-Plex or any of its subsidiaries, in each case since January 1, 2007 and (c) Dr. F. Patrick Smith shall deliver a schedule (the “Smith Disclosure Schedule”, and together with the WP Disclosure Schedule and the Board Member Disclosure Schedule,

Consent to Restructuring shall be obtained on or before the Effective Date from holders of not less than (i) 99.5% of Preferred Stock, (ii) 100% of Common Stock, (iii) 85% of the indirect interests in Common Stock (based on unit holdings of Tekni-Plex Partners LLC