THIRD AMENDMENT TO JUNIOR PARTICIPATION AGREEMENT

Exhibit 10.3

THIRD AMENDMENT TO JUNIOR PARTICIPATION AGREEMENT

     This Third Amendment to Junior Participation Agreement (this “Amendment”) dated as of October     , 2003, is entered into between GUARANTY BUSINESS CREDIT CORPORATION, a Delaware corporation (“GBCC”), and SCHULTES, INC., a New Jersey Corporation (together with its successors and any permitted assigns) collectively the “Participant.”

RECITALS:

     A.     GBCC and U.S. Plastic Lumber Ltd., a Delaware Corporation (“Company”), have entered into that certain Loan and Security Agreement dated as of December 19, 2002 (as amended, modified and restated from time to time, including, without limitation, by the “Second Amendment” as hereinafter defined, collectively, the “Loan Agreement”).

     B.     Company and Participant have entered into that certain Junior Participation Agreement dated as of August 7, 2003 (as amended, modified and restated from time to time, the “Participation Agreement”) providing for the sale by GBCC to Participant and the purchase by Participant from GBCC of an undivided subordinated participation interest in certain loans by GBCC to Company in an aggregate amount of up to One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) under a special advance subline under the Loan Agreement.

     C.     Company and Participant have requested that GBCC increase such special advance subline from One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) to Two Million Dollars ($2,000,000) and that GBCC sell to Participant an undivided subordinated participation interest in any loans made by GBCC under such increased special advance subline.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

Definitions. As used in this Amendment:

     “Second Amendment” means that certain Second Amendment to Loan and Security Agreement and Limited Waiver of Defaults of July 25, 2003 between GBCC and Company, as modified, supplemented, restated or modified from time to time.

     “Special Advance Subline” shall have the meaning set forth in the Second Amendment, as amended, supplemented, restated or modified from time to time.

     All capitalized terms used but not defined herein shall have the meanings given thereto in the Participation Agreement and, if not defined therein, in the Loan Agreement.

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     1.     Sale and Purchase of Participation Interest. The Participation Agreement is hereby amended to provide that GBCC hereby grants to Participant a 100% participation interest in the Special Advances in a total amount up to but not exceeding Two Million Dollars ($2,000,000), inclusive of Participant’s existing participation interest in the Special Advances made prior to the date hereof. In consideration of the Participant’s purchase of the Participation Interest in the Special Advances, the Participant irrevocably and unconditionally agrees to pay to GBCC the aggregate amount of up to Two Million Dollars ($2,000,000), inclusive of any amounts paid to GBCC prior to the date hereof, in immediately available funds on the Funding Date in accordance with paragraph 7 of the Second Amendment.

     2.     Reaffirmation of Participation Agreement. Except as amended hereby, the Participation Agreement and each other agreement, instrument and document executed by Participant in connection therewith in favor of GBCC remain in full force and effect and are hereby ratified and confirmed by the Participant.

     3.     Independent Credit Decision. The Participant hereby (a) acknowledges that it has received such documents and information as Participant has deemed appropriate to make its own independent credit and legal analysis and decision to enter into this Amendment, and (b) agrees that it will, independently and without reliance upon GBCC, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal analysis in connection with the rights and interests purchased by the Participant under the Participation Agreement, as amended hereby. The Participant acknowledges that GBCC has made no representations or warranties, express or implied, as to the loans, the letters of credit, the Company, the Transaction Documents, the collateral or the transactions thereunder, or the legal validity, enforceability or collectibility thereof.

     4.     Representations and Warranties.

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     5.     Effective Date; Conditions; Deliveries.

     6.     Equivalent Value. The Participant acknowledges and agrees that the value of the benefits sold, transferred and assigned to the Participant pursuant to this Amendment equals or exceeds the amount payable by the Participant in consideration therefor.

     7.     INDEMNIFICATION. THE PARTICIPANT HEREBY UNCONDITIONALLY AND IRREVOCABLY AGREES TO INDEMNIFY GBCC, AND ITS RESPECTIVE OFFICERS, EMPLOYEES AND REPRESENTATIVES, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS (EACH AN “INDEMNIFIED PERSON”), WITH RESPECT TO AND HOLD SUCH PERSONS HARMLESS FROM ANY AND ALL CLAIMS, LOSS,

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LIABILITY AND DEMANDS OF ANY KIND (INCLUDING, WITHOUT LIMITATION, ALL COSTS AND EXPENSES ARISING IN CONNECTION THEREWITH, INCLUDING REASONABLE ATTORNEYS’ FEES) BY ANY PERSON OR ENTITY WHATSOEVER, ARISING OUT OF OR RELATING TO THE PARTICIPANT’S PURCHASE OF ITS PARTICIPATION INTEREST AS PROVIDED FOR HEREIN, INCLUDING, WITHOUT LIMITATION, THE PARTICIPANT’S MAKING OF SUCH PURCHASE OR ITS RIGHT TO DO SO, THE FUNDS (OR THE SOURCE THEREOF) EMPLOYED BY THE PARTICIPANT IN MAKING PAYMENT FOR SUCH PURCHASE, AND ANY CLAIMS OF ANY OTHER PERSON.

     8.     Miscellaneous.

[The next page is the signature page.]

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     THIS AMENDMENT HAS BEEN EXECUTED OUTSIDE THE STATE OF FLORIDA.

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     The undersigned hereby agree and consent to the terms and conditions of the foregoing Amendment.

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