-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ElE+/6un97qw7S4vT6y0wa2m97FsbM86ivnm3xfkZO9r70HWEMFbhNmLglSEYQfY LDRANOpT+XiJ1Sf/qk6/7w== 0001047469-05-008363.txt : 20050331 0001047469-05-008363.hdr.sgml : 20050331 20050330214712 ACCESSION NUMBER: 0001047469-05-008363 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050331 DATE AS OF CHANGE: 20050330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLIANT CORP CENTRAL INDEX KEY: 0001049442 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, FOIL & COATED PAPER BAGS [2673] IRS NUMBER: 870496065 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-40067 FILM NUMBER: 05716186 BUSINESS ADDRESS: STREET 1: 1475 WOODFIELD ROAD CITY: SCHAUMBURG STATE: IL ZIP: 60173 BUSINESS PHONE: 8479693300 MAIL ADDRESS: STREET 1: 1475 WOODFIELD ROAD CITY: SCHAUMBURG STATE: IL ZIP: 60173 FORMER COMPANY: FORMER CONFORMED NAME: HUNTSMAN PACKAGING CORP DATE OF NAME CHANGE: 19971110 10-K 1 a2154755z10-k.htm FORM 10-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 333-40067

PLIANT CORPORATION
(Exact Name of the Registrant as Specified in its Charter)

Utah
(State or other jurisdiction of
incorporation or organization)

87-0496065
(I.R.S. Employer
Identification No.)

1475 Woodfield Road, Suite 700
Schaumburg, IL 60173
(847) 969-3300
(Address of principal executive offices and telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No ý

At March 21, 2005 there were 571,711 outstanding shares of the Registrant's common stock. As of June 30, 2004, 71,659, or approximately 12.5%, of the outstanding shares of the Registrant's common stock were held by persons other than affiliates of the Registrant. There is no established trading market for the Registrant's common stock and, therefore, the aggregate market value of shares held by non-affiliates cannot be determined by reference to recent sales or bid and asked prices.

This report contains certain forward-looking statements that involve risks and uncertainties, including statements about our plans, objectives, goals, strategies and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements. Some of the factors that could negatively affect our performance are discussed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Statement for Forward-Looking Information" and elsewhere in this report.

PART I

ITEM 1. BUSINESS

General

Pliant Corporation ("Pliant," the "Company," "we" or "us"), with 2004 revenues of approximately $968.7 million, is one of North America's leading manufacturers of value-added films and flexible packaging for food, personal care, medical, agricultural and industrial applications. We offer some of the most diverse product lines in the film industry and have achieved leading positions in many of these product lines. We operate 24 manufacturing and research and development facilities worldwide and we currently have approximately 1.0 billion pounds of annual production capacity.

Pliant has a proud heritage that traces back many decades. We have combined strategic acquisitions, internal growth, product innovation and operational improvements to grow our business from net sales of $310.8 million in 1996 to $968.7 million in 2004. We have invested heavily to expand our capabilities and value-added product offerings for our customers. Between January 1, 2000 and December 31, 2004, we invested a total of $212.3 million to expand, upgrade and maintain our asset base and information systems.

Recapitalization

On May 31, 2000, we consummated a recapitalization pursuant to an agreement dated March 31, 2000 among us, our then existing stockholders and an affiliate of J.P. Morgan Partners, LLC, whereby the affiliate acquired majority control of our common stock. The total consideration paid in the recapitalization was approximately $1.1 billion, including transaction costs. Pursuant to the recapitalization agreement:

•: we redeemed all of the shares of our common stock held by Jon M. Huntsman, our founder, then majority stockholder and then Chairman of the Board;
•: an affiliate of J.P. Morgan Partners, LLC purchased approximately one-half of the shares of our common stock held collectively by The Christena Karen H. Durham Trust and by members of our current and former senior management;
•: an affiliate of J.P. Morgan Partners, LLC and certain other institutional investors purchased shares of common stock directly from us;
•: the trust and the management investors at that time retained or "rolled-over" approximately one-half of the shares of our common stock collectively owned by them prior to the recapitalization; and
•: we issued to an affiliate of J.P. Morgan Partners, LLC and to certain other institutional investors a new series of senior cumulative exchangeable redeemable preferred stock and detachable warrants for our common stock.

Controlling Shareholders

As of March 21, 2005, J.P. Morgan Partners (BHCA), L.P. and/or affiliates owned approximately 55% of our outstanding common stock, 74% of our detachable warrants to purchase common stock issued in connection with our Series A preferred stock and 59% of our outstanding Series A preferred stock. J.P. Morgan Partners, LLC serves as investment advisor to J.P. Morgan Partners (BHCA), L.P. J.P. Morgan Partners, LLC is the private equity group of J.P. Morgan Chase & Co., which is one of the largest financial holding companies in the United States. J.P. Morgan Partners, LLC is a global partnership, with approximately $21 billion in capital under management as of December 31, 2004. It is a leading provider of equity capital for middle market buyouts, growth equity and venture capital and has closed over 1,300 individual transactions since its inception in 1984. (See "Risk Factors")

Recent Developments

Restructuring of Executive Management. In October 2003, Harold C. Bevis was appointed as our President and Chief Executive Officer and was elected to our Board of Directors. Edward A. Lapekas, who had served as our interim Chief Executive Officer since August 24, 2003, was named the Non-Executive Chairman of our Board of Directors. We entered into a consulting agreement with Mr. Lapekas in 2003. In November 2003, R. David Corey was named our Executive Vice President of Global Operations and was promoted to Executive Vice President and Chief Operating Officer in March 2004. Brian Johnson, who served as Chief Financial Officer of the Company beginning in July 2001, resigned as Executive Vice President and Chief Financial Officer of the Company in May 2004, although he continued to be employed as a non-executive officer of the Company until December 31, 2004. In September 2004, James Ide was hired as the Chief Financial Officer of the Company, a position from which he resigned effective January 26, 2005. Since that time, Mr. Bevis has served as the acting Chief Financial Officer of the Company. In May 2004, Lori Roberts was hired as Senior Vice President, Human Resources, a position from which she resigned effective March 18, 2005. Since that time, Mr. Corey has served as the acting director of Human Resources of the Company.

Sale of Senior Secured Discount Notes. On February 17, 2004, we completed the sale of $306,000,000 in aggregate principal amount at maturity of 11¹/8% Senior Secured Discount Notes due 2009 (the "Senior Secured Discount Notes"). The net proceeds from such sale in the amount of $220.2 million (after deducting underwriters fees) together with borrowings of $30.0 million under our revolving credit facility described below, were used to pay off our then existing term loan facilities in the amount of $219.6 million and our then existing revolving loan facility of $20 million and $3.8 million in fees and other costs, leaving $6.8 million of cash on hand. Subsequently the Senior Secured Discount Notes were exchanged for publicly held notes with substantially similar terms that were registered under the Securities Act of 1933, as amended.

Revolving credit facility. On February 17, 2004, we terminated our then existing credit facilities and entered into a revolving credit facility in the principal amount of up to $100 million. The new revolving credit facility contains substantially fewer financial covenants than our prior credit facilities and therefore substantially reduces our exposure to covenant default risk. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations")

Sale of Pliant Solutions and Reorganization of Company Operations. On September 30, 2004, we sold substantially all of the assets of our wholly-owned subsidiary, Pliant Solutions Corporation for a total consideration of $9 million. We acquired Pliant Solutions Corporation from Décora in 2002. Pliant Solutions Corporation, previously reported as a separate operating segment during the first three quarters of the 2004 fiscal year, manufactured decorative and surface coverings through the conversion of various films into consumer packaged goods. The Pliant Solutions operating segment had net sales for the nine months ended September 30, 2004 of $22.5 million; net sales for the twelve months ended December 31, 2003 of $34.9 million; and net sales for the eight months ended December 31, 2002 of

$28.3 million. As a result of our sale of Pliant Solutions Corporation, during the fourth quarter of 2004, we reorganized our operations under four operating segments: Specialty Products Group, Industrial Films, Engineered Films and Performance Films.

Adoption of 2004 Incentive Plans and Issuance of Series B Preferred Stock. Effective January 1, 2004, our Board of Directors adopted two new benefit plans in which some or all of our named executive officers may participate: the 2004 Management Incentive Compensation Plan and the 2004 MIP Long Term Incentive Plan. The participants in the 2004 Management Incentive Compensation Plan were paid cash bonuses relating to achievement of certain EBITDA and operating free cash flow goals for 2004. In addition, participants in the 2004 MIP Long Term Incentive Plan, which includes all officers and other key management personnel of the Company (except the Chief Executive Officer), received a credit of half of the 2004 bonus amount to the accumulated amount of their Long Term Incentive Plan Award that they can earn under the 2004 MIP Long Term Incentive Plan, which will become payable on December 31, 2007 under the terms of that plan to eligible employees who are then employed by the Company and who have satisfied certain other conditions as set forth in the plan. (See "Executive Compensation")

In August 2004, our Board of Directors adopted the 2004 Restricted Stock Incentive Plan. Since the adoption of the 2004 Restricted Stock Incentive Plan, we sold 720 shares of a newly created Series B Preferred Stock to our Chief Executive Officer and certain other officers in a private transaction at $162 per share, which was determined to be the fair market value of those shares based on an independent appraisal received by the Board.

Termination of Alliant Joint Venture. On January 5, 2005, we terminated our joint venture with Supreme Plastics Group PLC by purchasing all of the equity interests in the joint venture Supreme Plastics Group PLC owned for $400,000. As of January 5, 2005, Alliant Company LLC became a wholly-owned subsidiary of the Company. On January 5, 2005, Pliant Corporation signed a nonbinding letter of intent to sell the intellectual property, working capital, and equipment assets used in the Alliant operation to an independent third party for a purchase price of $6.3 million, subject to certain adjustments. Although a purchase agreement is being negotiated, there is no assurance if or when this sale will be completed. Any such sale will require the consent of or waivers by the Company's lenders, who may require that the proceeds of that sale be used to repay indebtedness.

Industry Overview

We manufacture and sell a variety of plastic films and flexible packaging products. The plastic film industry serves a variety of flexible packaging markets, including the pharmaceutical, medical, personal care, household, industrial and agricultural film markets, as well as secondary packaging and non-packaging end use markets. According to the Flexible Packaging Association, the North American market for flexible packaging was approximately $20.5 billion in 2003 and has grown at a compound annual growth rate, or CAGR, of approximately 3.7% from 1992-2003. Many of our plastic films are flexible packaging products as defined by the Flexible Packaging Association. However, the flexible packaging market, as defined by the Flexible Packaging Association, does not include certain of the products we sell, such as agricultural films, and includes certain products we do not sell, such as wax papers and aluminum foils. We believe, however, that trends affecting the flexible packaging industry also affect the markets for many of our other products.

Flexible packaging is used to package a variety of products, particularly food, which accounts for approximately half of all flexible packaging shipments. Recent advancements in film extrusion and resin technology have produced new, sophisticated films that are thinner and stronger and have better barrier and sealant properties than other materials or predecessor films. These technological advances have facilitated the replacement of many traditional forms of rigid packaging with film-based, flexible packaging that is lighter, is lower in cost and has enhanced performance characteristics. For example, in

consumer applications, stand-up pouches that use plastic films are now often used instead of paperboard boxes, glass jars and metal cans. In industrial markets, stretch and shrink films are often used instead of corrugated boxes and metal strapping to unitize, bundle and protect items during shipping and storage.

Except as otherwise indicated, all industry and market share data reported herein is based on estimates made by the Flexible Packaging Association in a "State of the Industry Report 2004," which was compiled based on data compiled from surveys submitted by its members beginning in December of 2003, or from data provided by the Flexible Packaging Association in an investment bank report titled "Paper and Packaging: Industry Overview and Outlook" issued in December 2003. Mr. Bevis serves on the Board of Directors of the Flexible Packaging Association and Pliant is a dues-paying member of the Flexible Packaging Association. Unless otherwise indicated, the market share and industry data used throughout this report were obtained primarily from internal company surveys and management estimates based on these surveys and our management's knowledge of the industry. We have not independently verified any of the data from third-party sources. Similarly, internal company surveys and management estimates, while we believe them to be reliable, have not been verified by any independent sources. While we are not aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed in "Cautionary Statement for Forward-Looking Information."

Products, Markets and Customers

Our products are sold into numerous markets for a wide variety of end uses and are offered through four operating segments: Specialty Products Group, Industrial Films, Engineered Films, and Performance Films. Operating segments are components of our business for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. In previous reporting periods, we had four operating segments: Pliant U.S., Pliant International, Pliant Flexible Packaging and Pliant Solutions. During the third quarter of 2004, we sold Pliant Solutions and reorganized our operations under our four current operating segments: Specialty Products Group, Industrial Films, Engineered Films and Performance Films. Segment information in this report with respect to 2003 and 2002 has been restated for comparative purposes. For more information on our operating segments and geographic information, see Note 14 to the consolidated financial statements included elsewhere in this report.

Specialty Products Group

The Specialty Products Group includes our Specialty Films and Printed Products Films divisions and accounted for 40.3%, 41.1% and 40.7% of our consolidated net sales in 2004, 2003 and 2002, respectively. Our Specialty Films division produces personal care films, medical films, and agricultural films.

Personal Care. We are a leading producer of personal care films used in disposable diapers, feminine care products and adult incontinence products. Personal care films must meet diverse and highly technical specifications. Many of these films must "breathe," allowing water vapors to escape. In some applications, the softness or "quietness" of the film is important, as in adult incontinence products. We are one of North America's leading producers of personal care films, with an estimated market share of approximately 35% in 2003 based on sales dollars.

Medical. We are a specialized niche manufacturer of medical films. Our medical films are used in disposable surgical drapes and gowns. We also produce protective packaging for medical supplies, such as disposable syringes and intravenous fluid bags. In addition, our products include packaging for disposable medical devices. Our medical films are manufactured in "clean-room" environments and must meet stringent barrier requirements. A sterile barrier is necessary to provide and assure the

integrity of the devices and to prevent contamination and tampering. These films must also be able to withstand varied sterilization processes.

Agricultural. We are a leading manufacturer of polyethylene mulch films that are sold to fruit and vegetable growers and to nursery operators. Our mulch films are used extensively in North America and Latin America. Commercial growers of crops like peppers, tomatoes, cucumbers and strawberries are the primary consumers of our mulch films. These crops are typically planted on raised beds that are tightly covered with mulch film. The mulch film eliminates or retards weed growth, significantly reduces the amount of water required by plants, controls soil bed temperatures for ideal growing conditions and allows easy application of fertilizer. We are one of North America's two largest producers of mulch films, with an estimated market share of approximately 31%.

Our Printed Products Films division provides printed rollstock, bags and sheets used to package food and consumer goods. Printed bags or rollstock are sold to bakeries, fresh and frozen food processors, manufacturers of personal care products, textile manufacturers and other dry goods processors. Bread and bakery bags represent a significant portion of our Printed Products Films business. Our Printed Products Films division produces approximately four billion bread and bakery bags each year, with an estimated share of 20% of the North American market.

The Specialty Products Group also includes our Mexican subsidiary, Pliant de Mexico S.A. de C.V., which produces printed products for Mexico and other Latin American countries. Pliant de Mexico S.A. de C.V. also produces personal care and barrier films for these markets. In 2004, management estimates that approximately 10% of our Printed Products sales were outside the United States, primarily in Mexico and Latin America.

Industrial Films

The Industrial Films segment accounted for 26.2%, 24.6% and 22.5% of our consolidated net sales in 2004, 2003 and 2002, respectively.

Our Industrial Films segment manufactures stretch and PVC films. In 2004, approximately 23% of our Industrial Films sales were outside the United States, primarily in Canada, Europe and Australia. Our customers in this segment include national distributors, such as Bunzl, and Xpedx; grocery chains, such as A&P, Kroger, Publix and Safeway; and end-users, such as P&G, Costco, and Wal-Mart.

Stretch Films. Our stretch films are used to bundle, unitize and protect palletized loads during shipping and storage. Stretch films continue to replace more traditional packaging, such as corrugated boxes and metal strapping, because of stretch films' lower cost, higher strength, and ease of use. We are North America's fourth largest producer of stretch films, with an estimated share of 10% of the North America Market.

PVC Films. Our PVC films are used by supermarkets, delicatessens and restaurants to wrap meat, cheese and produce. PVC films are preferred in these applications because of their clarity, elasticity and cling. We also produce PVC films for laundry and dry cleaning bags. Finally, we produce PVC films for companies that repackage the films in smaller cutterbox rolls for sale in retail markets in North America, Latin America and Asia. In 2004, we were the one of the largest producers of PVC films in North America, with an estimated market share of approximately 27%. In addition, we are the leading producer of PVC films in Australia, with an estimated market share of 60%, and have an estimated market share of approximately 15% in Europe.

Engineered Films

The Engineered Films segment accounted for 22.6%, 21.9% and 24.1% of our consolidated net sales in 2004, 2003 and 2002, respectively.

Engineered films are sold to converters of flexible packaging who laminate them to foil, paper or other films, print them, and ultimately fabricate them into the final flexible packaging product. Our engineered films are a key component in a wide variety of flexible packaging products, such as fresh-cut produce packages, toothpaste tubes and stand-up pouches. Generally, our engineered films add value by providing the final packaging product with specific performance characteristics, such as moisture, oxygen or odor barriers, ultraviolet protection or desired sealant properties. Because engineered films are sold for their sealant, barrier or other properties, they must meet stringent performance specifications established by the converter, including gauge control, clarity, sealability and width accuracy. We are a leader in introducing new engineered film products to meet flexible packaging industry trends and specific customer needs. We are one of North America's leading manufacturer of films sold to converters, with an estimated market share of approximately 30%.

Performance Films

The Performance Films segment accounted for 10.1%, 11.8% and 11.6% of our consolidated net sales in 2004, 2003 and 2002, respectively.

We manufacture a variety of barrier and custom films, primarily for smaller, but profitable, niche segments in flexible packaging and industrial markets. For example, we have an estimated share of 20% of the North American market for films for cookie, cracker and cereal box liners. We are also a leading manufacturer of barrier films for liners in multi-wall pet food bags, films for photoresist coatings for the electronics industry, and films for the protection and transportation of sheet molding compound used in the manufacture of boats and automotive parts.

Sales and marketing

Because of our broad range of product offerings and customers, our sales and marketing efforts are generally product or customer specific. We market in various ways, depending on both the customer and the product. However, most of our salespeople are dedicated to a specific product line and sometimes to specific customers.

The majority of our Specialty Films, Engineered Films and Performance Films are sold by our own direct sales force. These salespeople are supported by customer service and technical specialists assigned to each salesperson, and in some cases, to specific customers. Customer service representatives assist with order intake, scheduling and product information. Technical support personnel assist the salesperson and the customer with technical expertise, quality control and product development. We believe it is critical that our sales, marketing and technical support teams work together in order to meet our customers' product needs and provide meaningful product development.

We sell some of our Specialty Films, such as our agricultural films, through regional distributors. In addition, certain of our personal care films in Specialty Films and barrier films in Performance Films are sold through brokers who have long-standing relationships with customers.

Most of our Printed Products are sold through brokers. National grocery chains and some smaller customer accounts are serviced by our own direct sales force. Generally, each salesperson is supported individually by a customer service specialist and by a group of technical specialists.

Industrial Films are generally sold through distributors. We have an independent contract sales force that sells our stretch films to national and regional distributors. Our PVC films are sold by our own sales force to regional and national distributors, directly to national grocery chains, and directly to converters, who repackage the film into cutterbox rolls for sale in retail markets.

Manufacturing

Between January 1, 2000 and December 31, 2004, excluding acquisitions, we have invested a total of $212.3 million to expand, upgrade and maintain our asset base and information systems. With 24 plants, we are often able to allocate lines to specific products. Our multiple manufacturing sites and varied production capabilities also allow us to offer multiple plant service to our national customers. Generally, our manufacturing plants operate 24 hours a day, seven days a week.

We manufacture our film products using both blown and cast extrusion processes. In each process, thermoplastic resin pellets are combined with other resins, plasticizers or modifiers in a controlled, high temperature, pressurized process to create films with specific performance characteristics. Blown film is produced by extruding molten resin through a circular die and chilled air ring to form a bubble. In the cast film process, molten resin is extruded through a horizontal die onto a chill roll, where the film is quickly cooled. These two basic film manufacturing processes produce films with uniquely different performance characteristics. Cast films are generally clearer, softer and more uniform in thickness. Blown films offer enhanced physical properties, such as increased tear and puncture resistance and better barrier protection.

We also produce a significant amount of printed films and bags. We employ both flexographic and rotogravure printing equipment in our printing operations.

Technology and research and development

We believe our technology base and research and development provide critical support to our business and customers. Our research and development group provides the latest resin and extrusion technology to our manufacturing facilities and allows us to test new resins and process technologies. Our technical center in Newport News, Virginia has a pilot plant that allows the technical center to run commercial "scale-ups" for new products. We are able to use our broad product offerings and technology to transfer technological innovations from one market to another.

Our technical representatives often work with customers to help them develop new, more competitive products. This allows us to enhance our relationships with these customers by providing the technical service needed to support commercialization of new products and by helping them to improve operational efficiency and quality throughout a product's life cycle.

We spent $6.5 million, $7.3 million and $8.1 million on research and development for the years ended December 31, 2004, 2003 and 2002, respectively, before giving effect to revenues from pilot plant sales. In addition, we participate in several U.S. government funded research and development programs.

Intellectual property rights

Patents, trademarks and licenses are significant to our business. We have patent protection on many of our products and processes, and we regularly apply for new patents on significant product and process developments. We have registered trademarks on many of our products. We also rely on unpatented proprietary know-how, continuing technological innovation and other trade secrets to develop and maintain our competitive position. In addition to our own patents, trade secrets and proprietary know-how, we license from third parties the right to use some of their intellectual property. Although we constantly seek to protect our patents, trademarks and other intellectual property, our precautions may not provide meaningful protection against competitors and the value of our trademarks could be diluted.

Raw materials

Polyethylene, PVC, polypropylene and other resins and additives constitute the major raw materials for our products. We purchase most of our resin from major oil companies and petrochemical companies in North America. For the year ended December 31, 2004, resin costs comprised approximately 61% of our total manufacturing costs. Significant increases in the price of resins increase our costs, reduce our operating margins, and impair our ability to service our debt unless we are able to pass all of the increases on to our customers. The price of resins is a function of, among other things, manufacturing capacity, demand, and the price of crude oil and natural gas feed stocks. Resin shortages or significant increases in the price of resin have had and could continue to have a significant adverse effect on our business. Since the middle of 2002, we have experienced a period of significant uncertainty with respect to resin supplies and prices. High crude oil and natural gas pricing have had significant impact on the price and supply of resins. Prices for resin have risen dramatically during 2004 and are expected to continue to rise. Pliant's costs for resin on a weighted-average basis rose 29% from December 2003 to December 2004, with over half of that increase occurring in the fourth quarter of 2004.

Major suppliers of resin have implemented price increases to cover their increases in petroleum costs, and to improve their operating margins as capacity utilization increases. Due in part to consolidation in the resin supply industry, suppliers have resisted the consumers' efforts to limit or defer the effect of these increases. Our goal is for the prices of our products generally to fluctuate with the price of resins. Approximately half of our sales are made on a transactional basis, which allows us to pass through resin price increases, although competitive market conditions in our industry from time to time limit our ability to pass the full cost of higher resin pricing through to our customers immediately or completely. The other approximately one half of our sales are made pursuant to customer contracts, most of which dictate the timing in our ability to pass through the increase. A large majority of these contracts allow resin cost increases to be passed along quarterly, with some allowing increased costs to be passed on more quickly and a small number requiring a longer delay. In combination, the cost to the Company of the gap between the speed in which increased costs are passed on to us and the time in which we can pass these costs on to our customers has a negative impact on both our results of operations and our working capital needs. This trend is industry wide and its impact was significant in 2004 and is likely to continue and possibly increase in the future.

As one of the largest consumers of packaging resin in the United States, the Company is working on behalf of its customers with its suppliers to minimize the effects and the timing of the pass through of increased resin costs and to maximize the likelihood that resin supplies continue to be available to the Company in sufficient quantities and on timetables necessary to meet the needs of our customers. We also regularly evaluate commodity hedging, collar agreements, and other protective strategies and will implement them if and when appropriate. However, if this period of high resin pricing continues, the limits on our ability to pass through these costs to our customers will exert downward pressure on profits and negatively effect our cash flow and our working capital requirements.

Competition

The markets in which we operate are highly competitive on the basis of service, product quality, product innovation and price. Small and medium-sized manufacturers that compete primarily in regional markets service a large portion of the film and flexible packaging market, and there are relatively few large national manufacturers. In addition to competition from many smaller competitors, we face strong competition from a number of large film and flexible packaging companies. Some of our competitors are substantially larger, are more diversified, and have greater resources than we have, and, therefore, may have certain competitive advantages.

Employees

As of December 31, 2004, we had approximately 3,025 employees, of which approximately 850 employees were subject to a total of 9 collective bargaining agreements that expire on various dates between February 28, 2005 and March 7, 2007. The collective bargaining agreement covering our Langley union employees expired on February 28, 2005. We are currently operating under an informal extension of the terms of that agreement and are in negotiations with the union for a new collective bargaining agreement. We consider our current relations with our employees to be good. However, if major work disruptions were to occur, our business could be adversely affected.

Environmental matters

Our operations are subject to environmental laws in the United States and abroad, including those described below. Our capital and operating budgets include costs and expenses associated with complying with these laws, including the acquisition, maintenance and repair of pollution control equipment, and routine measures to prevent, contain and clean up spills of materials that occur in the ordinary course of our business. In addition, our production facilities require environmental permits that are subject to revocation, modification and renewal. We believe that we are in substantial compliance with environmental laws and our environmental permit requirements, and that the costs and expenses associated with such compliance are not material to our business. However, additional operating costs and capital expenditures could be incurred if, for example, additional or more stringent requirements relevant to our operations are promulgated.

From time to time, contaminants from current or historical operations have been detected at some of our present and former sites, principally in connection with the removal or closure of underground storage tanks. The cost to remediate these sites has not been material, and we are not currently aware that any of our facility locations have material outstanding claims or obligations relating to contamination issues.

Available Information

We file annual, quarterly and current reports and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file at the SEC's public reference facility at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20459. Please call the SEC at 1-800-SEC-0330 for further information on the public reference facility.

We maintain an Internet web site at http://www.pliantcorp.com. We do not currently make our annual, quarterly and current reports available on or through our web site. We do not have publicly traded stock, and copies of our reports are mailed to holders of our outstanding debt securities under the terms of our indentures. In addition, we believe virtually all of our investors and potential investors in our debt securities have access to our reports through the SEC's web site or commercial services. Therefore, we do not believe it is necessary to make our reports available through our web site. We also provide electronic or paper copies of our filings free of charge upon written or oral request directed to Pliant Corporation, 1475 Woodfield Road, Suite 700, Schaumburg, Illinois 60173, telephone: (866) 878-6188.

Cautionary Statement for Forward-Looking Information

Certain information set forth in this report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information that is based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies.

These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will" and similar terms and phrases, including references to assumptions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. These factors include, but are not limited to, the following:

•: general economic and business conditions, particularly an economic downturn;
•: industry trends;
•: increases in our leverage;
•: interest rate increases;
•: changes in our ownership structure;
•: raw material costs and availability, particularly resin;
•: competition;
•: the loss of any of our major customers;
•: changes in demand for our products;
•: new technologies;
•: changes in distribution channels or competitive conditions in the markets or countries where we operate;
•: costs of integrating any future acquisitions;
•: loss of our intellectual property rights;
•: foreign currency fluctuations and devaluations and political instability in our foreign markets;
•: changes in our business strategy or development plans;
•: availability, terms and deployment of capital;
•: availability of qualified personnel;
•: increases in the cost of compliance with laws and regulations, including environmental laws and regulations; and
•: other risks and uncertainties listed or described from time to time in reports we periodically file with the SEC.

We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements. All forward-looking statements, including, without limitation, management's examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. But, there can be no assurance that management's expectations, beliefs and projections will result or be achieved. All forward-looking statements apply

only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

Our risks are more specifically described in the "Risk Factors" section of this report. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.

Risk Factors

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. The following risks and uncertainties are among the factors that could cause our actual results to differ materially from the forward-looking statements made in this report. There may be other factors, including those discussed elsewhere in this report, that may cause our actual results to differ materially from the forward-looking statements. Any forward-looking statements should be considered in light of these factors.

Risks related to the Financial Structure of the Company

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our debt obligations.

We are highly leveraged, which means that we have a large amount of indebtedness relative to our stockholders' deficit. We are highly leveraged particularly in comparison to some of our competitors. As of December 31, 2004, we had total debt of $842.3 million, and for the 2004 fiscal year, earnings were insufficient to cover fixed charges by approximately $112.3 million. It may be difficult for us to generate sufficient earnings to cover fixed changes in future years.

Our high degree of leverage may limit our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes. In addition, a substantial portion of our cash flows from operations must be dedicated to the payment of principal and interest on our indebtedness and is not available for other purposes, including our operations, capital expenditures, new investments and future business opportunities. Our leveraged position may limit our ability to adjust to changing market conditions and to withstand competitive pressures, putting us at a competitive disadvantage; and we may be vulnerable in a downturn in general economic conditions or in our business, or we may be unable to carry out capital spending that is important to our growth and productivity improvement programs.

We may not be able to generate sufficient cash to service all of our indebtedness and could be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our estimated debt service for 2005 will be approximately $73.5 million, consisting of $2.0 million of scheduled mandatory principal payments and approximately $71.5 million of interest payments.

Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. These factors include:

•: fluctuations in interest rates;
•: unscheduled plant shutdowns;
•: increased operating costs;

•: prices and supply of raw materials; and
•: product prices and regulatory developments.

We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. See "Cautionary statements for forward-looking statements" and "Management's discussion and analysis of financial condition and results of operations—Liquidity and capital resources."

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such cash flows and capital resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our revolving credit facility and indentures restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.

If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including covenants in our indentures and credit facility), we could be in default under the terms of the agreements governing such indebtedness, including our indentures and revolving credit facility. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the credit facility could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may, in the future, need to obtain waivers from the required lenders under our credit facility to avoid being in default. If we breach our covenants under the revolving credit facility and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we could be in default under the revolving credit facility and the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.

Our variable rate indebtedness subjects us to interest rate risk.

Although we have substantially reduced our variable rate indebtedness, our borrowings under our revolving credit facility are and will be at variable rates of interest. An increase of 1% in interest rates would result in an additional $100,000 of annual interest expense for each $10.0 million in borrowings under our revolving credit facility. We are thus exposed to interest rate risk to the extent of our borrowings under the revolving credit facility.

Limits on our borrowing capacity under our revolving credit facility and other indebtedness may affect our ability to finance our operations.

While our revolving credit facility provides for $100.0 million of commitments, our ability to borrow funds under our revolving credit facility is subject to the amount of eligible receivables and inventory in our borrowing base under the facility. Further, if we do not maintain a specified fixed charge coverage ratio, the availability under our revolving credit facility may be limited. Our ability to make borrowings under our revolving credit facility will also be conditioned upon our compliance with other covenants in the credit agreement, including financial covenants that apply when our borrowings exceed certain amounts. In addition, the terms of our indentures currently limit the amount we may borrow under our revolving credit facility. Because of these limitations, we may not always be able to

meet our cash requirements with funds borrowed under our revolving credit facility. See "Description of credit facilities and other indebtedness—revolving credit facility."

We will rely significantly on the funds received from our subsidiaries to meet our debt service obligations, but our subsidiaries may not be able to distribute sufficient funds to us.

Although we are an operating company, a significant amount of our revenue is generated by our subsidiaries. For the year ended December 31, 2004, 21% of our net sales was generated by our subsidiaries. As a result, our ability to satisfy our debt service obligations will depend significantly on our receipt of dividends or other intercompany transfers of funds from our operating subsidiaries. The payment of dividends to us by our subsidiaries is contingent upon the earnings of those subsidiaries and is subject to various business considerations as well as certain contractual provisions which may restrict the payment of dividends and the transfer of assets to us. In the event of bankruptcy, liquidation or reorganization of our subsidiaries, claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims as the holder of the equity of our subsidiaries.

Risks related to our business

Continued increases in resin prices or the loss of a key resin supplier could lead to increased costs and lower profit margins.

As one of the largest consumers of packaging resin in the United States, the Company is working on behalf of its customers with its suppliers to minimize the effects and the timing of the pass through of increased resin costs and to maximize the likelihood that resin supplies continue to the Company in sufficient quantities and on timetables necessary to meet the needs of our customers. We also regularly evaluate commodity hedging, collar agreements, and other protective strategies and will implement them if and when appropriate. However, if this period of high resin pricing continues, the limits on our ability to pass through these costs to our customers will exert downward pressure on profits and negatively effect our cash flow and our working capital requirements.

We operate in highly competitive markets and our customers may not continue to purchase our products, which could lead to our having reduced revenues and loss of market share.

If we lose one or more of our major customers, our results of operations and our ability to service our indebtedness could be adversely affected.

Although no single customer accounted for more than 10% of our net sales for the year ended December 31, 2004, we are dependent upon a limited number of large customers with substantial purchasing power for a significant percentage of our sales. Our top ten customers accounted for approximately 29.7% of our net sales in 2004. Several of our largest customers satisfy some of their film requirements by manufacturing film themselves. The loss of one or more major customers, or a material reduction in sales to these customers as a result of competition from other film manufacturers, insourcing of film requirements or other factors, would have a material adverse effect on our results of operations and on our ability to service our indebtedness. See "Management's discussion and analysis of financial condition and results of operations" and "Business—Products, markets and customers."

Our ongoing efforts to achieve cost savings may not improve our operating results.

We regularly evaluate our operations in order to identify potential cost savings. From time to time, we implement plant restructurings or other initiatives designed to improve the efficiency of our operations and reduce our costs. These initiatives may not result in cost savings, however, particularly if our estimates and assumptions relating to the anticipated cost savings prove to be incorrect. Further, even if a cost savings initiative is successful, we may not be able to improve our operating results as a result of other factors discussed in this report, many of which are beyond our control, such as a reduction in the demand for our products or increases in raw material costs.

We may not be able to adequately protect our intellectual property, which could cause our revenues to decrease.

We rely on patents, trademarks and licenses to protect our intellectual property, which is significant to our business. We also rely on unpatented proprietary know-how, continuing technological innovation and other trade secrets to develop and maintain our competitive position. We routinely seek to protect our patents, trademarks and other intellectual property, but our precautions may not provide meaningful protection against competitors or protect the value of our trademarks. In addition to our own patents, trade secrets and proprietary know-how, we license from third parties the right to use some of their intellectual property. We routinely enter into confidentiality agreements to protect our

trade secrets and proprietary know-how. However, these agreements may be breached, may not provide meaningful protection or may not contain adequate remedies for us if they are breached.

Any future acquisitions may not be successfully integrated with our business and could cause our revenues to decrease, operating costs to increase or reduce cash flows.

Our efforts to integrate any businesses acquired in the future may not result in increased profits. Difficulties encountered in any transition and integration process for newly acquired companies could cause revenues to decrease, operating costs to increase or reduce cash flows.

Our operations outside of the United States are subject to additional currency exchange, political, investment and other risks that could hinder us from making our debt service payments, increase our operating costs and adversely affect our results of operations.

We operate facilities and sell products in several countries outside the United States. Our operations outside the United States include plants and sales offices in Mexico, Canada, Germany and Australia. As a result, we are subject to risks associated with selling and operating in foreign countries which could have an adverse affect on our financial condition and results of operations, our operating costs and our ability to make payments on our debt obligations, including our ability to make payments on our debt obligations under our revolving credit facility. These risks include devaluations and fluctuations in currency exchange rates, unstable political conditions, imposition of limitations on conversion of foreign currencies into U.S. dollars and remittance of dividends and other payments by foreign subsidiaries. The imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries, hyperinflation in certain foreign countries, and restrictions on investments and other restrictions by foreign governments could also have a negative effect on our business and profitability.

We are controlled by affiliates of J.P. Morgan Partners, LLC and its interests as an equity holder may conflict with your interests.

Affiliates of J.P. Morgan Partners, LLC own approximately 55% of our outstanding common stock, 74% of our detachable warrants to purchase common stock issued in connection with our preferred stock and 59% of our outstanding preferred stock. Subject to certain limitations contained in the stockholders' agreement among us, our stockholders, and holders of detachable warrants to purchase common stock issued in connection with our preferred stock, affiliates of J.P. Morgan Partners, LLC controls us. The interests of the affiliates of J.P. Morgan Partners, LLC may not in all cases be aligned with your interests.

On March 1, 2005, JPMorgan Chase & Co. announced that J.P. Morgan Partners, LLC will become independent when it completes the investment of its current $6.5 billion Global Fund and that the independent unit will retain portfolio management responsibility for the Global Fund and heritage investments of affiliates of J.P. Morgan Partners, LLC. However, at this time the Company has no additional information as to the impact, if any, that J.P. Morgan Partners, LLC becoming independent of JPMorgan Chase & Co. may have on the Company or its investments in the Company.

If we do not maintain good relationships with our employees, our business could be adversely affected by a loss of revenues, increased costs or reduced profitability.

Although we consider our current relations with our employees to be good, if major work disruptions were to occur, our business could be adversely affected by, for instance, a loss of revenues, increased costs or reduced profitability. As December 31, 2004, we had approximately 3,025 employees, of which approximately 850 employees were subject to a total of 9 collective bargaining agreements that expire on various dates between February 28, 2005 and March 7, 2007. The collective bargaining

agreement covering our Langley union employees expired on February 28, 2005. We are currently operating under an informal extension of the terms of that agreement and are in negotiations with the union for a new collective bargaining agreement. We have had one labor strike in the United States in our history, which occurred at our Chippewa Falls, WI plant in March 2000 and lasted approximately two weeks. In October 2001, we entered into a five-year agreement with the union representing the approximately 150 employees at our Chippewa Falls, WI manufacturing plant. We also had a temporary work stoppage at our Australia facility in 2001 that lasted approximately 30 days.

The cost of complying with federal and state environmental laws could be significant and increase our operating costs.

Complying with existing and future environmental laws and regulations that affect our business could impose material costs and liabilities on us. Our manufacturing operations are subject to certain federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, the protection of the environment and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. In the ordinary course of business, we are subject to periodic environmental inspections and monitoring by governmental enforcement authorities. We could incur substantial costs, including fines and civil or criminal sanctions, as a result of actual or alleged violations of environmental laws. In addition, our production facilities require environmental permits that are subject to revocation, modification and renewal. Violations of environmental permits can also result in substantial fines and civil or criminal sanctions. The ultimate costs under environmental laws and the timing of such costs are difficult to predict and potentially significant expenditures could be required in order to comply with environmental laws that may be adopted or imposed in the future.

Other Uncertainties

In addition to the factors described above, we face a number of uncertainties, including: (1) general economic and business conditions, particularly a continuing economic downturn; (2) industry trends; (3) changes in demand for our products; (4) potential legislation and regulatory changes; (5) new technologies; (6) changes in distribution channels or competitive conditions in the markets or countries where we operate; and (7) changes in our business strategy or development plans.

ITEM 2. PROPERTIES

Our principal executive offices are located at 1475 Woodfield Road, Suite 700, Schaumburg, IL 60173. We own most of the improved real property and other assets used in our operations. We lease all or part of six of the sites at which we have manufacturing operations. We also lease warehouse and office space at various locations. We consider the condition of our plants, warehouses and other properties and the other assets owned or leased by us to be generally good.

Since 2001, the Company has undertaken an effort to maximize the efficiency of our facilities by closing and disposing of a number of facilities. Production from these facilities was moved in large part to plants that were not operating at capacity. During 2004, we closed our Harrisville, Rhode Island manufacturing facility and transferred production to more efficient plants. We also acquired ownership of that portion of our Macedon, New York facility that we previously leased from ExxonMobil Oil Corporation.

We have an annual film production capacity of approximately 1 billion pounds. Our principal manufacturing plants are listed below. Unless otherwise indicated, we own each of these properties.

SEGMENT		PRODUCTS
Engineered Films
Chippewa Falls, Wisconsin		Converter and personal care films
Danville, Kentucky		Converter, barrier, and custom films
Deerfield, Massachusetts		Converter films
Orillia, Canada (two plants)*		Converter films
Performance Films
Dalton, Georgia		Converter, barrier, and custom films
Bloomington, Indiana*		Barrier and custom films
Odon, Indiana		Barrier and custom films
Industrial Films
Barrie, Canada*		PVC and polyethylene films
Calhoun, Georgia		PVC films
Danville, Kentucky		Converter, barrier, and custom films
Lewisburg, Tennessee		Stretch films
Phillipsburg, Germany		PVC Films
Preston, Australia*		PVC films
Toronto, Canada		PVC films
Specialty Products Group
*Specialty Films Division*
Harrington, Delaware		Personal care, medical, and converter films
McAlester, Oklahoma		Personal care, medical, and converter films
Washington, Georgia		Personal care, medical, and agricultural films
*Printed Products Division*
Kent, Washington		Printed bags and rollstock
Langley, British Columbia*		Printed bags and rollstock
Macedon, New York		Printed bags and rollstock
Mexico City, Mexico*		Barrier and personal care films, printed bags and rollstock
Shelbyville, Indiana*		Reclosable zipper products
Corporate/Other
Newport News, Virginia		Research facility and pilot plant

*: Indicates a leased building. In the case of Orillia, Canada, one of the two plants is leased.

ITEM 3. LEGAL PROCEEDINGS

On June 14, 2004, we settled the complaint filed against us by S.C. Johnson & Sons, Inc. and S.C. Johnson Home Storage filed in the U.S. District Court for the District of Michigan, Northern Division (Case No. 01-CV-10343-BC) for $6.0 million plus legal fees which was within management's estimated costs of $7.2 million accrued in the fourth quarter of 2003.

On February 26, 2003, former employees of our Fort Edward, NY manufacturing facility, which we acquired as part of the Decora acquisition, named us as defendants in a complaint filed in the Supreme Court of the State of New York, County of Washington (Index No. 4417E). We received service of this complaint on April 2, 2003, and successfully removed the case to the United States District Court for the Northern District of New York (Case No. 1:03cv00533). The complaint alleged claims against us for conspiracy to defraud and breach of contract arising out of our court-approved purchase of the assets of Decora Industries, Inc. and Decora, Incorporated. Plaintiffs' complaint sought compensatory and punitive damages and a declaratory judgment nullifying severance agreements for lack of consideration and economic duress. On December 15, 2004, the case was dismissed in response to our motions to dismiss. On January 13, 2005, the Plaintiff appealed the dismissal of the case to the United States

Court of Appeals for the Second District. We intend to resist the plaintiffs' claims vigorously. We do not believe this proceeding will have a material adverse affect on our financial condition or results of operations.

We are involved in ongoing litigation matters from time to time in the ordinary course of our business. In our opinion, none of such litigation is material to our financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We did not submit any matters to a vote of security holders during the fourth quarter of 2004.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information, Holders and Dividends

At March 21, 2005, we had 571,711 shares of common stock outstanding and there were 37 holders of record of our common stock. There is no established trading market for our common stock.

We have not declared or paid any cash dividends on our common stock during the last two years and do not anticipate paying any cash dividends in the foreseeable future. The indentures governing our outstanding debt securities contain certain restrictions on the payment of cash dividends with respect to our common stock, and our revolving credit facility also restricts such payments. In addition, the terms of our outstanding Series A Preferred Stock restrict the payment of cash dividends with respect to our common stock unless all accrued dividends on the Series A Preferred Stock have been paid.

Recent Sales of Unregistered Securities

Since the adoption of the 2004 Restricted Stock Incentive Plan, we sold 720 shares of a newly created Series B Preferred Stock to our Chief Executive Officer and certain other officers in private transactions at $162 per share, which was determined to be the fair market value of those shares based on an independent appraisal received by the Board. We believe that the issuance of these shares was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof because the issuance did not involve a public offering or sale.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data have been summarized from our consolidated financial statements and are qualified in their entirety by reference to, and should be read in conjunction with, such consolidated financial statements and the notes thereto included elsewhere in this report and in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

		Years ended December 31,
		2000			2001			2002			2003			2004
		(Dollars in millions)
Statement of operations data:(1)
	Net sales	$	843.8		$	840.4		$	850.9		$	894.5		$	968.7
	Cost of sales		696.7			665.1			693.7			758.2			826.8
	Gross profit		147.1			175.3			157.2			136.3			141.9
	Total operating expenses(2)		132.7			101.1			126.2			128.1			90.0
	Operating income (loss)		14.4			74.2			31.0			8.2			51.9
	Interest expense(3)(4)		(87.2	)		(76.0	)		(75.3	)		(96.4	)		(145.7	)
	Other income (expense), net		0.3			6.5			2.3			0.5			(0.7	)
	Income (loss) from continuing operations before income taxes		(72.5	)		4.7			(42.0	)		(87.8	)		(94.6	)
	Income tax expense (benefit)		(21.7	)		6.8			(1.5	)		5.2			1.6
	Loss from continuing operations		(50.8	)		(2.1	)		(40.5	)		(93.0	)		(96.2	)
	Loss from discontinued operations		—			—			(2.9	)		(21.3	)		(17.7	)
	Net income (loss)	$	(50.8	)	$	(2.1	)	$	(43.4	)	$	(114.3	)	$	(113.9	)
Other financial data:
	EBITDA from continuing operations(5)	$	54.2		$	127.7		$	79.0		$	55.5		$	92.2
	Net cash provided by (used in) operating activities		60.3			30.3			52.4			(14.2	)		(1.4	)
	Net cash used in investing activities		(65.6	)		(87.3	)		(55.2	)		(17.0	)		(17.6	)
	Net cash provided by (used in) financing activities		0.3			55.0			12.4			46.0			25.5
	Depreciation and amortization		39.5			47.0			45.7			46.9			41.1
	Impairment of goodwill and intangible assets(2)		—			—			8.6			18.3			—
	Impairment of fixed assets(2)		—			—			—			4.8			0.4
	Restructuring and other costs(2)		19.4			(4.6	)		30.1			12.6			2.1
	Non-cash stock-based compensation expense		2.6			7.0			—			—			—
	Capital expenditures		65.6			56.4			49.2			17.0			24.1
		December 31,
		2000			2001			2002			2003			2004
		(Dollars in millions)
Balance sheet data (at period end):
	Cash and cash equivalents	$	3.1		$	4.8		$	1.6		$	3.3		$	5.6
	Working capital		57.6			58.4			45.8			70.7			78.5
	Total assets		785.0			851.7			853.2			786.8			777.1
	Total debt		687.4			713.3			736.4			783.7			842.3
	Total liabilities(6)		885.9			903.0			960.1			992.4			1,291.3
	Redeemable preferred stock(7)		88.7			126.1			150.8			188.2			0.1
	Redeemable common stock		16.5			16.8			13.0			13.0			6.6
	Stockholders' equity (deficit)		(206.0	)		(194.5	)		(270.9	)		(407.1	)		(521.0	)

(1): On September 30, 2004, we sold substantially all of the assets of Pliant Solutions Corporation which was previously reported as one of our operating segments. In accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets, Pliant Solutions is being accounted

for as a discontinued operation and, accordingly, its assets are segregated from continuing operations, and its operating results are segmented and reported as discontinued operations in all periods presented. Net sales for the nine months ended December 31, 2004 and the twelve months ended December 31, 2003 were $22.5 million and $34.9 million, respectively. Net sales for the eight months ended December 31, 2002 were $28.3 million. No tax benefits were recorded on the losses from discontinued operations or the loss on sale of discontinued operations as realization of these tax benefits is not certain.

(2): Total operating expenses include restructuring and other costs of $2.1 million for the year ended December 31, 2004 for fixed asset impairment charges of $1.4 million and restructuring and other costs of $0.7 million related to closure of our Harrisville, RI facility. For the year ended December 31, 2003, restructuring and other costs of $12.6 million were included which consisted of $2.0 million for fixed asset impairment charges related to the closure of our facility in Shelbyville, IN, $0.7 million related to the closure of our facility in Brazil consisting primarily of fixed asset impairment charges, $2.6 million related to the closure and transfer of the production from our facility in Fort Edward, NY to our facilities in Mexico and Danville, KY, $1.4 million related to the consolidation of two plants in Mexico, $2.6 million related to the closure and transfer of production from our Merced, CA facility, and other costs related to the closure of our Shelbyville, IN facility, our Singapore office and a section of our Toronto facility. In addition, during 2003 we accrued the present value of future lease payments on three buildings we do not currently occupy in an amount equal to $3.3 million and a provision for litigation of $7.2 million.
: Total operating expenses for the year ended December 31, 2003 also included $18.2 million for the impairment of goodwill, consisting of $10 million in our Engineered Films segment for Canada, $7.2 million in our Specialty Products Group segment for Mexico and $1.0 million in our Industrial segment for Germany and Australia, and $4.8 million for impairment of fixed assets, $2.4 million in our Performance Films segment and $1.2 million in both our Specialty Products Group and Industrial Films segment.
: Total operating expenses for 2002 include $30.1 million of restructuring and other costs, including $14.8 million related to the closure of our plant in Merced, CA, a portion of our plant in Shelbyville, IN, a part of our plant in Toronto, Canada, and one of our plants in Mexico. In addition, these costs reflect $7.9 million for the costs of relocating several of our production lines related to plant closures and costs associated with production rationalizations at several plants. Total operating expenses for 2002 also include $7.4 million related to severance costs, including benefits for several companywide workforce reduction programs that were completed in 2002.
: Total operating expenses for the year ended December 31, 2002 also included $8.6 million for the impairment of goodwill associated with Mexico in our Specialty Products Group segment.
: Total operating expenses for 2001 include $7.0 million of non-cash stock-based compensation expense, $3.0 million of restructuring and other costs, $4.0 million for expenses related to the relocation of our corporate headquarters, $6.0 million of fees and expenses relating to our supply chain cost initiative, and a $3.0 million increase in depreciation expenses relating primarily to the purchase of a new computer system. In addition, total operating expenses for 2001 include a credit for $7.6 million related to the reversal of a previously accrued charge for the closure of our Harrington, DE plant. In 2001, we decided not to proceed with our previously announced closure of our Harrington, DE plant.
: Total operating expenses for 2000 include $10.8 million of costs related to the recapitalization and related transactions, $10.8 million of fees and expenses relating to our supply chain cost initiative, $19.4 million of restructuring and other costs, $7.1 million of costs related to the relocation of our corporate headquarters and a reduction in force, and $2.6 million of non-cash stock-based compensation expense.

(3): In May 2003, we prepaid a total of $75 million of revolving loans and $165 million of our term loans with the net cash proceeds from the issuance of $250 million of Senior Secured Notes. As a result, interest expense for 2003 included a $5.3 million charge for expensing a portion of previously capitalized financing fees incurred in connection with our credit facilities. In February 2004, we paid off our then existing term loan facility of $219.6 million and revolving loan facility of $20 million with proceeds from the issuance of $306 million Senior Secured Discount Notes. As a result, interest expense in 2004 included a $7.9 million charge for expensing a portion of our previously capitalized financing fees.
(4): In 2000, we refinanced most of our long-term debt and recorded a loss of $18.7 million to write-off unamortized deferred debt issuance costs and costs related to our tender offer for our 9¹/8% Senior Subordinated Notes due 2007. In 2004, we recognized $35.3 million of dividends and accretion on redeemable preferred stock as interest expense in accordance with SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.
(5): EBITDA from continuing operations reflects income from continuing operations before interest expense, income taxes, depreciation and amortization. We believe that EBITDA information enhances an investor's understanding of our ability to satisfy principal and interest obligations with respect to our indebtedness and to utilize cash for other purposes. EBITDA does not represent and should not be considered as an alternative to net income or cash flows from operating activities as determined by U.S. generally accepted accounting principles and may not be comparable to other similarly titled measures of other companies. In addition, there may be contractual, legal, economic or other reasons which may prevent us from satisfying principal and interest obligations with respect to our indebtedness and may require us to allocate funds for other purposes. A reconciliation of EBITDA to net cash provided by (used in) operating activities as set forth in our consolidated statements of cash flows is as follows:

		2000			2001			2002			2003			2004
		(Dollars in millions)
EBITDA from continuing operations		$	54.2		$	127.7		$	79.0		$	55.5		$	92.2
Adjustments:
	Interest expense		(87.2	)		(76.0	)		(75.3	)		(96.4	)		(145.7	)
	Income tax (expense) benefit		21.7			(6.8	)		1.5			(5.2	)		(1.8	)
	Impairment of fixed assets		—			—			—			4.8			0.4
	Preferred dividends & accretion on preferred shares		—			—			—			—			35.3
	Amortization of deferred financing costs and accretion of debt discount		1.4			2.7			3.7			9.9			35.1
	Deferred income taxes		(25.8	)		3.0			(5.4	)		1.5			0.2
	Provision for loss on accounts receivable		(0.2	)		0.3			2.6			1.7			1.6
	Non-cash compensation expense related to stock options		2.6			7.0			—			—			—
	Discount on stockholder note receivable		0.3			—			—			—			—
	Non-cash plant closing costs		14.8			(7.6	)		9.7			3.3			1.4
	Write-down of impaired goodwill and intangible assets		—			—			8.6			18.3			—
	Curtailment gain		—			—			—			—			1.6
	(Gain) loss on disposal of assets		0.5			(0.4	)		0.4			1.4			0.5
	Loss on extinguishment of debt		18.7			—			—			—			—
	Minority interest		—			0.3			(0.1	)		0.1			(0.3	)
	Change in operating assets and liabilities, net of effects of acquisitions		59.3			(19.9	)		27.7			(9.1	)		(21.7	)

Net cash provided by (used in) operating activities		$	60.3		$	30.3		$	52.4		$	(14.2	)	$	(1.4	)

(6): The Company adopted Statement of Financial Accounting Standard No. 150 ("SFAS 150"), Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, effective January 1, 2004. As a result, our Series A redeemable preferred stock, which has an unconditional mandatory redemption feature, was recorded as a liability on the date of adoption. In addition, effective January 1, 2004, the dividends and accretion on the preferred shares are included as a part of interest expense in the statement of operations. As a result of adopting SFAS 150, the Company's redeemable common shares that have been put for redemption by a shareholder have also been recorded as a liability.
(7): The amount presented includes proceeds of $141.0 million from the issuance of our Series A Preferred Stock in 2000, 2001 and 2003, plus the accrued and unpaid dividends, less the unamortized discount due to detachable warrants to purchase common stock issued in connection with our Series A Preferred Stock and unamortized issuance costs which were $76.3 million and $29.1 million, respectively as of December 31, 2003. The amount as of December 31, 2004 includes $0.1 million of proceeds from the sale of 720 shares of newly-created, non-voting Series B Redeemable Preferred Stock to selected officers of the Company.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this section is to discuss and analyze our consolidated financial condition, liquidity and capital resources and results of operations. This analysis should be read in conjunction with the consolidated financial statements and notes which appear elsewhere in this report. This section contains certain "forward-looking statements" within the meaning of federal securities laws that involve risks and uncertainties, including statements regarding our plans, objectives, goals, strategies and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under "Disclosure regarding forward-looking statements" and "Risk factors" and elsewhere in this report.

All references in this section to the consolidated financial statements or condensed consolidated financial statements and related notes included elsewhere in this report refer to those of Pliant Corporation and its subsidiaries.

Company Profile

Pliant generates revenues, earnings and cash flows from the sale of film and flexible packaging products throughout the world. We manufacture these products at 24 facilities located in the United States, Australia, Canada, Germany and Mexico. Our sales have grown primarily as a result of strategic acquisitions made over the past several years, increased levels of production at acquired facilities, return on capital expenditures and the overall growth in the market for film and flexible packaging products.

Overview

For 2004, the Company's net sales were $968.7 million, up $74.2 million or 8.3% over 2003, excluding Pliant Solutions, which was sold in the third quarter of 2004 and is accounted for as a discontinued operation. This growth was in large part due to increased volume as trade pound sold for 2004 were 878.9 million, up 35.7 million or 4.2% from 843.2 million in 2003. Overall, average selling price per pounds increased by 3.9% primarily due to pass-through of resin cost increases along with favorable product mix changes. Three of our four operating segments reported increased growth, with our Industrial Films segment leading the way with a $34.5 million, or 15.7%, increase in net sales.

Segment profit, defined as net income adjusted for interest expense, income taxes, depreciation, amortization, restructuring and other non-cash charges (principally the impairment of goodwill, intangible assets and fixed assets), was $94.6 million in 2004, up $3.4 million or 3.7% from 2003. Sales volume and mix contributed $9.8 million to the increased profit while operational excellence programs, including significant reductions in waste, improved by $15.5 million. Selling, general and administrative costs were better by $4.7 million. Offsetting these improvements was a $16.3 million negative impact from increased resin costs. This resin cost impact reflected a lag in our ability to increase selling prices as well as an adverse effect on waste costs and sales commissions. We use large quantities of polyethylene, PVC, and polypropylene and other resins in manufacturing our products. For the year ended December, 31, 2004, resin costs approximated 61% of our total manufacturing costs. Average resin prices increased approximately 29% during 2004 with half of the increase occurring in the fourth quarter of 2004. To address fluctuations in resin prices we have pass-through or cost-sharing arrangements covering a large portion of our sales, but most of these lag the increase in our cost by 30 to 90 days. We are implementing price increases for many customers that are currently not subject to pass-through adjustments and most new customer contracts contain resin pass-through agreements. However, if resin prices continue to rise, the delayed pass-through will exert downward pressure on short-term segment profit. Freight expenses increased by $4.6 million in 2004 as compared with 2003.

In addition to these factors, at year-end we recorded an unfavorable $4.5 million non-cash adjustment to employee vacation accruals.

On September 30, 2004, we sold substantially all the assets of our wholly owned subsidiary, Pliant Solutions Corporation. Pliant Solutions, previously reported as a separate operating segment, manufactured decorative and surface coverings through the conversion of various films into consumer packaged goods. In accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets, Pliant Solutions is being accounted for as a discontinued operation and, accordingly, the assets are segregated from continuing operations in the accompanying consolidated balance sheet, and its operating results are segmented and reported as discontinued operations in the consolidated statement of operations. Net sales for Pliant Solutions for the nine months ended September 30, 2004 were $22.5 million, for the twelve months ended December 31, 2003 were $34.9 million, and for the eight months ended December 31, 2002 were $28.3 million. No tax benefits were recorded on the losses from discontinued operations or the loss on sale of discontinued operations as realization of these tax benefits is not certain.

In the third quarter of 2004, we closed our Harrisville, Rhode Island facility and moved its production to more modern and efficient facilities. The costs related to this restructuring plan are now anticipated to total $2.7 million, consisting primarily of $1.4 million of fixed asset impairments, $0.4 million in equipment relocation, $0.3 million in severance and other personnel related costs and $0.4 million of other costs. Through December 31, 2004, approximately $2.1 million of these costs have been incurred.

Effective Janaury 1, 2004, the Company adopted Statement of Financial Accounting Standard No. 150 ("SFAS 150"), Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. As a result, our Series A redeemable preferred stock, which has an unconditional mandatory redemption feature, was recorded as a liability on the date of adoption of SFAS 150 at fair market value measured as the value of the securities on the date of issuance plus accretion of discount from the date of issuance through December 31, 2003 and the cumulative unpaid dividends from the date of issuance through December 31, 2003. Effective January 1, 2004, the dividends and accretion on the preferred shares are included as a part of interest expense in the statement of operations.

In addition, as a result of adopting SFAS 150, the Company's redeemable common shares that have been put for redemption by a shareholder were recorded as a liability at fair value. The fair value was computed using the agreed upon redemption price per share times the number of shares put by the shareholder. In accordance with SFAS 150, prior periods were not restated.

On September 24, 2004, the Company adopted a 2004 Restricted Stock Incentive Plan, pursuant to which we sold to our President and Chief Executive Officer and selected additional officers of the Company 704 shares of a total of 720 authorized shares of a newly-created, non-voting Series B Redeemable Preferred Stock for a cash purchase price of $162 per share. These shares were issued in private transactions with officers of the Company and therefore were exempt from the registration requirements of the Securities Act of 1933. On December 22, 2004, the remaining 16 authorized shares were issued to an officer for a cash purchase price of $162 per share.

On February 17, 2004, we completed the sale of $306,000,000 in aggregate principal amount at maturity of 11¹/8% Senior Secured Discount Notes due 2009 (the "Senior Secured Discount Notes"). The net proceeds from such sale in the amount of $220.2 million (after deducting underwriters' fees) together with borrowings of $30 million under our revolving credit facility described below, were used to pay off our then existing term loan facilities in the amount of $219.6 million and our then existing revolving loan facility of $20 million and $3.8 million in fees and other costs, leaving $6.8 million of cash on hand. Subsequently, the Senior Secured Discount Notes were exchanged for publicly held notes on substantially similar terms.

Critical accounting policies

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of financial statements in conformity with generally accepted accounting principles. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following discussion addresses our most critical accounting policies. These policies require management to exercise judgments that are often difficult, subjective and complex due to the necessity of estimating the effect of matters that are inherently uncertain.

Revenue recognition. Sales revenue is recognized when title transfers, the risks and rewards of ownership have been transferred to the customer, the price is fixed and determinable and collection of the related receivable is probable, which is generally at the time of shipment.

We have several rebate programs with certain of our customers and a cash discount program on accounts receivable. These costs are estimated at the time of sale and are reported as a reduction to sales revenue. Periodic adjustments are made as a part of our ongoing evaluation of all receivable related allowances.

Accounts receivable. We evaluate accounts receivable on a quarterly basis and review any significant customers with delinquent balances to determine future collectibility. We base our determinations on legal issues (such as bankruptcy status), past history, current financial and credit agency reports, and the experience of the credit representatives. We reserve accounts that we deem to be uncollectible in the quarter in which we make the determination. We maintain additional reserves based on our historical bad debt experience. Although there is a greater risk of uncollectibility in an economic downturn, we believe, based on past history and proven credit policies, that the net accounts receivable as of December 31, 2004 are of good quality.

Goodwill and other identifiable intangible assets. Goodwill associated with the excess purchase price over the fair value of assets acquired is currently not amortized. This is in accordance with Statement of Financial Accounting Standards No. 142 effective for fiscal years beginning after December 15, 2001. Goodwill is tested annually for impairment or more frequently if circumstances indicate that they may be impaired. Other identifiable intangible assets, such as customer lists, and other intangible assets are currently amortized on the straight-line method over their estimated useful lives. These assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may be less than the undiscounted cash flows.

Retirement plans. We value retirement plan assets and liabilities based on assumptions and actuarial valuations. Assumptions for the retirement plans are subject to the occurrence of future events, which are out of our control and could differ materially from the amounts currently reported.

Insurance. Our insurance for workers' compensation and employee-related health care benefits are covered using high deductible insurance policies. A third-party administrator is used to process such claims. We require all workers' compensation claims to be reported within 24 hours. As a result, we accrue our workers' compensation liability based upon the claim reserves established by the third-party administrator each month. Our employee health insurance benefit liability is based on our historical claims experience rate. Our earnings would be impacted to the extent actual claims vary from historical experience. We review our accruals associated with the exposure to these liabilities for adequacy at the end of each reporting period.

Inventory reserves. Each quarter we review our inventory and identify slow moving and obsolete items. Thereafter, we create allowances and reserves based on the realizable value of specific inventory items.

Fixed asset impairments. We review our fixed assets at each manufacturing facility as a group of assets with a combined cash flow. Any difference between the future cash flows and the carrying value of the asset grouping is recorded as a fixed asset impairment. In addition, we periodically review any idle production lines within a manufacturing facility to determine if the assets need to be disposed.

Deferred taxes. We record deferred tax assets and liabilities for the differences in the carrying amounts of assets and liabilities for financial and tax reporting purposes. Deferred tax assets include amounts for net operating loss, foreign tax credit and alternative minimum tax credit carry forwards. Valuation allowances are recorded for amounts that management believes are not recoverable in future periods.

Recent accounting pronouncements

In December 2004, the FASB issued SFAS 123(R) (revised December 2004), "Share-Based Payment", which is a revision of SFAS 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." This statement requires that the fair value at the grant date resulting from all share-based payment transactions be recognized in the financial statements. Further SFAS 123(R) requires entities to apply a fair-value based measurement method in accounting for these transactions. The minimum value method currently used by the Company is not allowed and the Company will be required to adopt the prospective method as proscribed by SFAS 123R. This value is recorded over the vesting period. This statement is effective for the first interim reporting period beginning after June 15, 2005. We are currently evaluating the provisions of SFAS 123(R), and the impact on our consolidated financial position and results of operations.

Results of operations

The following table sets forth the amount of certain statement of operations items and such amounts as a percentage of net sales, for the periods indicated.

	2004				2003				2002
	(Dollars in millions)
Net sales	$	968.7	100.0	%	$	894.5	100.0	%	$	850.9	100.0	%
Cost of sales		826.8	85.3			758.2	84.8	%		693.7	81.5	%

Gross profit		141.9	14.7	%		136.3	15.2	%		157.2	18.5	%
Operating expenses before restructuring and other costs, goodwill and asset impairment costs		87.5	9.0	%		92.4	10.3	%		87.5	10.3	%
Restructuring and other costs		2.1	0.2	%		12.6	1.4	%		30.1	3.6	%
Impairment of goodwill and intangible assets		—	—	%		18.3	2.1	%		8.6	1.0	%
Impairment of fixed assets		0.4	0.1	%		4.8	0.5	%		—	—

Total operating expenses		90.0	9.3	%		128.1	14.3	%		126.2	14.9	%

Operating (loss) income	$	51.9	5.4	%	$	8.2	0.9	%	$	31.0	3.6	%

Year ended December 31, 2004 compared with the year ended December 31, 2003

Net sales. Net sales increased by $74.2 million, or 8.3%, to $968.7 million for the year ended December 31, 2004 from $894.5 million for the year ended December 31, 2003. The increase was primarily due to a 4.2% increase in sales volume and a 3.9% increase in our average selling prices. See "Operating segment review" below for a detailed discussion of sales volumes and selling prices by segment and division.

Gross profit. Gross profit increased by $5.6 million, or 4.1%, to $141.9 million for the year ended December 31, 2004, from $136.3 million for the year ended December 31, 2003. This increase was due to better volume and mix by $9.8 million, improvements in manufacturing conversion costs of $10.1 million, and $5.4 million in waste improvements. Partially offsetting these was $11.2 million from the impact of rising resin costs which could not be immediately passed along in customer prices and a $3.1 million unfavorable impact on waste. Higher freight costs adversely affected gross margins by $4.6 million.

Total operating expenses before restructuring and other costs. Total operating expenses before restructuring and other costs decreased by $4.9 million, or 5.3%, to $87.5 million for the year ended December 31, 2004 from $92.4 million for the year ended December 31, 2003. This decrease includes a provision for litigation of $7.2 million recorded in 2003. Excluding the 2003 litigation provision, other operating expenses increased $2.3 million primarily due to increased sales commissions.

Restructuring and other costs. Restructuring and other costs were $2.1 million for the year ended December 31, 2004 as compared to $12.6 million for the year ended December 31, 2003, a decrease of $10.5 million. These costs in 2004 include $1.4 million in fixed asset impairment charges and severance and other costs of $0.2 million and $0.5 million, respectively related to the closure of our Harrisville, facility. Restructuring and other costs for the year ended December 31, 2003 included $2.0 million for fixed asset impairment charges related to the partial closure of our facility in Shelbyville, IN, $0.7 million related to the closure of our facility in Brazil consisting primarily of fixed asset impairment charges, $2.6 million related to the closure and transfer of the production from our facility in Fort Edward, NY to our facilities in Mexico and Danville, KY, $1.4 million related to the consolidation of two plants in Mexico, $2.6 million related to the closure and transfer of production from our Merced, CA facility, and other costs related to the closure of our Shelbyville, IN facility. In addition, during 2003 we accrued the present value of future lease payments on three buildings we do not currently occupy in an amount equal to $3.3 million. We also closed our office in Singapore in the fourth quarter of 2003.

Impairment of goodwill and intangible assets. There were no impairment charges for goodwill or intangible assets in the year ended December 31, 2004. In the year ended December 31,2003 goodwill impairment charges totaling $18.3 million were recorded, including $10.1 million in our Engineered Films segment for Canadian operations, $7.2 million in our Specialty Products Group segment related to Mexico and $1.0 million in our Industrial segment related to Australia and Germany.

Impairment of fixed assets. These charges reflect costs associated with abandoning production lines and related equipment with total carrying values of $0.4 million in our Engineered Films and Industrial Films segments in the year ended December 31, 2004 and $2.4 million, $1.2 million and $1.2 million in our Performance Films, Specialty Products Group and Industrial segments, respectively, in the year ended December 31, 2003.

Operating income (loss). Operating income increased by $43.7 million to $51.9 million for the year ended December 31, 2004 from $8.2 million for the year ended December 31, 2003, due to the factors discussed above.

Interest expense. Interest expense increased $49.3 million, or 51%, to $145.7 million for the year ended December 31, 2004 from $96.4 million for 2003. Effective January 1, 2004, dividends and accretion on the preferred shares are included as a part of interest expense in the statement of operations. For the year ended December 31, 2004 these costs were $35.3 million. Furthermore, the increase in interest expense resulted from higher interest costs from the issuance of our $306 million Senior Secured Discount Notes in February 2004 and our $250 million Senior Secured Notes in May of 2003. Also, the write-off of an incremental $2.6 million of previously capitalized financing fees, as a result of the repayment of our old bank credit facilities from the proceeds of the Senior Secured Discount Notes, contributed to the increase.

Other income (expense). Other expense was $(0.7) million for the year ended December 31, 2004, as compared to other income of $0.5 million for the year ended December 31, 2003. Other expense for the year ended December 31, 2004 includes $1.3 million loss on the sale of real property, $0.1 million currency gain, and $0.5 million other less significant items. Other expense for 2003 included a $1.4 million for losses on disposal of real property, $0.1 million currency gain, $0.2 million of royalty income, $0.2 million of rental income, and $1.4 million of other less significant items.

Income tax expense (benefit). In 2004 our income tax expense was $1.6 million, compared to an income tax expense of $5.2 million in 2003. These amounts represent effective tax rates of 1.7% and 5.9% for the years ended December 31, 2004 and 2003, respectively. The fluctuation in the effective tax rate is principally the result of foreign tax rate differences, the provision for valuation allowances, the write-off of goodwill and the accrued dividends on preferred stock. As of December 31, 2004, our deferred tax assets totaled approximately $125.7 million, of which $100.3 million related to net operating loss carry forwards. Our deferred tax liabilities totaled approximately $83.5 million. Due to uncertainty regarding the timing of the future reversals of existing deferred tax liabilities, the realization of our foreign tax credit carry forwards, and the realization of other deferred tax assets and carry forwards, we have recorded valuation allowances of approximately $61.7 million to offset the net operating loss carry forward and certain other deferred tax assets and carry forwards. Net taxes of zero were provided for the losses from discontinued operations due to any potential tax benefit being offset by the valuation allowance for net operating loss carry forwards.

Year ended December 31, 2003 compared with the year ended December 31, 2002

Net sales. Net sales increased by $43.6 million, or 5.1%, to $894.5 million for the year ended December 31, 2003 from $850.9 million for the year ended December 31, 2002. The increase was primarily due to an 8.3% increase in average selling prices, partially offset by a 3.0% decrease in sales volume. Our average selling prices increased primarily due to the pass through of increases in our raw material costs. See "Operating segment review" below for a detailed discussion of sales volumes and selling prices by segment and division.

Gross profit. Gross profit decreased by $20.9 million, or 13.3%, to $136.3 million for the year ended December 31, 2003, from $157.2 million for the year ended December 31, 2002. This decrease was primarily due to lower aggregate sales volumes and lower margins in certain segments. See "Operating segment review" below for a detailed discussion of the sales volumes and margins by segment.

Total operating expenses before restructuring and other costs. Total operating expenses before restructuring and other costs increased $4.9 million, or 5.6%, to $92.4 million for the year ended December 31, 2003 from $87.5 million for the year ended December 31, 2002. This increase was principally due to severance costs of $1.1 million related to recent organizational changes, increased lease expenses resulting from a sale-leaseback of equipment we entered into during the third quarter of 2002, as well as increases in legal, consulting, and commissions expense. The increase in total operating expenses was partially offset by a general decrease in sales and administrative costs. In addition, we recorded a provision for litigation of $7.2 million in 2003.

Restructuring and other costs. Restructuring and other costs were $12.6 million for the year ended December 31, 2003 as compared to $30.1 million for the year ended December 31, 2002. The costs for the year ended December 31, 2003 included $2.0 million for fixed asset impairment charges related to the partial closure of our facility in Shelbyville, IN, $0.7 million related to the closure of our facility in Brazil consisting primarily of fixed asset impairment charges, $2.6 million related to the closure and transfer of the production from our facility in Fort Edward, NY to our facilities in Mexico and Danville, KY, $1.4 million related to the consolidation of two plants in Mexico, $2.6 million related to the closure and transfer of production from our Merced, CA facility, and other costs related to the closure of our Shelbyville, IN facility. In addition, during 2003 we accrued the present value of future

lease payments on three buildings we do not currently occupy in an amount equal to $3.3 million. We also closed our office in Singapore in the fourth quarter of 2003. Restructuring and other costs for 2002 reflect approximately $13.2 million related to the partial closure of our Shelbyville, IN facility (including non-cash charges of $12.2 million related to impaired assets), $3.7 million related to the closure of our Merced, CA facility (including non-cash charges of $0.7 million related to impaired assets), $3.9 million related to costs associated with moving production lines purchased in the Uniplast acquisition, approximately $7.4 million related to severance costs related to several company-wide workforce reduction programs implemented in 2002, approximately $2.3 million related to costs associated with moving production equipment from our Fort Edward, NY facility to our Mexico facility, a non-cash charge of $1.0 million related to the impairment of certain manufacturing assets in our U.S. plants and approximately $3.0 million related to other costs associated with re-alignment of production resources at several other plants. See Note 3 to the consolidated financial statements included elsewhere in this report.

Impairment of goodwill and intangible assets. In the year ended December 31, 2003, goodwill impairment charges totaling $18.3 million were recorded, including $10.1 million in our Engineered Films segment for Canadian operations, $7.2 million in our Specialty Products Group segment related to Mexico and $1.0 million in our Industrial segment related to Australia and Germany. In the year ended December 31, 2002, goodwill impairments of $8.6 million were recorded related to Mexico in our Specialty Products Group segment.

Impairment of fixed assets. These charges reflect costs associated with abandoning production lines and related equipment with carrying values of $2.4 million, $1.2 million and $1.2 million in our Performance Films, Specialty Products Group and Industrial Segments, respectively.

Operating income (loss). Operating income decreased by $22.8 million to $8.2 million for the year ended December 31, 2003 from $31.0 million for the year ended December 31, 2002, due to the factors discussed above.

Interest expense. Interest expense increased $21.1 million, or 28%, to $96.4 million for the year ended December 31, 2003 from $75.3 million for 2002. The increase in interest expense resulted from higher interest costs from the issuance of $100 million of subordinated debt in April 2002 and $250 million of Senior Secured Notes in May 2003. In addition, interest expense for 2003 included a $5.3 million charge in the second quarter of 2003 for previously capitalized financing fees written-off as a result of the repayment of a portion of our credit facilities from the proceeds of the 11¹/8% Senior Secured Notes in May 2003.

Other income (expense). Other income was $0.5 million for the year ended December 31, 2003, as compared to other income of $2.3 million for the year ended December 31, 2002. Other income for 2003 included $1.4 million of losses on disposal of real property, $0.1 million of currency gain, $0.2 million of royalty income, $0.2 million of rental income, and $1.4 million of other less significant items. Other income for 2002 included $0.7 million related to a settlement with a customer in our Industrial segment and $1.6 million of other less significant items.

Income tax expense (benefit). In 2003 our income tax expense was $5.2 million, compared to an income tax benefit of $1.5 million in 2002. These amounts represent effective tax rates of 5.9% and (3.5%) for the years ended December 31, 2003 and 2002, respectively. The fluctuation in the effective tax rate is principally the result of foreign tax rate differences, the provision for valuation allowances and the write-off of goodwill. As of December 31, 2003, our deferred tax assets totaled approximately $105.8 million, of which $78.3 million related to net operating loss carry forwards. Our deferred tax liabilities totaled approximately $84.5 million. Due to uncertainty regarding the timing of the future reversals of existing deferred tax liabilities and the realization of our foreign tax credit carry forwards, we have recorded a valuation allowance of approximately $39.7 million to offset the net operating loss carry forwards and the foreign tax credit carry forwards.

Operating Segment Review

General

Operating segments are components of our business for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. We evaluate the performance of our operating segments based on net sales (excluding intercompany sales) and segment profit. The segment profit reflects income before interest expense, income taxes, depreciation, amortization, restructuring and other costs and other non-cash charges. For more information on our operating segments, including a reconciliation of segment profit to income before taxes, see Note 14 to the consolidated financial statements included elsewhere in this report.

We have four operating segments: Specialty Products Group, Industrial Films, Engineered Films and Performance Films.

Summary for years ended December 31, 2004, 2003, and 2002:

	Specialty Products Group		Industrial Films		Engineered Films		Performance Films		Corporate/ Other			Total
Year ended December 31, 2004
Net sales	$	390.7	$	254.1	$	219.0	$	98.1	$	6.8		$	968.7
Segment profit (loss)(1)		47.0		26.2		32.2		19.8		(30.6	)		94.6
Year ended December 31, 2003
Net sales	$	367.7	$	219.6	$	196.1	$	105.2	$	5.9		$	894.5
Segment profit (loss)(1)		49.0		27.2		34.1		24.0		(43.1	)		91.2
Year ended December 31, 2002
Net sales	$	346.6	$	191.4	$	205.4	$	98.6	$	8.9		$	850.9
Segment profit (loss)(1)		55.2		30.5		38.1		23.2		(28.2	)		118.8

(1): See Note 14 to the consolidated financial statements included elsewhere in this report for a reconciliation of segment profit to income before taxes.

Year ended December 31, 2004 compared to the year ended December 31, 2003

Specialty Products Group

Net sales. The net sales of our Specialty Products Group segment increased $23.0 million, or 6.3% to $390.7 million for the year ended December 31, 2004 from $367.7 million for 2003. This increase was primarily due to a 3.8% increase in our sales volumes and a 2.3% increase in our average selling prices.

Net sales in our Specialty Films division increased $10.7 million, or 6.2%, to $183.8 million for the year ended December 31, 2004 from $173.1 million for 2003. This increase was principally due to an increase in our sales volume of 5.0% and an increase in our average selling price of 1.1%. Net sales in our Printed Products Films division increased $12.4 million, or 6.4%, to $206.9 million for the year ended December 31, 2004 from $194.5 million for 2003. This increase was principally due to an increase in our sales volume of 2.3% and an increase in our average selling prices of 4.0%. We continue to experience market growth in our agricultural product market, along with growth in our printed products with tortilla, bakery and frozen food customers and with new and existing U.S. customers in our personal care and medical products markets, offset by a loss of personal care business in Mexico due to a diaper platform change for major customers.

Segment profit. The Specialty Products Group segment profit was $47.0 million for the year ended December 31, 2004, as compared to $49.0 million for the same period in 2003. This $2.0 million decrease was due to an $2.8 million increase in selling, general and administrative costs driven by higher commission costs associated with average sales prices and an accrual of $2.2 million in vacation related payroll costs, offset by reductions in other general and administrative costs.

Industrial Films

Net sales. The net sales of our Industrial Films segment increased $34.5 million, or 15.7%, to $254.1 million for the year ended December 31, 2004 from $219.6 million for 2003. This increase was principally due to an increase in our sales volumes of 6.7% and an increase in our average selling prices of 8.4%, primarily due to the pass through of raw material price increases and increased sales of value added products.

Segment profit. Industrial Films segment profit was $26.2 million for the year ended December 31, 2004, as compared to $27.2 million for the same period in 2003. This decrease in segment profit was primarily due to lower gross margins from compression between our average selling price and average raw material costs associated with sales to contractual customers and price erosion on sales to one of our more significant international customers. In addition, this segment experienced $0.5 million of start-up costs for new product launch with a major customer and $0.8 million in higher sales commissions and recorded an accrual of $0.6 million in vacation related payroll costs.

Engineered Films

Net sales. Net sales in Engineered Films increased $22.9 million, or 11.7%, to $219.0 million for the year ended December 31, 2004 from $196.1 million for 2003. This increase was principally due to an increase in our sales volume of 6.7% and an increase in our average selling prices of 4.7% principally due to the pass-through of raw material price increases and improvements in our sales mix. Increased sales activity and focus on major customers resulted in incremental sales volume in our converter, industrial and custom sales markets.

Segment profit. Engineered Films segment profit was $32.2 million for the year ended December 31, 2004, as compared to $34.1 million for the same period in 2003. This decrease in segment profit was primarily due to lower gross margins from compression between our average selling price and average raw material costs to contractual customers and the competitive environment with customers who are not parties to purchase agreements. In addition, this segment recorded an accrual of $0.7 million in vacation related payroll costs.

Performance Films

Net sales. The net sales of our Performance Films segment decreased $7.1 million, or 6.7%, to $98.1 million for the year ended December 31, 2004 from $105.2 million for 2003. This decrease was principally due to a decrease in our sales volumes of 8.2%, primarily in our custom and barrier films markets due to increased internal manufacturing by customers. This volume decrease was partially offset by an increase in our average selling prices of 1.6%, primarily due to pass through of resin price increases to customers.

Segment profit. Performance Films segment profit was $19.8 million for the year ended December 31, 2004, as compared to $24.0 million for the same period in 2003. This decrease in segment profit was primarily due to lower gross margins from compression between our average selling price and average raw material costs to contractual customers.

Corporate/Other

Corporate/Other includes our corporate headquarters and our research and development facility in Newport News, Virginia. Unallocated corporate expenses decreased $13.6 million to $30.6 million for the year ended December 31, 2004 from $43.0 million for 2003. This decrease was principally due an accrual in 2003 of $7.2 million for the estimated costs of litigation discussed in Note 13 to the consolidated financial statements and to elimination of administrative cost associated with our former international segment and Singapore operations. Unallocated research and development costs increased $2.9 million to $4.2 million.

Year ended December 31, 2003 compared to the year ended December 31, 2002

Specialty Products Group

Net sales. The net sales of our Specialty Products Group segment increased $21.1 million, or 6.1% to $367.7 million for the year ended December 31, 2003 from $346.6 million for 2002. This increase was primarily due to a 3.0% increase in our average selling prices, primarily due to the pass-through of raw material price increases, and in increase in sales volumes of 3.0%.

Net sales in our Specialty Films division increased $25.8 million, or 17.5%, to $173.2 million for the year ended December 31, 2003 from $147.4 million for 2002. This increase was principally due to an increase in our sales volume of 13.0% and an increase in our average selling prices of 3.9%. The increase in sales volume was primarily the result of incremental sales from a new film line at our Washington, GA plant and the transfer of business from our Engineered Films segment. Average selling prices increased due to the pass-through of raw material price increases and improvements in our sales mix.

Net sales of our Printed Products Film division decreased $4.7 million, or 2.3%, to $194.5 million for the year ended December 31, 2003 from $199.2 million for 2002. This decrease was principally due to a decrease in our sales volumes of 7.7%, partially offset by an increase in our average selling prices of 5.8%.

Segment profit. The Specialty Films segment profit decreased $6.2 million, to $49.0 million for the year ended December 31, 2003 from $55.2 million for 2002. This decrease in segment profit was primarily due to incremental volumes at lower margins and the competitive environment in the personal care business resulted in less than complete recovery of the increase in raw material prices and thus lower margins.

Industrial Films

Net sales. Net sales in our Industrial Films segment increased $28.2 million, or 14.7%, to $219.6 million for the year ended December 31, 2003 from $191.4 million for 2002. This increase was principally due to an increase in our average selling prices of 15.4%, principally due to the pass-through of raw material price increases, and offset by a 0.6% decrease in our sales volumes.

Segment profit. Industrial Films segment profit decreased $3.3 million, to $27.2 million for the year ended December 31, 2003 from $30.5 million for 2002. This decrease in segment profit was primarily due to lower gross margins resulting from higher waste and packaging costs of $2.1 million, machine start up costs in Germany and our Toronto Facilities and to $1.2 million increases in selling, general and administrative costs related to higher commission expense.

Engineered Films

Net sales. Net sales in our Engineered Films segment decreased $9.3 million, or 4.5%, to $196.1 million for the year ended December 31, 2003 from $205.4 million for 2002. This decrease was principally due to a decrease in our sales volume of 13.2%, partially offset by an increase in our average selling prices of 10.0% principally due to the pass-through of raw material price increases. The sales volumes decreased primarily as a result of the slowdown in the economy and the transfer of business to our Specialty Films division. Excluding the transfer of business to the Specialty Films division, sales volume of the Converter Films division decreased 11.0% for the year ended December 31, 2003 as compared to 2002.

Segment profit. Engineered Films segment profit decreased $4.0 million, to $34.1 million for the year ended December 31, 2003 from $38.1 million for 2002. This decrease was principally due to the decrease in sales volume, offset in part by increases in our average selling price exceeding increases in our average raw material costs.

Performance Films

Net sales. The net sales of our Performance Films segment increased $6.6 million, or 6.7%, to $105.2 million for the year ended December 31, 2003 from $98.6 million for 2002. This increase was principally due to an increase in our sales volumes of 1.3%, and an increase in our average selling prices of 5.4%, largely due to a favorable shift in the mix of higher value added products.

Segment profit. Performance Films segment profit increased $0.8 million, to $24.0 million for the year ended December 31, 2003 from $23.2 million for 2003. This increase in segment profit was primarily due to the shift to a more favorable product mix.

Corporate/Other

Corporate/Other includes our corporate headquarters and research and development facility in Newport, Virginia. Unallocated corporate expenses increased $14.8 million due primarily to an accrual of $7.2 million for the estimated costs of litigation discussed in Note 13 to the consolidated financial statements, $1.1 million of severance costs related to recent organizational changes, and increases in legal and consulting expenses. Unallocated research and development costs increased $0.8 million to $1.3 million.

Liquidity and Capital Resources

Sources of capital

Our principal sources of funds are cash generated by our operations and borrowings under our revolving credit facility. In addition, we have raised funds through the issuance of our 13% Senior Subordinated Notes due 2010, 11¹/8% Senior Secured Notes due 2009, 11¹/8% Senior Secured Discount Notes due 2009 and the sale of shares of our preferred stock.

All of the term debt and revolver debt under the credit facilities that existed at December 31, 2003 had been at variable rates of interest, so payment of the term loans with the proceeds of our 11¹/8% Senior Secured Discount Notes and borrowings under our revolving credit facility substantially reduced our exposure to interest rate risk. Although our new $100 million revolving credit facility is at a variable rate of interest, there are substantially fewer financial covenants than our credit facilities that existed at December 31, 2003, which will substantially reduce our exposure to covenant default risk. While the effective interest rate on the Senior Secured Discount Notes is higher than the term loans retired from the proceeds of the February 2004 offering, we will realize greater short-term liquidity and flexibility in our debt structure resulting from the elimination of a number of the financial and other

covenants in our then existing credit facilities and the deferral of the cash interest requirements of the Senior Secured Discount Notes.

In an attempt to manage our liquidity needs, we and our affiliates are analyzing and formulating potential strategic alternatives to reduce our leverage. In this regard, we or our affiliates may repurchase all or a portion of our Notes, through an exchange offer, a tender offer or open-market or privately-negotiated purchases, or through a combination of any of these or other alternatives. The funds for any such repurchases may be raised by selling additional equity, seeking additional capital contributions from our existing equity holders or by other means. There can be no assurance that any plan to reduce our indebtedness, if commenced, would be successfully completed.

Revolving credit facility

On February 17, 2004, we paid off and terminated our then existing credit facilities and entered into a revolving credit facility providing up to $100 million (subject to a borrowing base). The revolving credit facility includes a $15 million letter of credit subfacility, with letters of credit reducing availability under our revolving credit facility.

The revolving credit facility is secured by a first priority security interest in substantially all inventory, receivables, deposit accounts, 100% of capital stock of, or other equity interests in existing and future domestic subsidiaries and foreign subsidiaries that are guarantors of the Senior Secured Discount Notes, and 65% of the capital stock of, or other equity interests in existing and future first-tier foreign subsidiaries, investment property and certain other assets of the Company and the note guarantors (the "Second Priority Collateral"), and a second priority security interest in our real property, fixtures, equipment, intellectual property and other assets (the "First Priority Collateral").

The revolving credit facility matures on February 17, 2009. The Company is subject to periodic reporting of a borrowing base consisting of eligible accounts receivable and eligible inventory. The interest rates are at LIBOR plus 2.5% to 3.0% or ABR plus 1.5% - 2.0%.

The borrowings under the new revolving credit facility may be limited to a reduced availability. If the borrowing base is less than $110,000,000 and the Fixed Charge Coverage Ratio (FCCR) is less than 1.1, the reduced availability is the borrowing base minus $10,000,000. Furthermore, if the FCCR is less than that prescribed in our credit agreement, reduced availability is the lessor of the commitment or the borrowing base minus $15,000,000. As of December 31, 2004, we had approximately $60.1 million available for borrowing under our revolving credit agreement.

Issuance of 11¹/8% Senior Secured Discount Notes due 2009

On February 17, 2004 we completed the sale of $306 million principal amount at maturity (gross proceeds of $225.3 million) of 11¹/8% Senior Secured Discount Notes due 2009. The proceeds of the offering and borrowings under the revolving credit facility were used to repay and terminate the credit facilities that existed at December 31, 2003.

The Senior Secured Discount Notes mature on June 15, 2009, and are secured by a first priority security interest in the First Priority Collateral and a second priority security interest in the Second Priority Collateral. The Senior Secured Discount Notes are guaranteed by our existing and future domestic restricted subsidiaries and certain foreign subsidiaries.

Unless we elect to pay cash interest as described below, and except under certain limited circumstances, the Senior Secured Discount Notes will accrete from the date of issuance at the rate of 11¹/8% until December 15, 2006, compounded semiannually on each June 15 and December 15 commencing June 15, 2004, to an aggregate principal amount of $1,000 per note ($306.0 million in the aggregate assuming no redemption or other repayments). Commencing on December 15, 2006, interest

on the Senior Secured Discount Notes will accrue at the rate of 11¹/8% per annum and will be payable in cash semiannually on June 15 and December 15, commencing on June 15, 2007.

On any interest payment date prior to December 15, 2006, we may elect to commence paying cash interest (from and after such interest payment date) in which case (i) we will be obligated to pay cash interest on each subsequent interest payment date, (ii) the notes will cease to accrete after such interest payment date and (iii) the outstanding principal amount at the stated maturity of each note will equal the accreted value of such note as of such interest payment date.

On or after June 15, 2007, we may redeem some of all of the Senior Secured Discount Notes at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest: 105.563% if redeemed prior to June 15, 2008; 102.781% if redeemed prior to June 15, 2009; and 100% if redeemed on or after June 15, 2009. Prior to such date, we may not redeem the notes except as described in the following paragraph.

At any time prior to June 15, 2007, we may redeem up to 35% of the accreted value of the Senior Secured Discount Notes with the net cash proceeds of certain equity offerings by us at a redemption price equal to 111.125% of the accreted value thereof plus accrued interest, so long as (i) at least 65% of the accreted value of the notes remains outstanding after such redemption and (ii) any such redemption by us is made within 120 days after such equity offering.

11¹/8% Senior Secured Notes due 2009

On May 30, 2003, we completed the sale of $250 million aggregate principal amount of our 11¹/8% Senior Secured Notes due 2009. The 11¹/8% Senior Secured Notes due 2009 mature on September 1, 2009, and interest is payable on March 1 and September 1 of each year. The net proceeds from the sale of the 11¹/8% Senior Secured Notes due 2009 were used to repay borrowings under our then existing credit facilities in accordance with an amendment to our then existing credit facilities. The 11¹/8% Senior Secured Notes due 2009 rank equally with our existing and future senior debt and rank senior to our existing and future subordinated indebtedness, including the 13% Senior Subordinated Notes due 2010. The 11¹/8% Senior Secured Notes due 2009 are secured by a first priority security interest in the First Priority Collateral and a second priority security interest in the Second Priority Collateral. The 11¹/8% Senior Secured Notes due 2009 are guaranteed by some of our subsidiaries.

Prior to June 1, 2007, we may, on one or more occasions, redeem up to a maximum of 35% of the original aggregate principal amount of the 11¹/8% Senior Secured Notes due 2009 with the net cash proceeds of one or more equity offerings by us at a redemption price equal to 111.125% of the principal amount thereof, plus accrued and unpaid interest. Otherwise, we may not redeem the 11¹/8% Senior Secured Notes due 2009 prior to June 1, 2007. On or after that date, we may redeem some or all of the 11¹/8% Senior Secured Notes due 2009 at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest: 105.563% if redeemed prior to June 1, 2008; 102.781% if redeemed prior to June 1, 2009; and 100% if redeemed on or after June 1, 2009.

13% Senior Subordinated Notes due 2010

In 2000, we issued $220 million aggregate principal amount of 13% Senior Subordinated Notes due 2010. In 2002, we issued an additional $100 million of 13% Senior Subordinated Notes due 2010. The 13% Senior Subordinated Notes due 2010 mature on June 1, 2010, and interest on the 13% Senior Subordinated Notes due 2010 is payable on June 1 and December 1 of each year. The 13% Senior Subordinated Notes due 2010 are subordinated to all of our existing and future senior debt, rank equally with any future senior subordinated debt, and rank senior to any future subordinated debt. The 13% Senior Subordinated Notes due 2010 are guaranteed by some of our subsidiaries. The 13% Senior Subordinated Notes due 2010 are unsecured. Prior to June 1, 2003, we may, on one or more occasions,

redeem up to a maximum of 35% of the original principal amount of the 13% Senior Subordinated Notes due 2010 with the net cash proceeds of one or more equity offerings by us at a redemption price equal to 113% of the principal amount thereof, plus accrued and unpaid interest. Otherwise, we may not redeem the 13% Senior Subordinated Notes due 2010 prior to June 1, 2005. On or after that date, we may redeem the 13% Senior Subordinated Notes due 2010, in whole or in part, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest: 106.5% if redeemed prior to June 1, 2006; 104.333% if redeemed prior to June 1, 2007; 102.167% if redeemed prior to June 1, 2008; and 100% if redeemed on or after June 1, 2008.

Preferred stock

We have approximately $223.5 million of Series A Cumulative Exchangeable Redeemable Preferred Stock outstanding. The Series A preferred stock accrues dividends at the rate of 14% per annum; however, our board of directors has never declared or paid any dividends on the Series A preferred stock. Unpaid dividends accumulate and are added to the liquidation amount of the Series A preferred stock. After May 31, 2005 the annual dividend rate increases to 16% unless we pay dividends in cash. The dividend rate also increases to 16% if we fail to comply with certain of our obligations or upon certain events of bankruptcy. The Series A preferred stock is mandatorily redeemable on June 1, 2011. See Note 10 to the consolidated financial statements included elsewhere in this report. The shares of Series A Preferred Stock are non-voting.

On September 24, 2004, we adopted a 2004 Restricted Stock Incentive Plan, pursuant to which we sold to our President and Chief Executive Officer and selected additional officers of the Company, 704 shares of a total of 720 shares of a newly-created, non-voting Series B Redeemable Preferred Stock for a cash purchase price of $162 per share. These shares were issued in private transactions with officers of the Company and therefore were exempt from the registration requirements of the Securities Act of 1933. On December 22, 2004, the remaining 16 authorized shares were issued to an officer for a cash purchase price of $162 per share.

Upon the sale of all or substantially all of the Company's assets, sale of the majority of the outstanding Common Stock of the Company to a person other than J.P. Morgan or its affiliates; merger or consolidation of the Company, or the consummation of a liquidation, as those events are specifically described in the Company's Articles of Incorporation, we are required to redeem all shares of Series B Redeemable Preferred Stock by payment of cash in an amount equal to the product of (x) .000104166; times (y) the sum of the amount of cash distributions actually paid and the fair market value of assets distributed by the Company to its stockholders during the period commencing on September 24, 2004 through the date of such event, plus the net proceeds payable, whether in cash, stock or other assets, to the stockholders of the Company in respect of such event.

Upon a redemption by the Company of any shares of Series A Preferred Stock (or any payment on any notes issued in exchange therefor), the holder of each share of Series B Redeemable Preferred Stock shall be entitled to receive a cash dividend equal to the product of (x) .000104166; times (y) the net proceeds payable, whether in cash, stock or other assets, to the stockholders of the Company in respect to such redemption or such payment.

Upon an underwritten public offering of shares of capital stock of the Company to the public resulting in aggregate net proceeds to the Company of not less than $100 million each share of Series B Redeemable Preferred Stock shall be automatically converted into that number of shares of the class of common equity securities of the Company that are outstanding immediately following such public offering equal to the product of (x) .000104166; times (y) the total number of shares of such class of stock outstanding immediately following the consummation of the public offering. The shares of Series B Redeemable Preferred Stock are non-voting and do not bear dividends except as noted above.

Net cash used in operating activities

Net cash used in operating activities was $1.4 million for the year ended December 31, 2004, compared to net cash used in operations of $14.2 million for the same period in 2003, a difference of $12.8 million. This difference is primarily attributable to the recognition of $35.3 million in deferred dividends, accretion on the Series A preferred stock and $23.5 million of accretion on the senior secured discount notes, offset by reductions in goodwill and fixed asset impairments of $18.3 million and $4.4 million, respectively, $12.7 million in increased working capital requirements, $7.0 million in less losses from discontinued operations and $6.2 million less depreciation and amortization.

Net cash used in investing activities

Net cash used in investing activities was $17.6 million for the year ended December 31, 2004, as compared to $17.0 million for the same period in 2003. Capital expenditures in 2004 of $24.1 million included $8.7 million for new production lines, while capital expenditures in 2003 were principally for upgrading the operating efficiencies at our manufacturing facilities. In addition, during the third quarter of 2004, the Company sold substantially all the assets of our wholly-owned subsidiary, Pliant Solutions, receiving $6.5 million in cash proceeds.

Net cash provided by financing activities

Net cash provided by financing activities was $25.5 million for the year ended December 31, 2004, as compared to net cash provided by financing activities of $46.0 million for the year ended December 31, 2003. As a condition to the effectiveness of the March 2003 amendment to our then existing credit facilities, J.P. Morgan Partners agreed to purchase Series A preferred stock and warrants for $10 million. The activity for 2003 includes the net proceeds from the issuance of such $10 million of Series A preferred stock and warrants, the net proceeds from the issuance of $250 million principal amount of Senior Secured Notes in May 2003, and the use of these proceeds to repay term debt. In addition, we paid $10.5 million in financing fees for a related amendment to our then existing credit facilities and the issuance of the Series A preferred stock and warrants. The activity for both periods also includes scheduled principal payments on our term loans and borrowings and repayments under our then existing revolving credit facility.

As of December 31, 2004, we had approximately $78.5 million of working capital, approximately $60.1 million available for borrowings under our then existing revolving credit facility, with no outstanding borrowings under that facility, and approximately $6.7 million in letters of credit issued under our then existing revolving credit facility. Our outstanding borrowings under our then existing revolving credit facility fluctuated significantly during each quarter as a result of the timing of payments for raw materials, capital and interest, as well as the timing of customer collections. See "Sources of Capital" above for a discussion of the refinancing done in February 2004.

As of December 31, 2004, we had approximately $5.6 million in cash and cash equivalents. A portion of this amount was held by our foreign subsidiaries. Repatriation tax rates may limit our ability to access cash and cash equivalents generated by our foreign operations for use in our U.S. operations, including to pay principal and interest on outstanding borrowings.

Our total capital expenditures in 2004, 2003 and 2002 were approximately $24.1 million, $17.0 million, and $49.2 million, respectively. We currently estimate that our total capital expenditures will be approximately $30 to 35 million in 2005. These expenditures will consist of ongoing projects, productivity improvement projects and minor expansion of business and growth projects. Of this amount, approximately $12 million will be spent on projects to improve operational efficiencies.

Although our outstanding preferred stock accrues dividends, these dividends are only paid if declared. We do not expect to pay any dividends on our preferred stock for the foreseeable future.

Our revolving credit facility and the indentures relating to the 11¹/8% Senior Secured Discount Notes due 2009, and the 13% Senior Subordinated Notes due 2010 impose certain restrictions on us, including restrictions on our ability to incur indebtedness, pay dividends, make investments, grant liens, sell our assets and engage in certain other activities.

The interest expense and scheduled principal payments on our borrowings affect our future liquidity requirements. We expect that cash flows from operating activities and available borrowings under our revolving credit facility of up to $100 million (excluding $6.7 million of outstanding letters of credit) will provide sufficient cash flow to operate our business, to make expected capital expenditures and to meet foreseeable liquidity requirements. However, our ability to borrow under our revolving credit facility at any time will be subject to the borrowing base in effect at that time (which will vary depending upon the value of our accounts receivable and inventory). Our ability to make borrowings under our revolving credit facility will also be conditioned upon our compliance with other covenants in the new credit agreement, including financial covenants that apply when our borrowings exceed certain amounts. In addition, the terms of our indentures currently limit the amount we may borrow under our revolving credit facility.

Changes in raw material costs can significantly affect the amount of cash provided by our operating activities, which can affect our liquidity. Over the past several months, we have experienced a period of extreme uncertainty with respect to resin supplies and prices. High crude oil and natural gas pricing, have had a significant impact on the price and supply of resins. During the same period, many major suppliers of resin have announced price increases to cover their increases in feedstock costs. While the prices of our products generally fluctuate with the prices of resins, certain of our customers have contracts that limit our ability to pass the full cost of higher resin pricing through to our customers immediately. Further, competitive conditions in our industry may make it difficult for us to sufficiently increase our selling prices for all customers to reflect the full impact of increases in raw material costs. If this period of high resin pricing continues, we may be unable to pass on the entire effect of the price increases to our customers, which would adversely affect our profitability and working capital. In addition, further increases in crude oil and natural gas prices could make it difficult for us to obtain an adequate supply of resin from manufacturers affected by these factors.

If (a) we are not able to increase prices to cover historical and future raw materials cost increases, (b) we are unable to obtain adequate supply of resin, (c) volume growth does not continue as expected, or (d) we experience any significant negative effects to our business, we may not have sufficient cash flow to operate our business, make expected capital expenditures or meet foreseeable liquidity requirements. Any such event would have a material adverse effect on our liquidity and financial condition.

The following table sets forth our total contractual cash obligations excluding cash interest payments, as of December 31, 2004 (in thousands):

	Payments Due by Period
Contractual Cash Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-term debt (including capital lease obligations)	$	842,348	$	1,994	$	2,376	$	524,764	$	313,214
Operating leases		43,196		9,190		15,153		7,997		10,856
Redeemable preferred stock		223,548		—		—		—		223,548
Pension obligations		3,067		3,067		—		—		—
Raw material and other purchase obligations		32,796		28,550		4,246		—		—
Total contractual cash obligations	$	1,144,955	$	42,801	$	21,775	$	532,761	$	547,618

Cash used in discontinued operations

Net cash used in discontinued operations was $4.8 million for the year ended December 31, 2004 compared to net cash used of $14.8 million for the year ended December 31, 2003.

Other developments

For a discussion of material litigation in which we are involved, see Item 3—"Legal Proceedings."

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various interest rate and resin price risks that arise in the normal course of business. We regularly evaluate the advisability of entering into interest rate hedging agreements to manage interest rate market risks and commodity hedging agreements to manage resin market risks. However, significant increases in interest rates or the price of resins could adversely affect our operating margins, results of operations and ability to service our indebtedness.

Since the repayment of $219.6 million of variable rate term debt with the proceeds of our Senior Secured Discount Notes due 2009 and borrowings under our revolving credit facility on February 17, 2004, our interest rate risk has decreased substantially.

Our revolving credit facility is at a variable rate of interest. An increase of 1% in interest rates would result in an additional $100,000 of annual interest expense for each $10.0 million in borrowings under our revolving credit facility. We will thus be exposed to interest rate risk to the extent of our borrowings under the revolving credit facility.

Our raw material costs are comprised primarily of resins. Our resin costs comprised approximately 61% of our total manufacturing costs in 2004. Market risk arises from changes in resin costs. Although the average selling prices of our products generally increase or decrease as the cost of resins increases or decreases, the impact of a change in resin prices is more immediately reflected in our raw material costs than in our selling prices. From time to time we enter into commodity collar agreements to manage resin market risks. At December 31, 2004, we did not have any commodity collar agreements outstanding. Prices for resin have risen dramatically during 2004 and are expected to continue to rise. Pliant's costs for resin on a weighted-average basis rose 29% higher from December of 2003 to December of 2004, with over half of that increase occurring in the fourth quarter of 2004.

Fluctuations in exchange rates may also adversely affect our financial results. The functional currencies for our foreign subsidiaries are the local currency. As a result, certain of our assets and liabilities, including certain bank accounts, accounts receivable and accounts payable, exist in non U.S. dollar-denominated currencies, which are sensitive to foreign currency exchange rate fluctuations.

We enter into certain transactions denominated in foreign currencies and when advisable we have employed hedging techniques designed to mitigate foreign currency exposures. Gains and losses from these transactions as of December 31, 2004, have been immaterial and are reflected in the results of operations.

We are exposed to credit losses in the event of nonperformance by the counterparty to a financial instrument to which we are a party. We anticipate, however, that each of the counterparties to the financial instruments to which we are a party will be able to fully satisfy its obligations under the contract.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data required by this Item 8 are set forth at the pages indicated in Item 15(a) below.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. This information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including our principal executive officer and our principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them on a timely basis to material information required to be disclosed in our periodic filings.

Changes in Internal Controls

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in the foregoing paragraph.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information about our executive officers and directors is presented below. Pursuant to the stockholders' agreement among us, the holders of our common stock and the holders of warrants to purchase our common stock, our board of directors currently consists of eight members, four of whom are designated by our institutional common stockholders and warrant holders, one of whom is designated by The Christena Karen H. Durham Trust, two of whom are independent, and one of whom is appointed by our board of directors and must be a member of our senior management. The trust has the right to designate a second director to the Board, but that Board seat is currently vacant.

Name	Age	Position
Harold C. Bevis	45	President and Chief Executive Officer, Acting Chief Financial Officer, and Director
John D. Bowlin	54	Director
Richard P. Durham	40	Director
Sean Epps	36	Director
Edward A. Lapekas	61	Non-Executive Chairman
Albert (Pat) MacMillan	61	Director
Jeffrey C. Walker	49	Director
Timothy J. Walsh	41	Director
R. David Corey	56	Executive Vice President and Chief Operating Officer
Paul R. Frantz	39	Senior Vice President and General Manager—Performance Films
Greg E. Gard	44	Senior Vice President, Technology & Innovation
Joseph J. Kwederis	58	Senior Vice President, Finance
Robert J. Maltarich	53	Senior Vice President and General Manager—Industrial Film
Kenneth J. Swanson	38	Senior Vice President, President Specialty Products Group
Coleman R. Wooldridge	57	Senior Vice President and General Manager—Engineered Films

Harold C. Bevis was named President and Chief Executive Officer in October 2003. Mr. Bevis also serves on our Board of Directors and is currently serving as our Chief Financial Officer. He has over 20 years of global experience with multiple types of technology-driven manufactured products sold across a full range of sales channels. Mr. Bevis joined Pliant from Emerson Electric, where he served as President of Emerson Telecommunications Products, a group of manufacturing companies, beginning in 1998. Mr. Bevis led the sale of this group to Emerson while he was President and CEO of Jordan Telecommunication Products, Inc., a manufacturer of nonproprietary communications products. Prior to that, Mr. Bevis served as Senior Vice President and General Manager of General Cable Corporation, a large, vertically integrated domestic manufacturer of wire and cable products sold through wholesale and retail channels to companies such as The Home Depot, True Value Hardware, Rexel and Graybar. Mr. Bevis has also held positions of increasing responsibility with General Electric, Booz, Allen & Hamilton, and General Dynamics, where he began his career as an engineer. Mr. Bevis holds a B.S. in

Industrial Engineering from Iowa State University and an MBA in Marketing from Columbia University in New York. Mr. Bevis is the director who is a member of our senior management.

John D. Bowlin became one of our directors on January 31, 2005. Mr. Bowlin was President and Chief Executive Officer of Miller Brewing Company from 1999 until 2003, leading its sale to South African Breweries in 2002. From 1985 until 2002, Mr. Bowlin was employed by Philip Morris Companies, Inc., in various leadership capacities, including President, International, Kraft, Inc. (1996 - 1999), President and Chief Operating Officer, Kraft Foods, Inc. (1994 - 1996), President and Chief Operating Officer, Miller Brewing Company (1993 - 1994), and President, Oscar Mayer Food Corporation (1991-1993). Mr. Bowlin holds an MBA from Columbia University and a BS from Georgetown University. He is also a director of the Rayovac Corporation. Mr. Bowlin is one of the two independent directors.

Richard P. Durham became one of our directors on May 31, 2000. Mr. Durham also served as our President, from March 1997 through March 2001, and as our Chief Executive Officer from March 1997 through June 2002. He was also the chairman of our board of directors from May 31, 2000 to June 2002. Mr. Durham has been with various Huntsman Corporation affiliates since 1987. Prior to becoming our President, Mr. Durham served as Co-President and Chief Financial Officer of Huntsman Corporation. Mr. Durham is also a director of Huntsman Corporation. Mr. Durham is a graduate of The Wharton School of Business at the University of Pennsylvania. Mr. Durham is the Trust's designee to the board.

Sean Epps became one of our directors on January 31, 2005. Mr. Epps has been a Principal of J.P. Morgan Partners, LLC, the company's principal stockholder since 2000, and prior to that was an associate of that entity. Mr. Epps has extensive experience managing J.P. Morgan Partners, LLC' portfolio companies, and is also on the Board of Directors of Brand Services, Inc. and Chromalox Corporation. Mr. Epps holds a BA from Hamilton College and an MBA from The Wharton School, University of Pennsylvania. Mr. Epps is one of the persons designated to serve on the board by our institutional common stockholders and warrant holders.

Edward A. Lapekas became one of our directors on December 19, 2001 and became our Non-Executive Chairman on October 22, 2003. Mr. Lapekas served as our interim Chief Executive Officer from August 24, 2003 until October 22, 2003. From November 2002 until March 2003, Mr. Lapekas served as Chairman and Chief Executive Officer of NexPak Corporation, a media packaging company. Prior to that, Mr. Lapekas was Executive Chairman of Packtion Corporation, an e-commerce venture, from October 2000 until June 2001. From May 1996 until July 2000, Mr. Lapekas was employed by American National Can Group, Inc., last serving as Chairman and Chief Executive Officer. Prior to that, Mr. Lapekas served as Deputy Chairman and Chief Operating Officer of Schmalbach-Lubeca AG. From 1971 until 1991, Mr. Lapekas was employed by Continental Can Company, where he served in various strategy, planning, operating and marketing capacities. Mr. Lapekas is also a director of Silgan Corp. He received a B.A. degree from Albion College and an M.B.A. degree from Wayne State University. Mr. Lapekas is one of the two independent directors.

Albert (Pat) MacMillan became one of our directors on December 19, 2001. Mr. MacMillan is the founder and CEO of Team Resources, a consulting firm with offices in the United States, Venezuela, Peru, Chile, and Mexico. Founded in 1980, Team Resources provides client services in the areas of strategy, building team-based organizations, and designing leadership development strategies. He also serves on the boards of directors of Unum/Provident and Metokote Corporation, as well as several foundations and non-profit organizations. He received a B.A. degree in Business and an M.B.A. degree from the University of Washington. Pursuant to the stockholders' agreement, Mr. MacMillan is one of the designees to the board by our institutional common stockholders and warrant holders.

Jeffrey C. Walker became one of our directors on July 1, 2004. Mr. Walker is Managing Partner of J.P. Morgan Partners, LLC and Vice Chairman of JPMorgan Chase. J.P. Morgan Partners, LLC is a

global partnership and is our principal stockholder. Before co-founding JPMorgan Partners in 1984, Mr. Walker worked in the Investment Banking and Finance Divisions of Chemical Bank and the Audit and Consulting Divisions of Arthur Young & Co. He is also a director of numerous private and public corporations (1-800-Flowers, Metroplex, Doane Pet Care, House of Blues, Metokote and Axis Insurance). Mr. Walker is a Certified Public Accountant and a Certified Management Accountant, and holds a BS degree from the University of Virginia and an MBA from the Harvard Business School. Mr. Walker is one of the designees to the board by our institutional common stockholders and warrant holders.

Timothy J. Walsh became one of our directors on May 31, 2000. He served as Non-Executive Chairman from June 2002 until October 2003. Mr. Walsh is an executive officer of JPMP Capital Corp., which is the general partner of JPMP Master Fund Manager, L.P., which is the general partner of J.P. Morgan Partners (BHCA), L.P., our principal stockholder. Since 1999, Mr. Walsh has been a Partner of J.P. Morgan Partners, LLC (formerly, Chase Capital Partners). JP Morgan Partners is a global partnership. It is a leading provider of private equity and has closed over 1,300 individual transactions since its inception in 1984. JP Morgan Partners has more than 140 investment professionals in eight regional offices throughout the world. JP Morgan Partners' primary limited partner is J.P. Morgan Chase & Co. (NYSE: JPM), one of the largest financial institutions in the United States. From 1993 to 1999, Mr. Walsh held various positions with J.P. Morgan Partners in Europe and North America. Prior to 1993, he was a Vice President of J.P. Morgan Chase & Co. (formerly, The Chase Manhattan Corporation). Mr. Walsh is also a director of Better Minerals & Aggregates Company, Klockner Pentaplast S.A. and Metokote Corporation. Mr. Walsh received a B.S. degree from Trinity College and an M.B.A. degree from the University of Chicago. Pursuant to the stockholders' agreement, Mr. Walsh is one of the designees to the board by our institutional common stockholders and warrant holders.

R. David Corey was named Chief Operating Officer in March 2004. He joined Pliant as Executive Vice President for Global Operations in November 2003. Mr. Corey has over 30 years of experience leading extrusion-based manufacturing businesses. Mr. Corey was a senior executive at Emerson Electric where he was President of Dura-Line, a manufacturing business that produced telecom, gas and water conduit products. He supervised plants and sales forces in the US, Mexico, UK, Spain, Brazil, Czech Republic, Malaysia, India and China. Previously, Mr. Corey was President of International Wire with operations in the US and Asia. Prior to that, Mr. Corey was Senior Vice President and General Manager of Telecom products for General Cable Corporation. He earned a B.S. in Business from Eastern Illinois University.

Paul R. Frantz is currently the Senior Vice President and General Manager of the Performance Films Division. Mr. Frantz joined Pliant Corporation in July of 1992 following the acquisition of Goodyear Tire and Rubber Company's Film Division. Since that time, he has held numerous positions within the company. Most recently he has served as Senior Vice President Sales and Marketing Marquee Accounts. In 2003 he served as Senior Vice President Sales and Marketing for Pliant Solutions, from 2001 - 2003 he was Vice President Sales and Marketing for Secondary Packaging, and from 1999 - 2000 he was Managing Director—Europe. Other positions have included Director Sales and Marketing for Secondary Packaging and Marketing Manager for Secondary Packaging. Prior to joining Pliant Corporation, Mr. Frantz held various sales management positions with Goodyear and operations management positions in the thermoforming segment of the plastics industry. He holds a B.B.A. degree in Economics and Finance from Baylor University.

Greg E.Gard joined Pliant Corporation in 1989 and has held numerous technical positions supporting the various market segments within Pliant Corporation. Today, he serves as Senior Vice President of Technology and Innovation. His responsibilities in this regard include Product Development and Technical Service for the Corporation, with particular focus on shortening product development cycles, improving speed to market, and directing a team of packaging professionals in the

development of packages that protect and preserve while improving functionality and appearance. Before joining Pliant, Mr. Gard held engineering and management positions with Cryovac Sealed Air Corporation. Prior to this he worked for several years as an engineer with Dresser Atlas in oil and gas exploration. He holds a B.S. degree in electrical and computer engineering from the University of Wisconsin Madison. Mr. Gard is actively involved with Clemson University's Packaging Science program, one of only four academic institutions in the United States that offers a four-year program leading to a B.S. degree in Packaging Science. Currently, he serves on the Packaging Advisory Board at Clemson.

Joseph J. Kwederis joined Pliant Corporation as Senior Vice President, Finance in February 2005. Prior to joining Pliant Corporation, Mr. Kwederis was Senior Vice President/CFO of Dura-line Corporation from 1999 - 2004, and VP of Finance for International Wire Group from 1996 - 1999. From 1974 until 1996 he held positions of increasing responsibility in Accounting and Finance at General Cable Corporation. Mr. Kwederis holds a BS in Accounting from Rutgers University and an MBA from the University of Connecticut.

Robert J. Maltarich joined Pliant Corporation in July of 1992 following the acquisition of Goodyear Tire & Rubber Company's Films Division. Since that time, he has held numerous positions within Pliant Corporation. From 1992 - 1993 he served as Marketing Manager Film Products Worldwide, from 1994 - 1996 he was Director of National Accounts, and from 1997 - 1998 he was General Manager Custom Films Group. Other positions included Vice President and General Manager Barrier and Custom Films and, most recently, Senior Vice President of Sales, Flexible Packaging. Mr. Maltarich was promoted in October 2002 to Vice President and General Manager, Industrial Films, where he oversees Pliant's Stretch, Custom, and PVC film businesses. Prior to joining Pliant Corporation, Mr. Maltarich held numerous national and international positions in both sales and marketing with Goodyear Tire & Rubber Company. During his 18-year career at Goodyear, he served as General Marketing Manager Film Products Worldwide, General Manager European Film Products, Manager Film Products USA and District Sales Manager. He holds a B.S. degree in Business Administration from the University of Akron.

Kenneth J. Swanson is currently President, Specialty Products. Prior to this position, Mr. Swanson was the Senior Vice President and General Manager of the Specialty Films Division at Pliant. Since 1992, Mr. Swanson has had various leadership positions with CT Film, Huntsman Packaging, and Pliant. Prior to 1992, Mr. Swanson held multiple sales management positions in the injection molding segment of the plastics industry. Mr. Swanson holds a B.Sc. degree in Business Management from the University of Redlands, Redlands, CA.

Coleman R. Wooldridge joined Pliant Corporation in 1993 as the Plant Manager of the Dalton, Ga. Facility and in 1997 moved to Bloomington, Indiana as Plant Manager of the Bloomington and Odon plants. He was promoted to Vice President of Manufacturing in May of 1999, where he was responsible for the Converter, Personal Care and Barrier Division manufacturing operations. He was promoted to his current role of Vice President and General Manager of the Converter Division in October of 2002. Prior to joining Pliant, Mr. Wooldridge spent 4 years at Sonoco Products Company, where he held several positions in the manufacturing area, including Plant Manager in the High Density Film Products Division. Mr. Wooldridge began his career at General Electric, where he spent 15 years working in Supervisory roles and as a Product Development Engineer in plastics processing, which included work in injection and compression molding, vacuum forming and engineering resins. He holds a B.Sc. degree in Business Management from the University of Louisville, and a M.A. degree in Human Resource Development and Management from Webster University, St. Louis.

Code of Ethics for Officers

Our board of directors plans to adopt a code of ethics for all officers and directors which will be available upon request, but has not yet done so because the Company's equity securities are not registered under the Exchange Act or subject to the listing rules of any stock exchange or automated quotation system.

Audit Committee

Our Board of Directors has an audit committee. The audit committee maintains oversight responsibilities with respect to our accounting, auditing, financial reporting and internal control processes generally. The members of the audit committee are Timothy J. Walsh and Edward A. Lapekas. Mr. Lapekas is considered independent within the meaning of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended. Mr. Walsh may not be deemed independent in light of the numerous transactions between the Company and J.P. Morgan Partners and its affiliates (see Item 13, "Certain Relationships and Related Transactions"). A person who at the time was serving as a Director was appointed as the financial expert of the audit committee during 2004. However that member resigned from our Board of Directors and as Chairman of the audit committee on January 31, 2005.

Compensation Committee

Our Board of Directors has a compensation committee. The compensation committee maintains oversight responsibilitieswith respect to the compensation of our officers and directors. The members of the compensation committee are Albert (Pat) MacMillan, Timothy J. Walsh and Harold C. Bevis.

ITEM 11. EXECUTIVE COMPENSATION

The following summary compensation table sets forth information about compensation earned in the fiscal years ended December 31, 2004, 2003 and 2002 by each person serving as Chief Executive Officer during 2004 and the four other most highly compensated persons who were serving as executive officers of the Company (other than the Chief Executive Officer) as of the end of the last fiscal year and one other individual who would have been in that group of the most highly compensated persons but was not serving as an executive officer as of the end of the last fiscal year (collectively, the "Named Executive Officers").

Summary compensation table

					Long-term compensation
		Annual compensation(1)			Restricted Stock Awards
Name and principal position	Year	Salary ($)	Bonus ($)(2)		Total Shares Granted/Vested in 2004(3)	All other Compensation(4)
Harold C. Bevis(5) President and Chief Executive Officer	2004 2003 2002	608,333 78,974 —	928,974 — —	(6)	480 / 30 — —	1,083 — —
R. David Corey(7) Executive Vice President and Chief Operating Officer	2004 2003 2002	333,333 33,175 —	224,880 — —	(8)	48 / 3 — —	65,101 — —	(9)
Paul R. Frantz(10) Senior Vice President and General Manager—Performance Films	2004 2003 2002	196,167 169,086 145,497	100,000 9,968 15,625		16 / 0 — —	3,850 3,394 3,222
Kenneth J. Swanson(11) Senior Vice President, President Specialty Products	2004 2003 2002	219,500 168,500 153,751	150,000 34,518 16,015		40 / 2.5 — —	4,000 4,000 3,353
Greg E. Gard(12) Senior Vice President, Technology and Innovation	2004 2003 2002	215,333 162,500 146,680	90,000 27,900 19,130		16 / 6.25 — —	4,000 3,808 3,286
Brian E. Johnson(13) Former Executive Vice President and Chief Financial Officer	2004 2003 2002	296,633 267,799 267,799	46,900 47,860 41,928		— — —	4,000 4,000 5,700

(1): Perquisites and other personal benefits, securities or property, in the aggregate, are less than either $50,000 or 10% of the total annual salary and bonus reported for the applicable Named Executive Officer.
(2): All amounts for 2004 paid pursuant to 2004 Management Incentive Plan, except as indicated.
(3): Pursuant to the 2004 Restricted Stock Incentive Plan, certain executive officers of the Company were permitted to purchase shares of Series B Redeemable Preferred Stock in September of 2004 for $162.00 per share, which we determined to be the fair market value of those shares pursuant to an independent appraisal. One 48^th of those shares vest each month, subject to the holder being employed by the Company as of such dates. Three months (or .0625%) of the restricted shares granted to each such individual other than Mr. Frantz vested during 2004. Mr. Frantz' shares were not issued until December 2004, therefore none of his shares vested in 2004.

(4): All amounts reflect contributions for employer's 401(k) contributions, except as indicated.
(5): Mr. Bevis was appointed President and Chief Executive Officer in October 2003.
(6): Includes bonus of $850,000, paid in 2005 pursuant to the 2004 Management Incentive Compensation Plan and an additional discretionary bonus of $78,974 paid in 2004.
(7): Mr. Corey was appointed Executive Vice President of Global Operations in November 2003. He was promoted to Chief Operating Officer in March 2004.
(8): Includes bonus of $200,000, paid in 2005 pursuant to the 2004 Management Incentive Compensation Plan and an additional discretionary bonus of $24,880 paid in 2004.
(9): Includes $61,101 of moving expenses paid in 2004.
(10): Mr. Frantz was appointed Senior Vice President and General Manager—Performance films and became an executive officer on March 1, 2004.
(11): Mr. Swanson was appointed Senior Vice President and General Manager—Specialty Products Group and became an executive officer on February 16, 2004.
(12): Mr. Gard was appointed Senior Vice President, Technology and Innovation and became an executive officer on March 11, 2004.
(13): Mr. Johnson resigned as Executive Vice President and Chief Financial Officer effective September 16, 2004, but remained an non-executive officer employee of the Company until December 31, 2004.

Incentive Plans Adopted in 2004

Effective January 1, 2004, our Board of Directors adopted two new benefit plans in which some or all of the Named Executive Officers may participate: the 2004 Management Incentive Compensation Plan and the 2004 MIP Long Term Incentive Plan. The participants in the 2004 Management Incentive Compensation Plan were paid a bonus of $4,075,780 in 2005 relating to achievement of certain EBITDA and operating free cash flow goals for 2004. All Named Executive Officers participated in this plan and received bonuses for their 2004 performance, except the Chief Executive Officer, in the amounts indicated in the foregoing table. In addition, participants in the 2004 MIP Long Term Incentive Plan, which includes all officers and other key management personnel of the Company (except the Chief Executive Officer), received a credit of half of the 2004 bonus amount to the accumulated amount of their Long term Incentive Plan Award that they can earn under the 2004 MIP Long Term Incentive Plan, which can be become payable on December 31, 2007 under the terms of that plan. In August 2004, our Board of Directors adopted the 2004 Restricted Stock Incentive Plan. The grants under the 2004 Restricted Stock Incentive Plan are described below.

Stock Options and Restricted Stock

Pursuant to the recapitalization, options covering a total of 8,902 common shares were rolled over from a previous plan. In addition, we adopted our 2000 Stock Incentive Plan. The 2000 plan became effective as of the consummation of the recapitalization and authorizes grants of nonqualified stock options or restricted stock to employees, officers, directors, managers or advisors of Pliant or any of its subsidiaries. As amended, a total of 65,600 shares are authorized for issuance under the 2000 plan. As of December 31, 2003, we had outstanding grants of restricted stock covering 8,041 shares of common stock and options to acquire 45,012 shares of common stock under the 2000 plan. Shares of restricted stock that are forfeited, and unissued shares reserved for issuance pursuant to options that terminate, expire or are cancelled without having been fully exercised, become available to be issued pursuant to new grants under the 2000 Plan.

In August 2002, we adopted our 2002 Stock Incentive Plan. The 2002 plan authorizes grants of incentive stock options, nonqualified stock options and stock bonuses, as well as the sale of shares of common stock, to our and any of our subsidiaries' employees, officers, directors and consultants. A total of 4,793 shares are authorized for issuance under the 2002 plan.

Since the adoption of our 2004 Restricted Stock Incentive Plan in September 2004, we have sold to our President and Chief Executive Officer and certain other Named Executive Officers a total of 720 shares of a newly-created, non-voting Series B Redeemable Preferred Stock for a cash purchase price of $162 per share, which was determined by our Board to be the fair market value of these shares as of such date based on an independent appraisal received by the Company. The Series B Preferred Stock will be automatically converted into common equity of the Company upon the consummation of an underwritten public offering registered under the Securities Act of shares of capital stock of the Company resulting in aggregate proceeds (net of underwriters discounts and commissions) to the Company of not less than $100 million.

During the year ended December 31, 2004, 3,850 options to purchase common stock were granted and 17,394 options were cancelled. No stock options were granted to the Named Executive Officers during 2004.

The following table provides information as to the options held by each of the Named Executive Officers at the end of 2004. There is no established trading market for our common stock and, therefore, the aggregate market value of our shares cannot be determined by reference to recent sales or bid and asked prices. The value of unexercised in-the-money options was assumed to be equal to the price per share paid in the recapitalization $483.13 per share. None of the Named Executive Officers exercised any options during the last fiscal year.

Aggregated option exercises in last fiscal year and FY-end option values

Name	Shares acquired on exercise	Value realized	Number of securities underlying unexercised options at fy-end (#) exercisable/unexercisable		Value of unexercised in-the-money options at fy-end ($) exercisable/unexercisable
Paul R. Frantz	—	—	137/863		0/0
Greg E. Gard	—	—	132/1,368		0/0
Brian E. Johnson	—	—	4,000/0	(1)	0/0
Kenneth J. Swanson	—	—	137/1,363		0/0

(1): Mr. Johnson has the right to exercise all of his options on or before March 30, 2005. All options unexercised on such date will lapse.

The options or restricted common stock granted prior to January 1, 2001 pursuant to the 2000 plan, as amended, provide for vesting as follows: (1) one-sixth are "time-vested" options or shares, which vested on January 1, 2001, so long as the recipient was still our employee on such date, and (2) the remainder are "performance-vesting" options or shares, which vest in increments upon the achievement of performance targets as follows: (a) vesting in full, if 100% or more of the applicable performance target is achieved as of the end of any calendar quarter during the option term and (b) partial vesting if more than 90% of the applicable performance target is achieved as of the end of any calendar quarter during the option term. Moreover, all performance-vesting options or shares not previously vested in accordance with the preceding sentence will vest automatically in full on December 31, 2009 so long as the recipient is still our employee on such date. Options granted pursuant to the 2000 plan subsequent to January 1, 2001 vest similarly, except that all of the options are "performance-vesting" options, which vest in increments upon the achievement of performance targets.

Long Term Incentive Plan

Effective January 1, 2004, we adopted the 2004 MIP Long Term Incentive Plan to provide performance based incentives to eligible management associates who maintain their relationship with the Company over a period of years. Pursuant to this plan, one half of any award earned by any participants under each applicable management incentive plan during the four-year period beginning January 1, 2004 through December 31, 2007, will be added to the amount of the award that can be earned by the participant under this Long Term Incentive Plan. Such amounts can be earned by a participant if he or she (i) is actively employed by the Company or an affiliate during that four-year period and on the date of the payment of the award (March 15, 2008), (ii) has performed his or her duties to the satisfaction of the Board, and (iii) meets certain other criteria requiring not acting in a way that is inimical to the best interests of the Company, complying with Company policies, not breaching agreements benefiting the Company. Mr. Bevis does not participate in the 2004 MIP Long Term Incentive Plan. The following Named Executive Officers participate in this plan and accrued the following award amounts under the plan as a result of bonuses paid with respect to performance during 2004 under the 2004 Management Incentive Compensation Plan:

Long-Term Incentive Plans—Awards in 2004

Name	Award Amount Accrued in 2004	Payout Date
R. David Corey	100,000	December 31, 2007
Paul R. Frantz	50,000	December 31, 2007
Kenneth J. Swanson	75,000	December 31, 2007
Greg E. Gard	45,000	December 31, 2007
Brian E. Johnson	-0-	—

Pension plans

Effective July 1, 2004, we adopted the Fourth Amendment to the Pliant Corporation Defined Benefit Pension Plan. The purpose of this amendment was to "freeze" the benefits payable under such plan as of June 30, 2004, for all participants in the plan who are not subject to the collective bargaining agreement between the Company, South Deerfield, Massachusetts and the United Electrical Radio and Machine Workers of America and Local 274, such that no further benefits will accrue to current or future employees under that plan. Persons employed by the Company as of December 31, 2002, who did not have 5 years of vesting service as of June 30, 2004 (the minimum service period required to qualify for benefits under the Plan) will continue to accrue vesting service toward this minimum so long as they continue to be employed by the Company after June 30, 2004. For all employees that qualify for benefits under the Plan, as amended, their average final compensation and years of service credit (except as noted above) will be fixed as of June 30, 2004. Mr. Frantz, Mr. Gard and Mr. Swanson were the only Named Executive officers that met the 5 year service requirement at June 30, 2004. As of June 30, 2004, the accrued pension plan benefit for (i) Mr. Frantz was $2,671 per month payable beginning December 1, 2030 or $1,051 per month payable beginning June 1, 2017; (ii) Mr. Gard $1,968 per month payable beginning December 1, 2025 or $628 per month payable beginning June 1, 2015; and (iii) Mr. Swanson $1,878 per month payable beginning November 1, 2031 or $600 per month payable beginning January 1, 2020. None of the other Named Executive Officers are eligible to participate in the Pliant Corporation Defined Benefit Pension Plan.

Employment agreements

Effective January 1, 2004, the Company entered into a four-year employment agreement with Mr. Bevis, our President and Chief Executive Officer. The employment agreement provides for the

payment of a base salary of $650,000. Mr. Bevis is guaranteed an annual bonus of $650,000 if he is employed during the calendar year, payable no later than ten business days following the Company's receipt from its public accountants of the audited consolidated financial statements of the Company for such calendar year. The employment agreement also provides that Mr. Bevis will participate in all bonus and incentive plans or arrangements which may be provided by the Company from time to time to its senior executives, with award opportunities commensurate with this position, duties and responsibilities. The employment agreement expressly excludes from these benefits the Management Incentive Plan, the Pliant 2000 Stock Incentive Plan, the Pliant 2002 Stock Incentive Plan and any other equity based incentive or compensation plans. The employment agreement expressly includes the Pliant 2004 Restricted Stock Incentive Plan, at least four weeks paid vacation per year, and includes non-disclosure of confidential information provisions and a non-compete provision for one year following termination of employment with us (unless termination was due to the term expiring). Mr. Bevis has agreed in his employment agreement that any inventions, improvements, technical or software developments, trademarks, patents and similar information relating to us or our business, products or services conceived, developed or made by him while employed by us belong to us. If Mr. Bevis' employment is terminated without cause or he resigns for good reason, he will be entitled to receive severance payments and continue to participate in our medical and dental plans for one year.

On March 30, 2001, we entered into a five-year employment agreement with Brian E. Johnson, our Executive Vice President and Chief Financial Officer. On December 31, 2004 we entered into a Release Agreement with Mr. Johnson, whereby Mr. Johnson terminated his employment with the Company. Pursuant to the Release Agreement, Mr. Johnson acknowledged that he had received all of his compensation from the Company and that the only equity interests Mr. Johnson would hold in the Company post-termination would be 18 shares of Series A Preferred Stock, Warrants to purchase 18,270 shares of common stock and the option to purchase 1,000 shares of common stock pursuant to the 2000 Stock Incentive Plan and the Option Agreement related thereto. The Company agreed to pay Mr. Johnson his base salary until December 31, 2005 and his bonus based on the 2004 calendar year under the Management Incentive Plan. Mr. Johnson also receives medical and dental benefits until December 31, 2005 and outplacement service benefits for six months not to exceed $20,000.

We have not entered into employment agreements with Mr. Corey, Mr. Frantz, Mr. Swanson and Mr. Gard.

Compensation of directors

Each director who is not an employee of ours or a partner or senior advisor of J.P. Morgan Partners, LLC is entitled to receive an annual fee of $30,000, plus $10,000 per year for any committee service. Currently there are three directors who receive director fees: Messrs. Durham, Lapekas and MacMillan. In addition, Mr. Lapekas will receive a fee of $100,000 per year for his service as Non-Executive Chairman and a fee of $30,000 per year for serving on our audit committee.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners and Management

The following table contains information with respect to the ownership of our common stock as of March 21, 2005 by:

•: each person known to own beneficially more than 5% of our common stock,
•: each of our directors,
•: each of our Named Executive Officers, and

•: all of our executive officers and directors as a group.

The amounts set forth in the table and footnotes below do not include shares of restricted common stock issued under the 2000 plan that remain subject to performance vesting requirements that had not been met as of March 21, 2005.

Pursuant to a stockholders' agreement dated May 31, 2000, the parties to that agreement have committed to vote their shares in the election of directors in the manner described in "Certain relationships and related transactions—The stockholders' agreement."

The amounts and percentages of shares beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person's ownership percentage, but not for purposes of computing any other person's percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock.

	Number of shares of common stock beneficially owned	Percent of class
JPMP Capital Corp.(1)(2)	405,169	61.44	%
Southwest Industrial Films, LLC/Southwest Industrial Films II, LLC(1)(2)	405,169	61.44	%
The Christena Karen H. Durham Trust(3)(4)	158,917	27.8	%
Perry Acquisition Partners-2, L.P.(5).	34,527	6.0	%
Harold C. Bevis	0	0.0	%
R. David Corey	0	0.0	%
Richard P. Durham(4)	24,283	4.07	%
Durham Capital Limited(4)	24,283	4.07	%
Timothy J. Walsh(2)	0	0.0	%
Edward A. Lapekas	207	*
Albert (Pat) MacMillan	0	0.0	%
Brian E. Johnson	1,018	*
Jeffery C. Walker	0	0.0	%
John D. Bowlin	0	0.0	%
Sean Epps(2)	0	0.0	%
Paul R. Frantz(6)	34.21	*
Robert J. Maltarich(7)	112.48	*
Kenneth J. Swanson	45.225	*
Greg E. Gard	152.48	*
Coleman R. Woolridge	144.33	*
All directors and executive officers as a group (14 persons)	24,997	4.36	%

*: Less than 1%.
(1): Includes (i) 317,306 shares of common stock held by Southwest Industrial Films, LLC, which is controlled by J.P. Morgan Partners (BHCA), L.P., as managing member, (ii) 43,047 shares of common stock which are issuable upon exercise of warrants to purchase common stock issued in

connection with our Series A preferred stock held by Southwest Industrial Films II, LLC, which is controlled by J.P. Morgan (BHCA), L.P., as managing member, and (iii) 44,816 shares of common stock which are issuable upon exercise of warrants to purchase common stock issued in connection with our preferred stock held by Southwest Industrial Films, LLC. JPMP Capital Corp. is the indirect general partner of J.P. Morgan Partners (BHCA), L.P., and a wholly-owned subsidiary of J.P. Morgan Chase & Co., a publicly traded company. JPMP Capital Corp. and each of the foregoing entities is an affiliate of J.P. Morgan Partners, LLC and has an address c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas, 39^th Floor, New York, New York 10020.

(2): Mr. Walsh, Mr. Walker and Mr. Epps may be deemed the beneficial owners of the shares of common stock and warrants owned by each of Southwest Industrial Films, LLC and Southwest Industrial Films II, LLC, respectively, due to their positions with JPMP Capital Corp. and J.P. Morgan Partners, LLC, which are affiliates of J.P. Morgan Partners (BHCA), L.P., which in turn controls each of Southwest Industrial Films, LLC and Southwest Industrial Films II, LLC, as managing member.
(3): The address of The Christena Karen H. Durham Trust is P.O. Box 17600, Salt Lake City, Utah 84117. The trustee of the Trust is Richard P. Durham. The Trust was established for the benefit of Christena H. Durham and her children. Christena H. Durham is the wife of Richard P. Durham.
(4): Includes 23,033 shares of Common Stock held by Durham Capital Limited, an entity controlled by Richard P. Durham, and 1,250 shares of common stock held by Durham Capital Limited issuable upon exercise of warrants to purchase common stock issued in connection with our Series A preferred stock. As trustee of The Christena Karen H. Durham Trust and the spouse of Christena H. Durham, who is a beneficiary of the Trust, Richard P. Durham may be deemed the beneficial owner of the shares of common stock owned by the Trust. Richard P. Durham disclaims beneficial ownership of the shares of common stock owned by the Trust. The address for each of these persons and entities is 5772 South Holladay Blvd., Salt Lake City, Utah 84121.
(5): Includes 231 shares of common stock held by Perry Principals Holdings, LLC and 4,060 shares of common stock which are issuable upon exercise of warrants to purchase common stock issued in connection with our preferred stock held by Perry Acquisition Partners-3, L.P. Richard C. Perry is the managing member of Perry Principals Holdings, LLC and the managing member of Perry Investors-2, LLC, which is the general partner of Perry Acquisition Partners-2, L.P. Richard C. Perry is also the president of Perry Corp., which is the indirect general partner of Perry Acquisition Partners-3, L.P. As such, Richard C. Perry may be deemed to have voting and investment power with respect to the shares of common stock and warrants owned by Perry Acquisition Partners-2, L.P., Perry Acquisition Partners-3, L.P. and Perry Principals Holdings, LLC. Richard C. Perry disclaims beneficial ownership of such shares and warrants, except to the extent of his pecuniary interest therein. Each of the foregoing entities is an affiliate of Perry Acquisition Partners L.P. and has an address c/o Perry Acquisition Partners L.P., 599 Lexington Avenue, New York, New York 10022.
(6): Includes 20 shares of issued Common Stock and 14.21 shares of Common Stock issuable upon exercise of warrants.
(7): Includes 80 shares of issued Common Stock and 32.48 shares of Common Stock issuable upon exercise of warrants.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information relating to our equity compensation plans as of December 31, 2004. Our equity securities are closely held and are not publicly traded. In addition, as required by our stockholders' agreement, a majority of our board of directors has been appointed by

our institutional common stockholders and warrant holders, including our controlling shareholder. Therefore, our board of directors approves our equity compensation plans without obtaining approval directly from our shareholders.

Equity Compensation Plan Information

Plan category		Number of securities to be issued upon exercise of outstanding options, warrants and rights(1)		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
		(a)		(b)		(c)
Equity compensation plans approved by security holders		—			—	—
Equity compensation plans not approved by security holders		53,289	(2)	$	419.13	21,213

	Total	53,289		$	419.13	21,213

(1): Pursuant to the 2004 Restricted Stock Incentive Plan, during 2004 the Company issued 720 shares of Series B Redeemable Preferred Stock to the officers at a purchase price of $162 per share, which was deemed to be the fair market value of those shares based on an independent appraisal received by the Board.
(2): Includes 8,041 shares of restricted stock issued under the 2000 Stock Incentive Plan.

The equity compensation plans not approved by security holders include our 2000 Stock Incentive Plan 2002 Stock Incentive Plan, and 2004 Restricted Stock Incentive Plan. The material features of these plans are described under Item 11, "Executive Compensation—Stock Options and Restricted Stock," Item 13 "Certain Relationships and Related Transactions," and in Note 11 to our consolidated financial statements.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management

Agreements with Executive Officers and Directors

Effective January 1, 2004, we entered into a four -year employment agreement with Harold C. Bevis, our President and Chief Executive Officer and on December 31, 2004, we entered into a Release Agreement with Brian E. Johnson (see Item 11—Executive Compensation).

On January 26, 2005, we entered into a Letter Agreement with James Ide, terminating his employment as our Executive Vice President and Chief Financial Officer, effective February 28, 2005. Pursuant to such Letter Agreement, Mr. Ide received a $70,000 bonus for 2004.

On March 18, 2005, we entered into a Severance and Release Agreement with Lori Roberts, terminating her employment as our Senior Vice President, Human Resources, effective April 1, 2005. Pursuant to the Severance and Release Agreement, Ms. Roberts will receive a lump sum severance payment in the amount of $404,437, which includes the Company's payment for 28 shares of the Company's Series B Preferred Stock at $162 per share held by Ms. Roberts pursuant to the Company's right to repurchase such shares pursuant to the 2004 Restricted Stock Incentive Plan. After such repurchase, Ms. Roberts will retain four shares of the Series B Preferred Stock and will be entitled to continue participation in the Company's medical, dental and basic life insurance plans through March 31, 2006. Beginning April 1, 2006, Ms. Roberts may elect extended continuation coverage under

such plans for a period of 18 months. Ms. Roberts is also entitled to receive outplacement services for a period of 12 months, which shall not exceed $20,000, as well as reimbursement by the Company of Ms. Robert's legal fees incurred in connection with the negotiation of the Severance and Release Agreement, which shall not to exceed $7,500. Ms. Roberts has agreed not to compete with the Company for one year.

Richard P. Durham is a Director of the Company. On June 10, 2002, we entered into a separation agreement with Mr. Durham terminating his employment as our Chairman and Chief Executive Officer. Pursuant to the separation agreement, Mr. Durham agreed to convert an outstanding promissory note issued as payment for a portion of his shares into two promissory notes. The first note (the "Vested Secured Note"), in the principal amount of $2,430,798, related to Mr. Durham's time-vested shares and the vested portion of his performance-vesting shares. The separation agreement preserved a put option established by Mr. Durham's employment agreement with respect to his shares. For purposes of this put option, the separation agreement provides that the price per share to be paid by us is $483.13 with respect to common stock, $483.13 less any exercise price with respect to warrants, and the liquidation preference with respect to preferred stock. Mr. Durham's put option is subject to any financing or other restrictive covenants to which we are subject at the time of the proposed repurchase. Restrictive covenants under our existing credit facilities limit the number of shares we can currently repurchase from Mr. Durham. As of December 31, 2004, our total remaining purchase obligation to Mr. Durham was approximately $10,623,097, excluding accrued preferred dividends.

2004 Restricted Stock Incentive Plan and Series B Preferred Stock

class of stock outstanding immediately following the consummation of the public offering. The shares of Series B Redeemable Preferred Stock are non-voting and do not bear dividends except as noted above.

Transactions Between Pliant and Stockholders

Common Stock Registration Rights Agreement

Pursuant to a registration rights agreement entered into on May 31, 2000, as amended, we granted to our institutional common stockholders and warrant holders certain "demand" and "piggyback" registration rights for the registration under the Securities Act of the shares of common stock owned by them. Under the registration rights agreement, upon request of holders holding in excess of 50% of the shares of common stock held by our institutional investors and their transferees and affiliates (the "Requisite Investor Stockholders"), we are required to use our best efforts to register the shares. The Requisite Investor Stockholders are entitled to request two demand registrations. Also, if we are not a public company or sold to a third party prior to May 31, 2005, the Trust and its transferees and affiliates will be entitled to request one demand registration. Further, at any time 60 days after any initial public offering of common stock, holders holding in excess of 60% of the shares of common stock underlying our warrants to purchase common stock issued in connection with our preferred stock, and holders holding in excess of 60% of the shares of common stock underlying the note warrants will each be entitled to exercise one demand registration. At any time after we have qualified for use of Form S-3, all parties to the registration rights agreement will have the right to request that we effect a registration under the Securities Act of their shares of common stock, subject to customary "blackout" and "cutback" provisions. The stockholders and holders of the warrants to purchase common stock issued in connection with our preferred stock, and note warrants party to the registration rights agreement also may request that we use our best efforts to register shares of common stock held by them in other registrations initiated by us on our own behalf or on behalf of any other stockholder. We must pay all reasonable out-of-pocket costs and expenses, other than underwriting discounts and commissions, of any registration under the registration rights agreement. The registration rights agreement also contains customary provisions with respect to registration procedures, underwritten offerings and indemnification and contribution rights in connection with the registration of common stock on behalf of the stockholders, holders of the warrants to purchase common stock issued in connection with our preferred stock, and holders of the note warrants party to the registration rights agreement.

The stockholders' agreement

A stockholders' agreement entered into on May 31, 2000, as amended, governs the exercise of voting rights by our stockholders, including holders of our warrants to purchase common stock issued in connection with our preferred stock, who exercise their warrants for common stock, with respect to the election of directors and certain other material events. The parties to the stockholders' agreement agreed initially to vote their shares of common stock to elect (i) four directors designated by the Requisite Investor Stockholders, (ii) two directors designated by the Trust and (iii) one director appointed by our board of directors, who must be a member of our senior management. At the request of the Requisite Investor Stockholders, the size of our board of directors may be increased from seven to nine. If so increased, one of the two additional directors will be designated by the Requisite Investor Stockholders and the other will be our chief executive officer.

The provisions of the stockholders' agreement also govern:

•: restrictions on the transfer of shares of common stock and warrants to purchase common stock issued in connection with our preferred stock;
•: preemptive rights for holders of our common stock and warrants to purchase certain equity securities to be issued by us in the amounts required to maintain their percentage ownership;

•: stockholder or company rights of first refusal to purchase certain shares of our common stock to be sold by other stockholders;
•: agreement by stockholders and holders of the warrants to consent to the sale of all of, or a controlling interest in, us to a third party, if such sale is approved by our board of directors, and to sell their shares of common stock and warrants if so required;
•: rights of stockholders and holders of the warrants to participate in certain sales of the shares of our common stock by other stockholders; and
•: rights of holders of our common stock and warrants to receive certain financial and other information.

Credit facilities and note offerings

JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) is the syndication agent and is a lender under our revolving credit facility. JPMorgan Chase Bank received customary fees under our revolving credit facility for acting in such capacities. J.P. Morgan Securities Inc. served as the arranger for our revolving credit facility and in connection with certain amendments to our previous credit facilities and received customary fees in such capacity. An affiliate of JPMorgan Chase Bank received customary fees for arranging the December 2003 waiver with respect to our then existing credit facilities.

J.P. Morgan Securities Inc. was one of the initial purchasers in our May 2000 offering of our 13% Senior Subordinated Notes due 2010 and was also the dealer manager for the debt tender offer and consent solicitation relating to our 9¹/8% Senior Subordinated Notes due 2007. J.P. Morgan Securities Inc. received fees of approximately $8.7 million for acting in such capacities. J.P. Morgan Securities Inc. was also one of the initial purchasers in our April 2002 offering of our 13% Senior Subordinated Notes due 2010 and received fees of approximately $1.9 million for acting in such capacity. We used approximately $93.3 million of the net proceeds from the April 2002 offering to repay indebtedness under our then existing credit facilities. J.P. Morgan Securities Inc. was an initial purchaser in our May 2003 offering of 11¹/8% Senior Secured Notes due 2009 and received fees of approximately $4.4 million for acting in such capacity. We used approximately $240 million of the net proceeds from the May 2003 offering to repay indebtedness under our then existing credit facilities. J.P. Morgan Securities Inc. was an initial purchaser in our February 2004 offering of 11¹/8% Senior Secured Discount Notes due 2009 and received fees of approximately $2.5 million for acting in such capacity. We used the proceeds of this February 2004 offering to repay and terminate then existing credit facilities. In addition, JP Morgan Chase Bank is a lending party under our existing credit facility completed in February 2004 and received fees of approximately $0.9 million for acting in such capacity. In addition, we paid fees of approximately $0.6 million in September 2000, approximately $0.5 million in July 2001, approximately $0.6 million in April 2002, approximately $0.6 million in October 2002, approximately $0.5 million in March 2003, approximately $0.3 million in May 2003 and approximately $0.1 million in December 2003, to JPMorgan Chase Bank, in each case in connection with amendments to our then existing credit facilities.

Each of JPMorgan Chase Bank, J.P. Morgan Chase & Co. and J.P. Morgan Securities Inc. is an affiliate of Southwest Industrial Films, LLC, which owns approximately 55% of our outstanding common stock and currently has the right under the stockholders' agreement to appoint four of our directors, and of Flexible Films, LLC, which, together with affiliates, owns approximately 59% of our outstanding preferred stock, subject to certain preemptive rights with respect to 10,000 shares of preferred stock issued on March 25, 2003. Southwest Industrial Films, LLC and Flexible Films, LLC are subsidiaries of J.P. Morgan Partners (BHCA), L.P. Timothy J. Walsh and Jeffrey Walker, who serve on our board of directors, are partners of J.P. Morgan Partners, LLC and Sean Epps who also serves on our board of directors is a principal of J.P. Morgan Partners, LLC. J.P. Morgan Partners, LLC serves

as investment advisor to J.P. Morgan Partners (BHCA), L.P. and JPMP Capital Corp. JPMP Capital Corp. is a subsidiary of J.P. Morgan Chase & Co. and is the general partner JPMP Master Fund Manager, L.P., which is the general partner of J.P. Morgan Partners (BHCA), L.P. Messr. Walsh and Walker are executive officers of JPMP Capital Corp. and a limited partner of JPMP Master Fund Manager, L.P.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees for professional services provided by our independent auditors in each of the last two fiscal years, in each of the following categories are:

	2004		2003
Audit fees	$	861,157	$	799,582
Audit-related fees		3,680		37,374
Tax fees		382,451		188,125
All other fees		—		—

	$	1,247,288	$	1,025,081

Fees for audit services include fees associated with the annual audit, the reviews of the Company's quarterly reports on Form 10-Q, statutory audit requirements internationally, comfort letters and responses to SEC comments regarding Form S-1 and Form S-4 filings. Tax fees included tax planning and restructuring matters. Audit related fees included due diligence fees for acquisitions and advisory services related to Sarbanes-Oxley matters.

All audit and other fees paid to our independent auditor are pre-approved by the Audit Committee.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1)		Pliant Corporation and Subsidiaries Financial Statements:
		Index to Financial Statements and Financial Statement Schedule
		Report of Independent Registered Public Accounting Firm
		Consolidated Balance Sheets as of December 31, 2004 and 2003
		Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002
		Consolidated Statements of Stockholders' Deficit for the years ended December 31, 2004, 2003 and 2002
		Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002
		Notes to Consolidated Financial Statements
(a)(2)		Financial Statement Schedule:
		Schedule II—Valuation and Qualifying Accounts
		The remaining schedules set forth in Regulation S-X have not been included because they are not applicable to our business.

INDEX TO EXHIBITS

	Exhibit Number
	2.1		Recapitalization Agreement, dated as of March 31, 2000 (the "Recapitalization Agreement"), among Pliant Corporation, Chase Domestic Investments, L.L.C., Richard P. Durham as Representative, and the shareholders of Pliant Corporation signatory thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Pliant Corporation on April 12, 2000).
	2.2		Amendment No. 1, dated as of April 3, 2000, to the Recapitalization Agreement (incorporated by reference to Exhibit 2.2 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	2.3		Amendment No. 2, dated as of May 31, 2000, to the Recapitalization Agreement (incorporated by reference to Exhibit 2.3 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	3.1		Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	3.2		Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.2 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	3.3		Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.3 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).

	3.4		Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.4 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	3.5		Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.5 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	3.6		Fourth Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation's Current Report on Form 8-K filed on September 30, 2004).
	3.7		Second Amended and Restated Bylaws of Pliant Corporation (incorporated by reference to Exhibit 3.6 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	4.1		Indenture, dated as of May 31, 2000, among Pliant Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	4.2		First Supplemental Indenture, dated as of July 16, 2001, among Pliant Corporation, the New Note Guarantors party thereto, the existing Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.3 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	4.3		Form of 2000 Notes (incorporated by reference to Exhibit B to Exhibit 4.1).
	4.4		Indenture, dated as of April 10, 2002, among Pliant Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.4 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-86532)).
	4.5		Form of 2002 Note (incorporated by reference to Exhibit B to Exhibit 4.4).
	4.6		Indenture, dated as of May 30, 2003, among Pliant Corporation, the Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.6 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.7		Form of Senior Secured Note (incorporated by reference to Exhibit B to Exhibit 4.6) (incorporated by reference to Exhibit 4.6 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.8		Form of Indenture, dated as of February 17, 2004, among Pliant Corporation, the Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.8 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.9		Form of Senior Secured Discount Note (incorporated by reference to (incorporated by reference to Exhibit B to Exhibit 4.8 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.10		Second Priority Security Agreement, dated as of May 30, 2003, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.8 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).

	4.11		Form of Security Agreement dated as of February 17, 2004, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.11 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.12		Form of Canadian Security Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the guarantors party thereto, and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.12 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.13		Second Priority Pledge Agreement, dated as of May 30, 2003, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.9 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.14		Form of Pledge Agreement dated as of February 17, 2004, among Pliant Corporation, the subsidiary pledgors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.14 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.15		Form of Canadian Pledge Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the pledgors party thereto, and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.15 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.16		Exchange and Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, the Note Guarantors party thereto, and Chase Securities, Inc. and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.3 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	4.17		Exchange and Registration Rights Agreement, dated as of April 10, 2002, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities, Inc. and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.7 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-86532)).
	4.18		Exchange and Registration Rights Agreement, dated as of May 30, 2003, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities Inc., Deutsche Bank Securities, Inc. and Credit Suisse First Boston LLC, as Initial Purchasers (incorporated by reference to Exhibit 4.12 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.19		Form of Exchange and Registration Rights Agreement, dated as of February 17, 2004, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities Inc., Credit Suisse First Boston LLC and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.19 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.20		Fourth Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation's Current Report on Form 8-K filed on September 30, 2004).
	10.1		Note Warrant Agreement, dated as of May 31, 2000, among Pliant Corporation and The Bank of New York, as Warrant Agent, relating to the 220,000 Note Warrants (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).

	10.2		Stockholders' Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrant holders listed on the signature pages thereto (incorporated by reference to Exhibit 10.2 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.3		Amendment No. 1 and Waiver, dated as of July 16, 2001, to the Stockholder's Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.3 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	10.4		Amendment No. 2, dated as of December 19, 2001, to the Stockholder's Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.4 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
	10.5		Amendment No. 3, dated as of March 25, 2003, to the Stockholder's Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.5 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.6		Amendment No. 4, dated as of June 5, 2003, to the Stockholder's Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.6 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	10.7		Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.3 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.8		Amendment No. 1, dated as of June 13, 2000, to the Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.4 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.9		Amendment No. 2, dated as of March 25, 2003, to the Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.8 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.10		Securities Purchase Agreement, dated as of May 31, 2000, among Pliant Corporation and each of the purchasers of Pliant Corporation's preferred stock listed on the signature pages thereto (incorporated by reference to Exhibit 10.5 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).

	10.11		Amendment No. 1 and Waiver, dated as of July 16, 2001, to the Securities Purchase Agreement dated as of May 31, 2000 among Pliant Corporation, and each of the purchasers of Pliant Corporation's preferred stock listed on the signature pages thereto (incorporated by reference to Exhibit 10.7 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	10.12		Warrant Agreement, dated as of May 31, 2000, among Pliant Corporation and Chase Domestic Investments, L.L.C. (incorporated by reference to Exhibit 10.6 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.13		Amendment No. 1, dated as of July 16, 2001, to the Warrant Agreement dated as of May 31, 2000 among Pliant Corporation and the initial warrantholders listed in Schedule I thereto (incorporated by reference to Exhibit 10.9 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	10.14		Amendment No. 2, dated as of March 25, 2003, to the Warrant Agreement dated as of May 31, 2000 among Pliant Corporation and the initial warrantholders listed in Schedule I thereto (incorporated by reference to Exhibit 10.13 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.15		Securities Purchase Agreement, dated as of July 16, 2001, among Pliant Corporation and the purchasers of Pliant Corporation's preferred stock listed on the schedules thereto (incorporated by reference to Exhibit 10.10 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	10.16		Securities Purchase Agreement, dated as of March 25, 2003, among Pliant Corporation and the Purchasers named therein (incorporated by reference to Exhibit 10.15 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.17		Securities Purchase Agreement, dated as of March 25, 2003, between Pliant Corporation and J.P. Morgan Partners (BHCA), L.P. (incorporated by reference to Exhibit 10.16 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.18		Form of Purchase Agreement, dated as of February 6, 2004, among Pliant Corporation, J.P. Morgan Securities Inc., Credit Suisse First Boston LLC and Deutsche Bank Securities Inc. (incorporated by reference to Exhibit 10.18 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.19		Form of Credit Agreement, dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiary borrowers party thereto, the various lenders party thereto, Credit Suisse First Boston, as Administrative Agent and Documentation Agent, Deutsche Bank Trust Company Americas, as Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent (incorporated by reference to Exhibit 10.19 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).

	10.20		Form of Consent and Amendment, dated as of March 8, 2004, to the Credit Agreement dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiary borrowers party to the Credit Agreement, the financial institutions party to the Credit Agreement as Lenders, Credit Suisse First Boston, as Administrative Agent and Documentation Agent, Deutsche Bank Trust Company Americas, as Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent (incorporated by reference to Exhibit 10.20 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.21		Form of Amended and Restated Intercreditor Agreement, dated as of February 17, 2004, among Deutsche Bank Trust Company Americas, as Credit Agent, Wilmington Trust Company, as Second Priority Noteholder Agent and as 2004 Noteholder Agent, and Pliant Corporation (incorporated by reference to Exhibit 10.21 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.22		Form of Guarantee Agreement, dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiaries guarantors party thereto and Credit Suisse First Boston, as Administrative Agent (incorporated by reference to Exhibit 10.22 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.23		Form of Domestic Security Agreement, dated as of February 17, 2004, among Pliant Corporation, the subsidiary guarantors party thereto and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.23 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.24		Form of Canadian Security Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the guarantors party thereto, and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.24 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.25		Form of Domestic Pledge Agreement, dated as of February 17, 2004, among Pliant Corporation, the subsidiary pledgors party thereto and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.25 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.26		Form of Canadian Pledge Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the pledgors party thereto, and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.26 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.27		Form of Indemnity, Subrogation and Contribution Agreement, dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiary guarantors party thereto and Credit Suisse First Boston, as Administrative Agent (incorporated by reference to Exhibit 10.27 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.28		Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.12 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.29		Amendment No. 1, dated as of February 1, 2001, to the Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.14 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).

	10.30		Separation Agreement, dated as of June 10, 2002, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
	10.31		Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.13 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.32		Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.14 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.33		Letter Agreement, dated as of December 27, 2000, terminating the Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.17 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	10.34		Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.15 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.35		Letter Agreement, dated as of January 22, 2001, terminating the Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.19 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	10.36		Employment Agreement, dated as of March 30, 2001, between Pliant Corporation and Brian E. Johnson (incorporated by reference to Exhibit 10.30 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
	10.37		Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.16 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.38		Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.17 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.39		Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.18 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.40		Stock Redemption Agreement, dated as of December 27, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.23 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	10.41		Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.19 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.42		Stock Redemption Agreement, dated as of February 1, 2001, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.25 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).

	10.43		Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Richard P. Durham (incorporated by reference to Exhibit 10.20 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.44		Amendment No. 1, dated as of March 1, 2001, to the Pledge Agreement dated as of May 31, 2000, among Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.35 to Post-Effective Amendment No. 2 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.45		Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Jack E. Knott (incorporated by reference to Exhibit 10.21 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.46		Amendment No. 1, dated as of April 1, 2001, to the Pledge Agreement dated as of May 31, 2000, among Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.36 to Post-Effective Amendment No. 2 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.47		Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Scott K. Sorensen (incorporated by reference to Exhibit 10.22 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.48		Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Ronald G. Moffitt (incorporated by reference to Exhibit 10.23 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.49		1998 Pliant Corporation Stock Option Plan (incorporated by reference to Exhibit 10.10 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 1998).
	10.50		Pliant Corporation Management Incentive Plan for Senior Divisional Management (1999) (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
	10.51		Pliant Corporation 2000 Stock Incentive Plan (as amended and restated through April 17, 2002) (incorporated by reference to Exhibit 10.54 to Pliant Corporation's Annual report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.52		Second Amended and Restated Stock Option Agreement, dated as of May 31, 2000 between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.27 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.53		Pliant Corporation Management Incentive Plan (2000) (incorporated by reference to Exhibit 10.2 to Pliant Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
	10.54		Pliant Corporation Management Incentive Plan (2001) (incorporated by reference to Exhibit 10.48 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
	10.55		Pliant Corporation Management Incentive Plan (2002) (incorporated by reference to Exhibit 10.49 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
	10.56		Pliant Corporation Management Incentive Plan (2003) (incorporated by reference to Exhibit 10.56 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).

	10.57		Pliant Corporation 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
	10.58		Consulting Agreement dated as of August 24, 2003, between Pliant corporation and Edward A. Lapekas (incorporated by reference to Exhibit 10.63 to Post-Effective Amendment No. 1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-107843).
	10.59		Separation Agreement, dated as of September 8, 2003, between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.64 to Post-Effective Amendment No. 1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-107843).
	10.60		Separation Agreement, dated as of September 8, 2003, between Pliant Corporation and Elise H. Scroggs (incorporated by reference to Exhibit 10.65 to Post-Effective Amendment No. 1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-107843).
	10.61*		Employment Agreement, dated January 1, 2004, between Pliant Corporation and Harold Bevis
	10.62*		Release Agreement, dated December 31, 2004, between Pliant Corporation and Brian Johnson
	10.63*		Letter Agreement, dated January 26, 2005, between Pliant Corporation and James Ide
	10.64*		Severance and Release Agreement, dated as of March 18, 2005, between Pliant Corporation and Lori Roberts
	10.65*		Pliant Corporation 2004 Management Incentive Compensation Plan
	10.66*		Pliant Corporation 2004 MIP Long Term Incentive Plan
	10.67		Pliant Corporation 2004 Restricted Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Current Report on Form 8-K filed on September 30, 2004).
	10.68*		Pliant Corporation 2004 Restricted Stock Incentive Plan Form of Restricted Stock Agreement
	10.69*		Fourth Amendment to the Pliant Corporation Defined Benefit Pension Plan
	10.70*		Buy Out Agreement, dated January 5, 2005, among Pliant Corporation, Pliant Investment, Inc. and Supreme Plastics Group PLC
	10.71*		Assignment of Limited Liability Company Interests, dated January 5, 2005, between Pliant Investment, Inc. and Supreme Plastics Group PLC
	10.72		Agreement for Purchase and Sale of Assets, dated July 12, 2004, among Pliant Corporation, Pliant Solutions Corporation and Kittrich Corporation (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Current Report on Form 8-K filed on October 6, 2004).
	10.73		Form of Amendment to Credit Agreement (incorporated by reference to Exhibit 10.61 to Pliant Corporation's Current Report on Form 8-K filed on December 23, 2004).
	21.1*		Subsidiaries of Pliant Corporation.
	31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
	31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
	32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*: Filed with this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 30, 2005.

		PLIANT CORPORATION
		By	/s/ HAROLD C. BEVIS Harold C. Bevis, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 30, 2005 by the following persons on behalf of the Registrant and in the capacities indicated.

		By	/s/ HAROLD C. BEVIS Harold C. Bevis, Chief Executive Officer, Acting Chief Financial Officer Principal Financial and Accounting Officer, and Director
		By	/s/ JOHN D. BOWLIN John D. Bowlin, Director
		By	/s/ RICHARD P. DURHAM Richard P. Durham, Director
		By	/s/ SEAN EPPS Sean Epps, Director
		By	/s/ EDWARD A. LAPEKAS Edward A. Lapekas, Director
		By	/s/ ALBERT MACMILLAN Albert MacMillan, Director
		By	/s/ JEFFREY C. WALKER Jeffrey C. Walker, Director
		By	/s/ TIMOTHY J. WALSH Timothy J. Walsh, Director

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

The Registrant has not sent to its security holders any annual report to security holders covering the Registrant's last fiscal year or any proxy statement, form of proxy or other proxy soliciting material sent to more than 10 of the Registrant's security holders with respect to any annual or other meeting of security holders.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Pliant Corporation and Subsidiaries Financial Statements:
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2004 and 2003		F-3
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002		F-4
Consolidated Statements of Stockholders' Deficit for the years ended December 31, 2004, 2003 and 2002		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002		F-7
Notes to Consolidated Financial Statements		F-8
Financial Statement Schedule:
Schedule II—Valuation and Qualifying Accounts		S-1

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Pliant Corporation

We have audited the accompanying consolidated balance sheets of Pliant Corporation as of December 31, 2004 and 2003, and the related consolidated statements of operations, cash flows and changes in stockholders' equity (deficit) for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pliant Corporation at December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the financial statements, effective January 1, 2004, the Company changed its method of accounting for certain financial instruments to conform with SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.

/s/ Ernst & Young LLP
Chicago, Illinois
March 23, 2005

F-2

PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2004 and 2003 (Dollars in Thousands, Except per Share Data)

				2004			2003
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	5,580		$	3,308
	Receivables:
		Trade accounts, net of allowances of $4,489 and $4,736, respectively			117,087			95,606
		Other			8,308			12,136
	Inventories				94,300			84,125
	Prepaid expenses and other				4,032			3,809
	Income taxes receivable				361			1,436
	Deferred income taxes				11,961			9,417
	Discontinued current assets				—			15,294

			Total current assets		241,629			225,131
PLANT AND EQUIPMENT, net					297,145			315,420
GOODWILL					182,237			182,162
OTHER INTANGIBLE ASSETS, net					17,076			19,252
OTHER ASSETS					39,005			40,172
DISCONTINUED NONCURRENT ASSETS					—			4,649

			Total assets	$	777,092		$	786,786

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
	Trade accounts payable			$	96,282		$	89,800
	Accrued liabilities:
		Interest payable			12,985			19,775
		Customer rebates			8,391			7,924
		Other			43,462			35,947
	Current portion of long-term debt				1,994			1,033

			Total current liabilities		163,114			154,479
LONG-TERM DEBT, net of current portion					840,354			782,624
OTHER LIABILITIES					26,454			27,493
DEFERRED INCOME TAXES					31,433			27,792
SHARES SUBJECT TO MANDATORY REDEMPTION					229,910			—

			Total liabilities		1,291,265			992,388

MINORITY INTEREST					33			291
REDEEMABLE PREFERRED STOCK:
	Series A—167,000 shares authorized, no par value, redemption and liquidation value of $1,000 per share; 140,973 shares outstanding at December 31, 2003				—			188,223
	Series B—720 shares authorized, no par value, 720 shares outstanding at December 31, 2004				117			—

REDEEMABLE COMMON STOCK—no par value; 60,000 shares authorized; 10,873 and 29,073 shares outstanding as of December 31, 2004 and December 31, 2003, respectively, net of related stockholders' notes receivable of $1,827 at December 31, 2004 and $4,258 at December 31, 2003					6,645			13,008

STOCKHOLDERS' DEFICIT:
	Common stock—no par value; 10,000,000 shares authorized, 542,638 shares outstanding as of December 31, 2004 and December 31, 2003				103,376			103,376
	Warrants to purchase common stock				39,133			39,133
	Accumulated deficit				(650,974	)		(537,052	)
	Stockholders' notes receivable				(660	)		(660	)
	Accumulated other comprehensive loss				(11,843	)		(11,921	)

			Total stockholders' deficit		(520,968	)		(407,124	)

			Total liabilities and stockholders' deficit	$	777,092		$	786,786

See notes to consolidated financial statements.

F-3

PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2004, 2003 and 2002 (Dollars in Thousands)

			2004			2003			2002
NET SALES			$	968,680		$	894,479		$	850,908
COST OF SALES				826,819			758,145			693,676

		Gross profit		141,861			136,334			157,232

OPERATING EXPENSES:
	Selling, general and administrative			81,058			77,976			79,422
	Research and development			6,489			7,289			8,124
	Impairment of goodwill and intangible assets			—			18,255			8,600
	Impairment of fixed assets			359			4,844			—
	Restructuring and other costs			2,108			12,607			30,066
	Provision for litigation			—			7,200			—

		Total operating expenses		90,014			128,171			126,212

OPERATING INCOME				51,847			8,163			31,020
INTEREST EXPENSE—Current and Long Term debt				(110,353	)		(96,404	)		(75,264	)
INTEREST EXPENSE—Dividends and accretion on Redeemable Preferred Stock				(35,325	)		—			—
OTHER INCOME (EXPENSE), net				(737	)		472			2,278

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES				(94,568	)		(87,769	)		(41,966	)

INCOME TAX EXPENSE (BENEFIT):
	Current			1,794			3,682			3,980
	Deferred			(205	)		1,508			(5,442	)

		Total income tax expense (benefit)		1,589			5,190			(1,462	)

LOSS FROM CONTINUING OPERATIONS				(96,157	)		(92,959	)		(40,504	)

DISCONTINUED OPERATIONS
	Loss from discontinued operations			(7,395	)		(21,343	)		(2,926	)
	Loss on sale of discontinued operations			(10,370	)		—			—

LOSS FROM DISCONTINUED OPERATIONS				(17,765	)		(21,343	)		(2,926	)

NET LOSS			$	(113,922	)	$	(114,302	)	$	(43,430	)

See notes to consolidated financial statements.

F-4

PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

For the Years Ended December 31, 2004, 2003 and 2002
(In Thousands)

					Class A Common Stock			Class B Common Stock							Warrants to Purchase Common Stock
											Common Stock													Accumulated Other Comprehensive Income/(Loss)
											Common Stock							Accumulated Deficit			Stockholders' Notes Receivable
		Total			Shares	Amount		Shares	Amount		Shares	Amount						Accumulated Deficit			Stockholders' Notes Receivable
Balance, December 31, 2001		$	(194,543	)							543	$	103,362		$	38,715		$	(326,356	)	$	(616	)	$	(9,648	)
Comprehensive loss:
	Net loss		(43,430	)															(43,430	)
Minimum pension liability, net of taxes			(937	)																					(937	)
Fair value change in interest rate derivatives classified as cash flow hedges, net of taxes			(2,453	)																					(2,453	)
Foreign currency translation adjustment			(4,806	)																					(4,806	)

Comprehensive loss			(51,626	)

Issuance of common stock to management for warrants			—										39			(39	)
Preferred stock dividend and accretion			(24,634	)															(24,634	)
Purchase of stock by directors			63										63
Repurchase of stock from management			(88	)									(88	)
Amortization of discount on stockholder's note receivable			(44	)																		(44	)

Balance, December 31, 2002		$	(270,872	)	—	$	—	—	$	—	543	$	103,376		$	38,676		$	(394,420	)	$	(660	)	$	(17,844	)

See notes to consolidated financial statements.

F-5

PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

For the Years Ended December 31, 2004, 2003 and 2002 (In Thousands)

					Class A		Class B
					Class A		Class B					Warrants to Purchase Common Stock
					Common Stock		Common Stock		Common Stock											Accumulated Other Comprehensive Income/(Loss)
					Common Stock		Common Stock		Common Stock					Accumulated Deficit			Stockholders' Notes Receivable
		Total			Shares	Amount	Shares	Amount	Shares	Amount				Accumulated Deficit			Stockholders' Notes Receivable
Balance, December 31, 2002		$	(270,872	)	—	—	—	—	543	$	103,376	$	38,676	$	(394,420	)	$	(660	)	$	(17,844	)
Comprehensive loss:
	Net loss		(114,302	)											(114,302	)
Minimum pension liability adjustment, net of taxes			(527	)																	(527	)
Fair value change in interest rate derivatives classified as cash flow hedges, net of taxes			3,177																		3,177
Foreign currency translation adjustment			3,273																		3,273

Comprehensive loss			(108,379	)

Issuance of warrants			457										457
Preferred stock dividend and accretion			(28,330	)											(28,330	)

Balance, December 31, 2003		$	(407,124	)	—	—	—	—	543	$	103,376	$	39,133	$	(537,052	)	$	(660	)	$	(11,921	)

Comprehensive loss:
	Net loss		(113,922	)											(113,922	)
Minimum pension liability adjustment, net of taxes			(3,888	)																	(3,888	)
Fair value change in interest rate derivatives classified as cash flow hedges, net of taxes			2,220																		2,220
Foreign currency translation adjustment			1,746																		1,746

Comprehensive loss			(113,844	)

Balance, December 31, 2004		$	(520,968	)	—	—	—	—	543	$	103,376	$	39,133	$	(650,974	)	$	(660	)	$	(11,843	)

See notes to consolidated financial statements.

F-6

PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2004, 2003 and 2002 (Dollars in Thousands)

					2004			2003			2002
Cash flows from operating activities:
	Net loss				$	(113,922	)	$	(114,302	)	$	(43,430	)
	Adjustments to reconcile net loss to net cash provided by (used in) continuing operating activities:
		Depreciation and amortization				41,051			46,896			45,718
		Impairment of fixed assets				359			4,844			—
		Amortization and write-off of deferred financing costs and accretion of debt discount				35,072			9,862			3,707
		Deferred dividends and accretion on preferred shares				35,325			—			—
		Deferred income taxes				(205	)		1,508			(5,442	)
		Provision for losses on accounts receivable				1,600			1,667			2,635
		Loss from discontinued operations				13,770			21,343			2,926
		Write down of impaired assets of discontinued operations				3,995			—			—
		Non-cash plant closing costs				1,443			3,260			9,727
		Write down of impaired goodwill and intangibles				—			18,255			8,600
		(Gain) or loss on disposal of assets				546			1,452			381
		Curtailment gain				1,562			—			—
		Minority Interest				(258	)		99			(79	)
		Changes in operating assets and liabilities—net of effects of acquisitions:
			Trade accounts receivable			(22,110	)		1,307			17,786
			Other receivables			3,957			2,656			(1,565	)
			Inventories			(9,059	)		4,297			1,096
			Prepaid expenses and other			(202	)		191			(556	)
			Intangible assets and other assets			2,443			(1,089	)		(4,687	)
			Trade accounts payable			6,408			(23,316	)		2,252
			Accrued liabilities			1,137			4,715			7,961
			Income taxes payable/receivable			1,258			932			145
			Other liabilities			(5,614	)		1,203			5,244

				Net cash provided by (used in) continuing operating activities		(1,444	)		(14,220	)		52,419

Cash flows from continuing investing activities:
	Capital expenditures for plant and equipment					(24,090	)		(17,039	)		(49,151	)
	Acquisitions, net of cash acquired					—			—			(23,164	)
	Proceeds from sale of assets					6,450			—			17,122

				Net cash used in continuing investing activities		(17,640	)		(17,039	)		(55,193	)

Cash flows from continuing financing activities:
	Payment of capitalized loan fees					(9,864	)		(10,801	)		(7,439	)
	Net proceeds (net of repurchases) from issuance of common stock, preferred stock and warrants					117			9,532			(3,227	)
	Proceeds from issuance of senior discount notes and subordinated debt					225,299			250,000			103,752
	Borrowings (Repayments) under revolver					24,000			49,776			—
	Repayments of term debt and revolver due to refinancing					(214,085	)		(252,500	)		(80,694	)

				Net cash provided by continuing financing activities		25,467			46,007			12,391

Cash used in discontinued operations						(4,843	)		(14,761	)		(8,865	)

Effect of exchange rate changes on cash and cash equivalents					$	733		$	1,686		$	(3,935	)

Net increase (decrease) in cash and cash equivalents						2,272			1,673			(3,183	)
Cash and cash equivalents, beginning of the year						3,308			1,635			4,818

Cash and cash equivalents, end of the year					$	5,580		$	3,308		$	1,635

Supplemental disclosures of cash flow information:
	Cash paid during the year for:
		Interest			$	80,411		$	76,341		$	69,207

		Income taxes			$	1,647		$	2,629		$	4,884

Supplemental schedule of non-cash investing and financing activities:

In 2002 we repurchased $6.5 million of redeemable common stock in exchange for the cancellation of $6.5 million of notes receivable.

See notes to consolidated financial statements.

F-7

PLIANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Nature of operations Pliant Corporation and its subsidiaries (collectively "Pliant") produce polymer-based (plastic), value-added films for flexible packaging, personal care, medical, agricultural and industrial applications. Our manufacturing facilities are located in North America, Latin America, Germany and Australia.

Principles of Consolidation The consolidated financial statements include the accounts of Pliant Corporation and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition Sales revenue is recognized when title transfers, the risks and rewards of ownership have been transferred to the customer, the price is fixed and determinable and collection of the related receivable is probable, which is generally at the time of shipment. Revenue is reduced by rebates made to customers based on an estimate of the amount of the rebate at the time the sale is recorded.

Accounts Receivable Accounts receivable consist primarily of amounts due to us from our normal business activities. Accounts receivable amounts are determined to be past due when the amount is overdue based on contractual terms. We maintain an allowance for doubtful accounts to reflect the expected uncollectibility of accounts receivable based on past collection history and specific risks identified among uncollected amounts. Accounts receivable are charged off against the allowance for doubtful accounts when we have determined that the receivable will not be collected. Collateral is generally not required for accounts receivable. One customer represented approximately 6% and 5% of consolidated receivables at December 31, 2004 and 2003, respectively.

Inventories Inventories consist principally of finished film and packaging products and the raw materials necessary to produce them. Inventories are carried at the lower of cost (on a first-in, first-out basis) or market value. Resin costs comprise the majority of our total manufacturing costs. Resin shortages or significant increases in the price of resin could have a significant adverse effect on our business.

Plant and Equipment Plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated economic useful lives of the assets as follows:

Land improvements		20 years
Buildings and improvements		20 years
Computer Equipment and Software		3-7 years
Machinery and equipment		7-15 years
Furniture, fixtures and vehicles		3-7 years
Leasehold improvements		Lower of useful life (10-20 years or term of lease agreement)

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Maintenance and repairs are charged to expense as incurred and costs of improvements and betterments are capitalized. Upon disposal, related costs and accumulated depreciation are removed from the accounts and resulting gains or losses are reflected in operations.

Costs incurred in connection with the construction or major rebuild of equipment are capitalized as construction in progress. No depreciation is recognized on these assets until placed in service.

Goodwill and Other Intangible Assets Goodwill and intangible assets deemed to have indefinite lives are no longer amortized, but are subject to an annual impairment test based on the fair value of the assets. Amortization of other intangible assets is computed using the straight-line method over the estimated economic useful lives of 5-15 years. (See Note 5)

Impairment of Long-Lived Assets When events or conditions indicate a potential impairment, we evaluate the carrying value of long-lived assets, including amortizable intangible assets, based upon current and expected undiscounted cash flows, and recognize an impairment when the estimated undiscounted cash flows are less than the carrying value of the asset. Measurement of the amount of impairment, if any, is based upon the difference between the asset's carrying value and fair value.

Other Assets Other assets consist primarily of deferred debt issuance costs, deposits, and spare parts. Deferred debt issuance costs are amortized using a straight line method which approximates the effective yield method.

Cash and Cash Equivalents For the purpose of the consolidated statements of cash flows, we consider short-term highly liquid investments with maturity when purchased of three months or less to be cash equivalents. Cash generated outside of the United States is generally subject to taxation if repatriated.

Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. The Company, like other multi-national companies, is regularly audited by federal, state and foreign tax authorities, and tax assessments may arise several years after tax returns have been filed. Accordingly, tax reserves have been recorded when, in management's judgment, it is not probable that the Company's tax position will ultimately be sustained. While predicting the outcome of the audits involves uncertainty and requires estimates and informed judgments, we believe that the recorded tax liabilities are adequate and appropriate. The judgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to or further interpretation of regulations. Income tax expense is adjusted in the period in which these events occur or when the statute of limitations for a specific exposure item has expired.

Derivative Financial Instruments Our borrowings under the credit facilities are at variable rates of interest and expose us to interest rate risk. The Company periodically utilizes interest rate derivative contracts to reduce the effect of interest rate increases. (See Note 7).

Foreign Currency Translation The accounts of our foreign subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and an average exchange rate for each month for revenues, expenses, gains and losses. Where the local currency is the functional currency, translation adjustments are recorded as a separate component of stockholders'

F-9

equity (deficit). Where the U.S. dollar is the functional currency, translation adjustments are recorded in other income within current operations.

Shipping and Handling Costs. Shipping and handling costs are included in cost of sales.

Accounting For Stock-Based Compensation Plans We apply Accounting Principles Board Opinion No. 25 and related interpretations in accounting for stock-based compensation plans as they relate to employees and directors. Had compensation cost for all the outstanding options been determined in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," our net loss for the years ended December 31, 2004, 2003 and 2002 would have been the following pro forma amounts (in thousands):

	2004			2003			2002
As reported	$	(113,922	)	$	(114,302	)	$	(43,430	)
Pro forma stock compensation expense		(800	)		(773	)		(707	)

Pro forma	$	(114,722	)	$	(115,075	)	$	(44,137	)

The fair market value of each option is estimated on the date of grant using the minimum value option-pricing model based on the following assumptions for 2004, 2003 and 2002 grants, respectively: risk free rate of return of 4.0% in 2004 and 2003 and 6.0% in 2002; expected life of 7 years to 10 years; dividend yield of 0%; and volatility of 0%, The weighted average fair value of the options as determined by the minimum value option-pricing model was $146 per share for 2004, $103 per share for 2003 and $202 per share for 2002.

Employees As of December 31, 2004, we had approximately 3,025 employees, of which approximately 850 employees were subject to a total of 8 collective bargaining agreements that expire on various dates between, February 28, 2005 and March 7, 2007. The collective bargaining agreement covering our Langley union employees expired on February 28, 2005. We are currently operating under an informal extension of the terms of that agreement and are in negotiations with the union for a new collective bargaining agreement. As of December 31, 2004 we had approximately 135 employees under collective bargaining agreements, including Langley, which expire in 2005.

Reclassifications Certain reclassifications have been made to the consolidated financial statements for comparative purposes.

Accounting Change The Company adopted Statement of Financial Accounting Standard No. 150 ("SFAS 150"), Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, effective January 1, 2004. As a result, our Series A redeemable preferred stock, which has an unconditional mandatory redemption feature, was recorded as a liability on the date of adoption at fair market value. Fair market value was determined using the value of the securities on the date of issuance plus accretion of discount from the date of issuance through December 31, 2003 and the cumulative unpaid dividends from the date of issuance through December 31, 2003. In addition, effective January 1, 2004, the dividends and accretion on the preferred shares are included as a part of interest expense in the statement of operations.

In addition, as a result of adopting SFAS 150, the Company's redeemable common shares that have been put for redemption by a shareholder were recorded as a liability at fair value. The fair value

F-10

was computed using the agreed upon price of the redemption times the number of shares put by the shareholder. As required by SFAS 150, prior periods were not restated. The shares subject to mandatory redemption are as follow (in thousands):

	As of January 1, 2004		December 31, 2004
Redeemable Preferred Shares 167,000 shares authorized, 140,973 shares outstanding as of January 1, 2004 and December 31, 2004, designated as Series A, no par value with a redemption value of $1,000 per share plus accumulated dividends.	$	188,223	$	223,548
18,200 Redeemable Common Shares that have been put for redemption by a shareholder, net of a shareholder note of $2,431		6,362		6,362

Total shares subject to mandatory redemption	$	194,585	$	229,910

The maximum cash settlement at the redemption date of June 1, 2011 (assuming no cash dividends are paid through the redemption date) is $680.6 million for the redeemable preferred shares and $6.4 million (net of the note receivable of $2.4 million) for the redeemable common shares that have been put for redemption by the shareholder.

New Accounting Pronouncements In December 2004, the FASB issued SFAS 123(R) (revised December 2004), "Share-Based Payment", which is a revision of SFAS 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," This statement requires that the fair value at the grant date resulting from all share-based payment transactions be recognized in the financial statements. Further, SFAS 123(R) requires entities to apply a fair-value based measurement method in accounting for these transactions. The minimum value method currently used by the Company is not allowed and the Company will be required to adopt the prospective method as proscribed by SFAS123(R). This value is recorded over the vesting period. This statement is effective for the first interim reporting period beginning after June 15, 2005. We are currently evaluating the provisions of SFAS 123(R), and the impact on our consolidated financial position and results of operations.

2. Inventories

Inventories consisted of the following at December 31 (in dollars in thousands):

	2004		2003
Finished goods	$	47,259	$	49,880
Raw materials and other		37,595		27,066
Work-in-process		9,446		7,179

Total	$	94,300	$	84,125

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3. Restructuring and Other Costs

Restructuring and other costs include plant closing costs (including costs related to relocation of manufacturing equipment), charges for impairment of fixed assets related to plant closures, office closing costs and other costs related to workforce reductions. The following table summarizes restructuring and other costs for the three years ended December 31 (in dollars in thousands):

		2004		2003		2002
Plant Closing Costs:
	Severance	$	206	$	263	$	2,511
	Relocation of production lines		36		1,452		2,955
	Leases		—		1,903		—
	Other plant closing costs		437		4,130		9,077
Office closing and workforce reduction costs
	Severance		—		660		6,551
	Leases		—		1,357		—
	Other office closure costs		—		188		352

Total Plant/Office			679		9,953		21,446

	Fixed asset impairments related To plant closures		1,429		2,654		8,620

Total Restructuring and other costs		$	2,108	$	12,607	$	30,066

Restructuring and other costs for the year ended December 31, 2004 included $1.4 million for fixed asset impairment charges, $0.2 million in severance and $0.5 million in other costs related to the closure of our facility in Harrisville, Rhode Island.

Restructuring and other costs for the year ended December 31, 2003 included $2.0 million for fixed asset impairment charges related to the closure of our facility in Shelbyville, IN, $0.7 million related to the closure of our facility in Brazil consisting primarily of fixed asset impairment charges, $2.6 million related to the closure and transfer of the production from our facility in Fort Edward, NY to our facilities in Mexico and Danville, KY, $1.4 million related to the consolidation of two plants in Mexico, $2.6 million related to the closure and transfer of production from our Merced, CA facility, and other costs related to the closure of our Shelbyville, IN facility, our Singapore office and a section of our Toronto facility. In addition, during 2003 we accrued the present value of future lease payments on three buildings we do not currently occupy in an amount equal to $3.3 million.

Restructuring and other costs for the year ended December 31, 2002 included $16.8 million related to the closure of our plant in Merced, CA, a portion of our plant in Shelbyville, IN, a part of our plant in Toronto, Canada, one of our plants in Mexico, and our Fort Edward, NY facility (acquired as part of the Decora acquisition). In addition, these costs reflect $7.9 million for the costs of relocating several of our production lines related to plant closures and costs associated with production rationalizations at several plants. Restructuring and other costs for 2002 also include $5.3 million related to severance costs, including benefits for several companywide workforce reduction programs that were completed in 2002.

F-12

The following table summarizes the roll-forward of the reserve from December 31, 2003 to December 31, 2004 (dollars in thousands):

					Accruals for the Year Ended December 31, 2004
		12/31/2003			Accruals for the Year Ended December 31, 2004														12/31/04
		12/31/2003										Other Plant Closure Costs							12/31/04
		# Employees Terminated	Accrual Balance		Additional Employees	Severance		Relocated Production Lines		Leases		Other Plant Closure Costs		Total		Payments/ Charges			# Employees Terminated	Accrual Balance
*Plant Closing Costs:*
Merced		54	$	1,235	—	$	—	$	—	$	—	$	—	$	—	$	(235	)	54	$	1,000
Rhode Island		—		—	49		206		36		—		437		679		(665	)	49		14
Shelbyville		8		1,606	—		—		—		—		—		—		(519	)	8		1,087
Leases		—		2,004	—		—		—		—		—		—		(390	)	—		1,614

		62	$	4,845	49	$	206	$	36	$	—	$	437	$	679	$	(1,809	)	111	$	3,715

*Office Closing and Workforce Reduction Costs:*
Leases		—	$	1,129	—	$	—	$	—	$	—	$	—	$	—	$	(519	)	—	$	610
Severance		114		237	—		—		—		—		—		—		(153	)	114		84
Singapore		—		152	—		—		—		—		—		—		(25	)	—		127

		114	$	1,518	—	$	—	$	—	$	—	$	—	$	—	$	(697	)	114	$	821

Subtotal Plant/Office		176	$	6,363	49	$	206	$	36	$	—	$	437	$	679	$	(2,506	)	225	$	4,536

*Fixed Asset Impairments related to Plant Closures:*
Rhode Island		—		—	—		—		—		—		—	$	1,429		—		—		—

		—		—	—		—		—		—		—	$	1,429		—		—		—

	TOTAL	176	$	6,363	49	$	206	$	36	$	—	$	437	$	2,108	$	(2,506	)	225	$	4,536

F-13

The following table summarizes the roll-forward of the reserve from December 31, 2002 to December 31, 2003 (dollars in thousands):

					Accruals for the Year Ended December 31, 2004
		12/31/2003			Accruals for the Year Ended December 31, 2004																12/31/04
		12/31/2003												Other Plant Closure Costs							12/31/04
		# Employees Terminated	Accrual Balance		Additional Employees		Severance			Relocated Production Lines		Leases		Other Plant Closure Costs		Total		Payments/ Charges			# Employees Terminated	Accrual Balance
*Plant Closing Costs:*
Merced		54	$	1,527	(44	)	$	—		$	725	$	—	$	1,825	$	2,550	$	(2,842	)	10	$	1,235
Toronto		18		124	(18	)		28			114		—		44		186		(310	)	—		—
Shelbyville		12		2,451	(12	)		(48	)		87		—		327		366		(1,211	)	—		1,606
Mexico—Solutions		—		—	—			134			526		—		746		1,406		(1,406	)	—		—
Clearfield		—		641	—			—			—		1,903		—		1,903		(540	)	—		2,004
Mexico		—		—	—			223			—		—		1,188		1,411		(1,411	)	—		—

		84	$	4,743	(74	)	$	337		$	1,452	$	1,903	$	4,130	$	7,822	$	(7,720	)	10	$	4,845

*Office Closing and Workforce Reduction Costs:*
Leases		—	$	430	—		$	—		$	—	$	1,357	$	—	$	1,357	$	(658	)	—	$	1,129
Severance		90		3,580	(86	)		586			—		—		—		586		(3,929	)	4		237
Singapore		—		—	—			—			—		—		188		188		(36	)	—		152

		90	$	4,010	(86	)	$	586		$	—	$	1,357	$	188	$	2,131	$	(4,623	)	4	$	1,518

Subtotal Plant/Office		174	$	8,753	(160	)	$	923		$	1,452	$	3,260	$	4,318	$	9,953	$	(12,343	)	14	$	6,363

*Fixed Asset Impairments related to Plant Closures:*
Shelbyville		—		—	—			—			—		—		—	$	1,958		—		—		—
Brazil		—		—	—			—			—		—		—	$	696		—		—		—

		—		—	—			—			—		—		—	$	2,654		—		—		—

	TOTAL	174	$	8,753	(160	)	$	923		$	1,452	$	3,260	$	4,318	$	12,607	$	(12,343	)	14	$	6,363

Plant Closing Costs:

2004—During the third quarter of 2004, we closed our Harrisville, Rhode Island facility and moved its production to more modern and efficient facilities. It is anticipated that this restructuring plan will result in a workforce reduction of 49 positions, all of which were effective by December 31, 2004. All restructuring plan costs are attributable to our Engineered Films segment and are anticipated to total 2.7 million, consisting primarily of fixed asset impairment charges of $1.4 million, equipment relocation costs of $0.4 million, severance and other personnel related costs of $0.3 million and other costs of $0.6 million.

2003—During 2003, we accrued the present value of future lease payments on three buildings we no longer occupied in an amount equal to $3.3 million. As of December 31, 2004 $2.2 million of these accruals are remaining

2002—In September 2002, we approved a plan to close our production facility in Merced, California and relocate its production lines to our plants in Toronto, Canada and Danville, Kentucky. As of December 31, 2002, we accrued $1.6 million as part of plant closing costs for the severance

F-14

expenses related to the closure of the Merced facility. The cost of relocating the production lines are expensed to plant closing costs as incurred. In October 2002, we approved a plan to close our production facility in Shelbyville, Indiana and consolidate its production lines with our Alliant joint venture. As of December 31, 2002 we accrued $0.7 million as part of plant closing costs for severance expenses. Other costs are expensed to our plant closing costs as incurred. The Shelbyville closure and the Merced closure were completed in the first quarter of 2003. As of December 31, 2004, the $1.0 million remaining reserves for Merced relate to environmental cleanup and the $1.1 million in Shelbyville for remaining future lease payments.

In addition, we commenced a process in 2002 to consolidate our two plants in Mexico. The cost of relocating the production lines was expensed to plant closing costs as incurred. We also incurred $2.3 million in plant closure costs in connection with the closing of our Fort Edward, New York facility and moving production to our facilities in Mexico and Danville, Kentucky. We also made certain production rationalizations at our Toronto, Canada plant and Calhoun, Georgia plant. There are no remaining accruals as of December 31, 2003.

As a part of the 2001 Uniplast acquisition the Company approved a plan to close three Uniplast production facilities and reduce the sales and administrative personnel. As of December 31, 2002 the closure of the production plants and reduction of sales and administrative personnel were complete. Severance costs associated with this plan of $3.0 million were accrued as a part of the cost of the acquisition. The cost of relocating production lines to existing Company locations was expensed to plant closing costs as incurred. The Company incurred approximately $3.9 million for these relocation costs in 2002. There is no accrual remaining at December 31, 2002.

In connection with the closure of our Shelbyville facility in 2002, we determined that the values of several assets relating to this facility were impaired. This facility manufactured re-closable bags and was part of our Specialty Products Group segment. We closed this facility due to low sales volumes of re-closable bags. The impairment charges totaled $7.9 million, consisting of $5.2 million for equipment, $2.3 million for patents, moulds and intangible assets, and $0.4 million for the plant building. The $4.5 million of other closure costs associated with the closure of the Shelbyville facility consisted of $2.1 million relating to the write off of an equipment lease, $1.5 million of obsolete inventory that was written off, $0.3 million of accounts receivable that were written off and $0.6 million of labor and other costs related to an orderly shut down of the facility. The Shelbyville plant had a pre-tax loss of $1.9 million during the year ended December 31, 2002.

Office Closings and Workforce Reduction Costs

2002 During the year ended December 31, 2002, we implemented four workforce reduction programs. During the year ended December 31, 2002, 111 employees were terminated, resulting in an estimated annual cost saving, including benefits, of $10.1 million. Total severance cost, including benefits, for these terminations was $6.9 million. The accruals remaining at December 31, 2004, 2003 and 2002 were $0.1 million, $0.2 million and $3.6 million, respectively.

Total plant closing costs and severance and related costs resulting from the 2002 workforce reductions discussed above have been included as part of restructuring and other costs in the consolidated statement of operations for the year ended December 31, 2002.

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As of December 31, 2002, all of the expected employee terminations had been completed in connection with the workforce reduction, closure of the Salt Lake City and the closure of the Dallas offices.

4. Discontinued Operations

In May 2002, we acquired substantially all of the assets and assumed certain liabilities of Decora Industries, Inc. and its operating subsidiary, Decora Incorporated (collectively, "Decora"), a New York based manufacturer and reseller of printed, plastic films, including plastic films and other consumer products sold under the Con-Tact® brand name for approximately $23.2 million and formed a new wholly-owned subsidiary, Pliant Solutions Corporation. The purchase price was negotiated with the creditors committee and was paid in cash using borrowings from our existing revolving credit facility.

On September 30, 2004, we sold substantially all of the assets of Pliant Solutions Corporation. Pliant Solutions, previously reported as a separate operating segment, manufactured decorative and surface coverings through the conversion of various films into consumer packaged goods. These products were sold through retailers to consumers for a wide range of applications, including shelf-lining, decorative accents, glass coverings, surface repair, resurfacing and arts and crafts projects.

In accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets, Pliant Solutions is being accounted for as a discontinued operation and, accordingly, its assets are segregated from continuing operations in the accompanying consolidated balance sheet, and its operating results are segmented and reported as discontinued operations in the accompanying consolidated statement of operations in all periods presented. Net sales for the nine and twelve months ended December 31, 2004 and 2003 were $22.5 million and $34.9 million, respectively. Net sales for the eight months ended December 31, 2002 were $28.3 million. No tax benefits were recorded on the losses from discontinued operations or the loss on sale of discontinued operations as realization of these tax benefits is not certain.

The assets of Pliant Solutions were sold for $9 million, of which $6.5 million was paid in cash at closing, and $2.5 million will be paid in equal monthly installments over a 3-year period. We recognized a loss on the sale of $10.4 million.

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5. Plant and Equipment

The cost and the related accumulated depreciation at December 31 is as follows (in thousands):

	2004			2003
Land and improvements	$	7,729		$	7,711
Buildings and improvements		68,338			65,896
Machinery and equipment		414,695			403,451
Computer equipment and software		36,066			34,519
Furniture, fixtures and vehicles		6,369			6,361
Leasehold improvements		4,906			5,547
Construction in progress		5,586			8,379

		543,689			531,864
Less accumulated depreciation and amortization		(246,544	)		(216,444	)

Plant and equipment, net	$	297,145		$	315,420

The depreciation expense for the years ended December 2004, 2003 and 2002 was $38.1 million, $43.7 million and $42.1 million, respectively.

During the year ended December 31, 2004, we recorded an impairment change of $0.4 million to scrap fixed assets in our Engineered Films and Industrial Films segments. During the year ended December 31, 2003 we recorded an impairment charge to scrap unused fixed assets for $4.8 million. This impairment was a result of the lack of business in one production line in our Industrial segment, one production line in our Performance segment and several small production lines in our Specialty Products Group segment.

6. Goodwill and Intangible Assets

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets". SFAS No. 142, which was effective for fiscal years beginning after December 15, 2001, requires that ratable amortization of goodwill be replaced with periodic tests of goodwill impairment and that intangible assets, other than goodwill, which have determinable useful lives, be amortized over their useful lives. As required by SFAS 142, the Company stopped amortizing goodwill effective January 1, 2002. The Company has evaluated goodwill for impairment under SFAS 142 guidelines. The Company's annual impairment test is conducted on October 1 of each year based on a methodology including prices of comparable businesses and discounted cash flows. Based on the 2004 annual impairment test, no impairments were recorded. Based upon the 2003 annual impairment test, the Company determined that goodwill was impaired in various international operations in the Specialty Products Group, Industrial Films and Engineered Films segment, and a total of $18.2 million goodwill was written down. These impairments were a result of lower sales volumes and margins from these units. In 2002, based on this evaluation, the Company determined that the goodwill in certain units was impaired, and $8.6 million of goodwill in the Specialty Products Group was written down in the fourth quarter.

Intangible assets, other than goodwill, that have indefinite lives are not amortized. Instead, the Company evaluates the fair value of these assets in connection with its annual impairment test on October 1 of each year. Currently, the Company does not have any intangible asset, other than goodwill, with an indefinite life.

F-17

We have four operating segments, all of which have goodwill. Our operating segments are consistent with our reporting units as defined in SFAS 142. Operating segments are components of our business for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. Goodwill is allocated to the segments based on fair value. As discussed in Note 15, our operating segments were reorganized in 2004 and goodwill reallocated based on fair value. The changes in the carrying value of goodwill for the year ended December 31, 2003 and 2004 were as follows (in thousands):

	Specialty Products Group			Industrial Films			Engineered Films			Performance Films		Corporate/ Other		Total
Balance as of December 31, 2002	$	138,741		$	3,394		$	43,206		$	14,996	$	—	$	200,337
Goodwill impaired		(7,162	)		(1,027	)		(9,986	)		—		—		(18,175	)

Balance as of December 31, 2003	$	131,579		$	2,367		$	33,220		$	14,996	$	—	$	182,162

Foreign exchange rate adjustment		—			75			—			—		—		75
Goodwill impaired		—			—			—			—		—		—

Balance as of December 31, 2004	$	131,579		$	2,442		$	33,220		$	14,996	$	—	$	182,237

Other intangible assets, are as follows as of December 31 (in thousands):

	2004					2003
	Gross Carrying Value		Accumulated Amortization			Gross Carrying Value		Accumulated Amortization
Other intangible assets:
Customer lists	$	22,965	$	(8,587	)	$	22,500	$	(6,717	)
Other		22,741		(20,043	)		22,717		(19,248	)

Total	$	45,706	$	(28,630	)	$	45,217	$	(25,965	)

The weighted average remaining amortization periods for customer lists is 8.1 and 8.7 years for 2004 and 2003, respectively. The weighted average remaining amortization periods for other intangibles is 2.6 and 2.9 years for 2004 and 2003, respectively.

The estimated amortization for each of the next five years on the other intangible assets included above is as follows (in thousands):

Year Ending December 31
2005	$	2,461
2006		2,405
2007		2,237
2008		1,376
2009		960

Amortization expense for other intangible assets was approximately $2.5 million, $3.2 million, and $3.6 million, for the years ended December 31, 2004, 2003 and 2002, respectively.

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7. Long-Term Debt

Long-term debt as of December 31, consists of the following (in thousands):

	2004			2003
Credit Facilities:
Revolver, variable interest, 6.75% as of December 31, 2004	$	24,000		$	—
Tranche A and B term loans, variable interest at a weighted average rate of 5.9% as of December 31, 2003		—			219,575
Senior secured discount notes at 11¹/8%, net of unamortized issue discount of $58,359		247,641			—
Senior secured notes, interest at 11¹/8%		250,000			250,000
Senior subordinated notes, interest at 13.0% (net of unamortized issue discount, premium and discount related to warrants of $6,786 and $7,598 at 2004 and 2003, respectively)		313,214			312,402
Obligations under capital leases		6,778			856
Insurance financing, interest at 3.03% as of December 31, 2004		715			824

Total		842,348			783,657
Less current portion		(1,994	)		(1,033	)

Long-term portion	$	840,354		$	782,624

The scheduled maturities of long-term debt by year, as of December 31, 2004 are as follows (in thousands):

Year Ending December 31,
2005	$	1,994
2006		1,387
2007		989
2008		928
2009		523,836
Thereafter		313,214

Total debt as of December 31, 2004	$	842,348

On February 17, 2004 we repaid the balance outstanding on the revolving credit facility and term loans that existed on that date from the proceeds of the issuance of Senior Secured Discount Notes and the revolving credit agreement discussed below.

Revolving Credit Facility

On February 17, 2004, we entered into a revolving credit facility providing up to $100 million (subject to a borrowing base). The new revolving credit facility includes a $15 million letter of credit subfacility, with letters of credit reducing availability under our revolving credit facility.

The revolving credit facility is secured by a first priority security interest on substantially all inventory, receivables, deposit accounts, 100% of capital stock of, or other equity interests in existing

F-19

and future domestic subsidiaries and foreign subsidiaries that are note guarantors, and 65% of the capital stock of, or other equity interests in existing and future first-tier foreign subsidiaries investment property and certain other assets of the Company and the note guarantors (the "Second Priority Collateral"), and a second priority security interest in our real property, fixtures, equipment, intellectual property and other assets (the "First Priority Collateral").

The borrowings under the revolving credit facility may be limited to a reduced availability. Reduced Availability is defined as: if the borrowing base is less than $110,000,000 and the Fixed Charge Coverage Ratio (FCCR) is less than 1.1, the reduced availability is the borrowing base minus $10,000,000. Furthermore, if the FCCR is less than that prescribed in our credit agreement, RA is the lessor of the commitment or the borrowing base minus $15,000,000. As of December 31, 2004, we had approximately $60.1 million available for borrowing under our revolving credit agreement.

Issuance of 11¹/8% Senior Secured Discount Notes due 2009

On February 17, 2004 we completed the sale of $306 million ($225.3 million of proceeds) principal at maturity of 11¹/8% Senior Secured Discount Notes due 2009. The proceeds of this offering and the revolving credit facility (discussed above) were used to repay and terminate the credit facilities that existed at December 31, 2003.

The Senior Secured Discount Notes are secured by a first priority security interest in the First Priority Collateral and a second priority security interest in the Second Priority Collateral. The Senior Secured Discount Notes are guaranteed by our existing and future domestic restricted subsidiaries and certain foreign subsidiaries.

Unless we elected to pay cash interest as described below, and except under certain limited circumstances, the notes will accrete from the date of issuance at the rate of 11¹/8% until December 15, 2006, compounded semiannually on each June 15 and December 15 commencing June 15, 2004, to an aggregate principal amount of $1,000 per note ($306.0 million in the aggregate assuming no redemption or other repayments). Commencing on December 15, 2006, interest on the notes will accrue at the rate of 11¹/8% per annum and will be payable in cash semiannually on June 15 and December 15, commencing on June 15, 2007.

On or after June 15, 2007, we may redeem some or all of the notes at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest: 105.563% if redeemed prior to June 15, 2008; 102.781% if redeemed prior to June 15, 2009; and 100% if redeemed on or after June 15, 2009. Prior to such date, we may not redeem the notes except as described in the following paragraph.

F-20

At any time prior to June 15, 2007, we may redeem up to 35% of the accreted value of the notes with the net cash proceeds of certain equity offerings by us at a redemption price equal to 111.125% of the accreted value thereof plus accrued interest, so long as (i) at least 65% of the accreted value of the notes remains outstanding after such redemption and (ii) any such redemption by us is made within 120 days after such equity offering.

11¹/8% Senior Secured Notes due 2009

On May 30, 2003, we completed the sale of $250 million aggregate principal amount of our 11¹/8% Senior Secured Notes due 2009. The 11¹/8 Senior Secured Notes due 2009 mature on September 1, 2009, and interest is payable on March 1 and September 1 of each year. The net proceeds from the sale of the 11¹/8% Senior Secured Notes due 2009 were used to repay borrowings under our then existing credit facilities in accordance with an amendment to our existing credit facilities. The Senior Secured Notes due 2009 rank equally with our existing and future senior debt and rank senior to our existing and future subordinated indebtedness, including the 13% Senior Subordinated Notes due 2010. The 11¹/8% Senior Secured Notes due 2009 are secured, on a second-priority lien basis, by a substantial portion of our assets. Due to this second-priority status, the 11¹/8% Senior Secured Notes due 2009 effectively rank junior to our obligations secured by a first-priority lien on the collateral securing the 11¹/8% Senior Secured Notes due 2009 to the extent of the value of such collateral. In addition, the 11¹/8% Senior Secured Notes due 2009 effectively rank junior to any of our obligations that are secured by a lien on assets that are not part of the collateral securing the 11¹/8% Senior Secured Notes due 2009, to the extent of the value of such assets. The 11¹/8% Senior Secured Notes due 2009 are guaranteed by some of our subsidiaries.

Prior to June 1, 2006, we may, on one or more occasions redeem up to a maximum of 35% of the original aggregate principal amount of the 11¹/8% Senior Secured Notes due 2009 with the net cash proceeds of one or more equity offerings by us at a redemption price equal to 111.125% of the principal amount thereof, plus accrued and unpaid interest. Otherwise, we may not redeem the 11¹/8% Senior Secured Notes due 2009 prior to June 1, 2007. On or after that date, we may redeem some or all of the 11¹/8% Senior Secured Notes due 2009 at the following redemption prices (expressed as a percentage of principal amount). Plus accrued and unpaid interest: 105.563% if redeemed prior to June 1, 2008; 102.781% if redeemed prior to June 1, 2009; and 100% if redeemed on or after June 1, 2009.

13% Senior Subordinated Notes due 2010

In 2000, we issued $220 million aggregate principal amount of 13% Senior Subordinated Notes due 2010. In 2002, we issued an additional $100 million of 13% Senior Subordinated Notes due 2010. The 13% Senior Subordinated Notes due 2010 mature on June 1, 2010, and interest on the 13% Senior Subordinated Notes due 2010 is payable on June 1 and December 1 of each year. The 13% Senior Subordinated Notes due 2010 are subordinated to all of our existing and future senior debt, rank equally with any future senior subordinated debt, and rank senior to any future subordinated debt. The 13% Senior Subordinated Notes due 2010 are guaranteed by some of our subsidiaries. The 13% Senior Subordinated Notes due 2010 are unsecured. We may not redeem the 13% Senior Subordinated Notes due 2010 prior to June 1, 2005. On or after that date, we may redeem the 13% Senior Subordinated Notes due 2010, in whole or in part, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest: 106.5% if redeemed prior to June 1, 2006;

F-21

104.333% if redeemed prior to June 1, 2007; 102.167% if redeemed prior to June 1, 2008; and 100% if redeemed on or after June 1, 2008.

The credit facilities and the indentures described above impose certain restrictions on us, including restrictions on our ability to incur indebtedness, pay dividends, make investments, grant liens, sell our assets and engage in certain other activities.

Interest Rate Risk and Derivative Instruments

Borrowings under our credit facilities are at variable rates of interest, exposing us to the risk of increased interest rates. Our leveraged position and the covenants contained in our debt instruments may also limit our flexibility to adjust to changing market conditions and our ability to withstand competitive pressures, thus putting us at a competitive disadvantage. We may be vulnerable to a downturn in general economic conditions or in our business or be unable to carry out capital spending that is important to our growth and productivity improvement programs. Thus the Company periodically utilizes interest rate derivatives contracts to reduce the effect of interest rate increases.

We apply SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 137 and SFAS No. 138. In accordance with these statements, we recognize the fair value of derivatives as either assets or liabilities in the balance sheet. To the extent that the derivatives qualify as a hedge, gains or losses associated with the effective portion are recorded as a component of other comprehensive income while the ineffective portion is recognized in income.

As of December 31, 2004, we had no outstanding interest rate derivatives. The fair value of our interest rate derivative agreements reported on our consolidated balance sheet at December 31, 2003 in other liabilities is approximately $3.6 million. The effective portion of the changes in fair value of these instruments is reported in other comprehensive income. As the hedged contract matures, the gain or loss is recorded as interest expense in the consolidated statement of operations. Any changes in fair value of the ineffective portion of the instruments is reported as interest expense in the consolidated statement of operations. The ineffective portion for the years ended December 31, 2003 was not material.

The change in accumulated derivative loss included as a part of accumulated other comprehensive loss as of December 31, is as follows (in thousands):

	2004			2003			2002
Beginning accumulated derivative loss, net of taxes	$	2,220		$	5,397		$	2,944
Change associated with current period hedge transactions		—			(3,022	)		2,674
Amount reclassified into earnings		(2,220	)		(155	)		(221	)

Ending accumulated derivative loss, net of taxes	$	—		$	2,220		$	5,397

F-22

Interest Expense

Interest expense—current and long-term debt in the statement of operations for 2004, 2003 and 2002 are as follows (in thousands):

	2004		2003		2002
Interest expense accrued, net	$	95,191	$	78,299	$	65,751
Recurring amortization of financing fees		4,510		5,282		4,289
Write-off of previously capitalized financing fees		7,897		5,294		—
Change in fair value and cash payment of interest rate derivatives		2,755		7,529		5,224

TOTAL	$	110,353	$	96,404	$	75,264

Cash interest payments	$	80,411	$	76,341	$	69,207

8. Leases

Capital Leases We have acquired certain land, building, machinery and equipment under capital lease arrangements that expire at various dates through 2008. At December 31, the gross amounts of plant and equipment and related accumulated amortization recorded under capital leases were as follows (in thousands):

	2004			2003
Land and building	$	247		$	247
Machinery and equipment		7,317			1,072
Total assets held under capital leases		7,564			1,319
Less: accumulated amortization		(436	)		(400	)

	$	7,128		$	919

The amortization expense is included in depreciation expense. In November of 2004, the Company entered into a capital lease of $5.1 million for a production line in our Industrial segment.

Operating Leases We have non-cancelable operating leases, primarily for vehicles, equipment, warehouse, and office space that expire through 2014, as well as month-to-month leases. The total expense recorded under all operating lease agreements in the accompanying consolidated statements of operations is approximately $11.2 million, $12.6 million, and $10.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. Future minimum lease payments under operating

F-23

leases and the present value of future minimum capital lease payments (with interest rates between 8.9% and 11.75%) as of December 31, 2004 are as follows (in thousands):

Year Ending December 31		Operating Leases		Capital Leases
	2005	$	9,190	$	1,782
	2006		8,511		1,771
	2007		6,642		1,251
	2008		4,026		1,094
	2009		3,971		2,286
Thereafter			10,856		—

Total minimum lease payments		$	43,196	$	8,184

Amounts representing interest					(1,407	)

Present value of net minimum capital lease payments				$	6,777

During the year ended December 31, 2002, the Company entered into a transaction in which production lines were sold for approximately $15 million ($5 million of which was retained by the lessor as a required security deposit) and leased back to the Company under an operating lease agreement. These production lines were sold for their carrying values, thus no gain or loss was recorded on the transactions.

9. Income Taxes

The components of income (loss) from continuing operations before income taxes for the years ended December 31 are as follows (in thousands):

	2004			2003			2002
United States	$	(82,859	)	$	(70,539	)	$	(43,551	)
Foreign		(11,709	)		(17,230	)		1,585

Total	$	(94,568	)	$	(87,769	)	$	(41,966	)

F-24

The following is a summary of domestic and foreign provisions for current and deferred income taxes and a reconciliation of the U.S. statutory income tax rate to the effective income tax rate.

The provisions (benefits) for income taxes for the years ended December 31, are as follows (in thousands):

			2004			2003		2002
Current:
	Federal		$	—		$	—	$	—
	State			80			82		261
	Foreign			1,714			3,600		3,719

		Total current		1,794			3,682		3,980

Deferred:
	Federal			(1,048	)		216		(5,887	)
	State			(346	)		169		(1,848	)
	Foreign			1,189			1,123		2,293

		Total deferred		(205	)		1,508		(5,442	)

		Total income tax expense (benefit)	$	1,589		$	5,190	$	(1,462	)

The effective income tax rate reconciliations for the years ended December 31, are as follows (in thousands):

		2004			2003			2002
Income (loss) before income taxes		$	(94,568	)	$	(87,769	)	$	(41,966	)
Expected income tax provision (benefit) at U.S. statutory rate of 35%			(33,099	)		(30,719	)		(14,688	)
Increase (decrease) resulting from:
	Goodwill		3			3,075			—
	Accrued dividends on preferred stock		12,364			—			—
	State taxes		(1,597	)		(2,304	)		(975	)
	Change in valuation allowance		15,074			20,594			7,766
	Foreign rate difference		4,277			9,755			7,761
	Other, net		4,567			4,789			(1,326	)

Total income tax expense (benefit)		$	1,589		$	5,190		$	(1,462	)
Effective income tax rate			1.7	%		5.9	%		(3.5	)%

F-25

Components of net deferred income tax assets and liabilities as of December 31, are as follows (in thousands):

			2004			2003
Deferred income tax assets:
	Net operating loss carry forwards		$	100,267		$	78,328
	AMT and foreign tax credit carry forwards			4,755			4,755
	Accrued pension costs			6,132			8,129
	Accrued employee benefits			7,664			4,137
	Accrued plant closing costs			1,929			2,235
	Allowance for doubtful trade accounts receivable			1,129			366
	Inventory related costs			973			2,145
	Other			2,852			5,729

				125,701			105,824
		Valuation Allowance		(61,694	)		(39,693	)

	Total deferred income tax assets			64,007			66,131
Deferred income tax liabilities:
	Tax depreciation in excess of book depreciation			(71,090	)		(76,321	)
	Amortization of intangibles			(7,329	)		(5,113	)
	Other			(5,060	)		(3,072	)

		Total deferred income tax liabilities		(83,479	)		(84,506	)

Net deferred income tax liability			$	(19,472	)	$	(18,375	)

As reported on consolidated balance sheets:
	Net current deferred income tax asset		$	11,961		$	9,417
	Net non-current deferred income tax liability			(31,433	)		(27,792	)

		Net deferred income tax liability	$	(19,472	)	$	(18,375	)

The net operating loss carry forwards for federal tax purposes are approximately $257.1 million. These losses expire in 2020 through 2024. Due to uncertainty regarding realization, valuation allowances of approximately $55.7 million and $36.1 million in 2004 and 2003 respectively have been recorded to offset the deferred tax asset related to the net operating losses.

The foreign tax credit carry forwards for federal tax purposes are approximately $3.6 million expiring in 2010 through 2011. Due to uncertainty regarding realization, valuation allowances of approximately $3.6 million for 2004 and 2003 has been recorded to offset the deferred tax asset related to the foreign tax credits.

Undistributed earnings of foreign subsidiaries amounted to approximately $13.1 million as of December 31, 2004. Approximately $3.6 million is considered to be permanently invested and $9.5 million may be distributed in future years. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes, subject to an adjustment for foreign tax credits, and withholding taxes payable to foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with the calculation.

F-26

On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the "Act"). The Act creates a temporary incentive for U. S. corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and, as of today, uncertainty remains as to how to interpret numerous provisions in the Act.

10. Employee Benefit Plans

Defined Contribution Plan We sponsor a salary deferral plan covering substantially all of our non-union domestic employees. Plan participants may elect to make voluntary contributions to this plan up to 15% of their compensation. We contribute up to 1% of the participants' compensation based on our profits and also match employee contributions up to 2% of the participants' compensation. We expensed approximately $1.7 million, $2.0 million and $2.4 million as our contribution to this plan for the years ended December 31, 2004, 2003 and 2002, respectively.

Defined Benefit Plans We sponsor three noncontributory defined benefit pension plans (the "United States Plans") covering domestic employees with 1,000 or more hours of service. We fund our plans in amounts to fulfill the minimumfunding requirements of the Employee Retirement Income Security Act of 1974. Contributions are intended to not only provide for benefits attributed to service to date but also for those expected to be earned in the future. In the second quarter of 2004, the Company redesigned its retirement programs which led to the curtailment and "freeze" of the pension plan for U.S. salaried employees effective June 30, 2004. As a result, a curtailment gain of $1.6 million was recognized as income in 2004. We also sponsor a defined benefit plan in Germany (the "Germany Plan").

F-27

The consolidated accrued net pension expense for the years ended December 31, 2004, 2003 and 2002 includes the following components (in thousands):

	2004			2003			2002
United States Plans
Service cost-benefits earned during the period	$	2,583		$	4,474		$	3,845
Interest cost on projected benefit obligation		4,970			5,157			4,582
Expected return on assets		(4,560	)		(3,476	)		(3,698	)
Curtailment gain		(1,562	)		—			—
Other		372			517			160

Total accrued pension expense	$	1,803		$	6,672		$	4,889

Germany Plan
Service cost-benefits earned during the period	$	112		$	98		$	82
Interest cost on projected benefit obligation		115			93			80

Total accrued pension expense	$	227		$	191		$	162

Employer Contributions
2005 Expected to plan trusts		$3,067
Expected Benefit Payments
2005		$2,765
2006		2,861
2007		3,042
2008		3,226
2009		3,394
2010-2014		20,888

	2004		2003		2002
Weighted-Average Assumptions Used to Determine Net Cost
Discounted rate	6.25	%	6.75	%	7.25	%
Expected return on plan assets	9.00	%	9.00	%	9.00	%
Rate of compensation increase (non-union plans)	4 .0	%	4.0	%	4.0	%

Long-Term Rate Investment Return Assumption

The rate of investment return assumption was developed through analysis of historical market returns, current market conditions, and the fund's past experience. Estimates of future market returns by asset category are lower than actual long-term historical returns in order to generate a conservative forecast. Overall, it was projected that funds could achieve a 9.00% return over time.

Investment Strategy

Our investment portfolio contains a diversified blend of equity and debt securities. Furthermore, equity investments are diversified across domestic and international stocks as well as large and small capitalizations. Investment risk is measured and monitored on an ongoing basis through quarterly

F-28

investment portfolio reviews. The target allocation of equity securities is 70 percent of the plan assets. The target allocation of debt securities is 30 percent of the plan assets. As of December 31, 2004, the actual allocation was 52 percent equity securities, 21 percent debt securities and 27 percent insurance contracts.

Measurement date

Pliant Corporation uses a measurement date of December 31 for its pension plans. The following tables set forth the funded status of the United States Plans and the Germany Plan as of December 31, 2004, 2003, and 2002 and the amounts recognized in the consolidated balance sheets at those dates (in thousands):

		2004			2003			2002
United States Plans
Change in benefit obligation:
	Obligation at January 1	$	87,369		$	73,003		$	60,706
	Service cost		2,583			4,474			3,845
	Interest cost		4,970			5,157			4,582
	Plan amendments		—			122			593
	Curtailments		(14,875	)		—			—
	Actuarial (gain) loss		3,247			7,112			5,388
	Other		—			—			152
	Benefits paid		(2,730	)		(2,499	)		(2,263	)

	Obligation at December 31	$	80,564		$	87,369		$	73,003

Change in plan assets:
	Fair value of assets at January 1	$	48,838		$	37,071		$	41,872
	Actual return on plan assets		5,004			7,146			(3,260	)
	Employer contributions		7,261			7,120			569
	Other		—			—			153

	Benefit payments		(2,730	)		(2,499	)		(2,263	)

Fair value of plan assets at December 31		$	58,373		$	48,838		$	37,071
Underfunded status at December 31		$	22,191		$	38,531		$	35,932
Unrecognized net actuarial gain (loss)			(6,506	)		(15,762	)		(12,661	)
Unrecognized prior service cost			(789	)		(2,415	)		(2,469	)

Accrued long-term pension liability included in other liabilities		$	14,896		$	20,354		$	20,802

F-29

Amounts recognized in the balance sheet consist of (in thousands):

	2004			2003
Accrued benefit cost	$	14,896		$	20,354
Additional minimum liability in other liabilities		6,388			2,194
Intangible asset		(789	)		(773	)
Accumulated other comprehensive income		(5,599	)		(1,421	)

Accumulated pension liability	$	14,896		$	20,354

The projected benefit obligation, accumulated benefit obligation, and fair value of assets for the plans were as follows (in thousands):

	2004			2003
Projected benefit obligation	$	80,564		$	87,369
Accumulated benefit obligation		79,657			70,882
Fair value of Assets		58,373			48,838
Weighted-Average Assumptions as of December 31
Discount rate		6.00	%		6.25	%
Rate of Compensation increase		4.00	%		4.00	%

		2004			2003
Germany Plan
Change in benefit obligation:
	Obligation at January 1	$	1,967		$	1,492
	Service cost		112			98
	Interest cost		115			93
	Benefits paid		(34	)		(25	)
	Change due to exchange rate		155			309

	Obligation at December 31	$	2,315		$	1,967

Fair value of plan assets at December 31			None			None
Underfunded status at December 31		$	2,315		$	1,967
Unrecognized net actuarial gain			139			122

Accrued long-term pension liability included in other liabilities		$	2,454		$	2,089

Assumptions used for future compensation was 1.75% for 2004 and 2003. Discount rates were 5.25% for 2004 and 5.75% for 2003. The cash surrender value of life insurance policies for Germany Plan participants included in other assets in the consolidated balance sheets is approximately $1.3 million and $0.5 million as of December 31, 2004 and 2003.

Effective January 1, 2003 we revised the United States Plans to exclude the participation of new non-union employees in such plans.

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Foreign Plans Other Than Germany Employees in other foreign countries are covered by various post employment arrangements consistent with local practices and regulations. Such obligations are not significant and are included in the consolidated financial statements in other liabilities.

Other Plans As part of the acquisition of Blessings Corporation in 1998, we assumed two supplemental retirement plans covering certain former employees of Blessings Corporation. The liability for these plans included in other liabilities and at December 31, 2004 was approximately $1.9 million. The liability for these plans was included in other liabilities at December 31, 2003 was approximately $1.8 million. This liability was frozen at the time of the acquisition.

11. Redeemable Stock

Common Stock On May 31, 2000, we consummated a recapitalization pursuant to an agreement dated March 31, 2000 ("Recapitalization") among us, our then existing stockholders and an affiliate of J. P. Morgan Partners, LLC, whereby J. P. Morgan Partners, LLC acquired majority control of our common stock. Prior to the Recapitalization, we sold 50,611 shares of Class C nonvoting common stock to employees. As consideration, we received cash of approximately $2.5 million and secured promissory notes for approximately $2.6 million. We redeemed 1,100 of these shares prior to the Recapitalization. An additional 17,967 shares were redeemed in connection with the Recapitalization, and the remaining 31,544 shares were exchanged for the same number of common shares.

As part of the Recapitalization, we entered into employment agreements with our executive officers serving at that time: Richard P. Durham, Jack E. Knott II, Scott K. Sorensen and Ronald G. Moffitt. The employment agreements established repurchase rights and put options for shares held by these executive officers following the Recapitalization. These repurchase rights allow us to repurchase these shares from the employee in the event of termination for any reason. The put options allow the employees to require us to purchase all of the shares held by the employee in the event of resignation for good reason, death, disability or retirement, subject to the restrictive provisions of our credit facilities or any other agreements. The purchase price under the repurchase rights and the put options is the fair market value of the common stock, as determined in good faith by our board of directors.

The $2.6 million of notes receivable we originally received as partial consideration for the shares sold prior to the Recapitalization related to shares purchased by Mr. Durham, Mr. Sorensen and Mr. Moffitt. These secured promissory notes bore interest at 7% per annum. These notes were amended in connection with the Recapitalization and were further amended in connection with certain severance arrangements and other events relating to the transition to a new management team. Pursuant to these amendments, interest ceased to accrue on Mr. Sorensen's note as of December 31, 2000, and interest ceased to accrue on Mr. Durham's note and Mr. Moffitt's note as of February 28, 2001. Interest accrued prior to these dates is payable in three annual installments beginning on May 31, 2006 and the principal is due May 31, 2008.

In connection with the Recapitalization in May 2000, we sold an aggregate of 32,750 shares of additional restricted common stock to Messrs. Durham, Knott, Sorensen and Moffitt for $483.13 per share, the estimated fair market value. We received, as consideration, notes receivable totaling $15.8 million. Under the May 2000 restricted stock purchase agreements related to the restricted common stock, we have repurchase rights, which allow us to repurchase unvested shares from these individuals, if the individuals cease to be employees for any reason. The repurchase rights lapsed with

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respect to one-sixth of these shares on January 1, 2001. The repurchase rights lapsed with respect to an additional one-sixth of these shares in January 2002 based on the financial results for the year ended December 31, 2001. Vesting for the remainder of the shares is reviewed at the end of each calendar quarter as follows: (a) vesting in full if 100% or more of the applicable target market value of equity is achieved as of the end of the applicable calendar quarter and (b) partial vesting if more than 90% of the applicable target market of equity is achieved as of the end of the applicable calendar quarter. If the applicable targets are below 90% each year, vesting will automatically occur in full on December 31, 2009. The repurchase rights also terminate in the event of certain acceleration events as defined in the agreement. The repurchase price per share is the original price paid by the employee plus interest compounded annually at 7% commencing on the 181st day after the date of termination of the employee through the date on which the shares are actually repurchased. The foregoing repurchase rights with respect to the restricted stock apply only to unvested restricted shares. As discussed above, however, our employment agreements with Messrs. Durham, Knott, Sorensen and Moffitt established additional repurchase rights and put options applicable to all other shares held by these individuals.

The $15.8 million of secured promissory notes received as consideration for the 32,750 shares of restricted common stock bore interest at 7% per annum. These notes were also modified in connection with the severance arrangements and other events relating to the transition to a new management team. These modifications are described below.

On December 27, 2000, we entered into a severance agreement with Mr. Sorensen. Under the agreement, we cancelled approximately $133,000 of accrued interest on a note receivable. We repurchased 6,211 shares of restricted stock for $483.13 per share and offset the purchase price against $3.0 million of note principal. In addition, we agreed on January 2, 2001, to repurchase an additional 539 shares of restricted stock for $483.13 per share and offset the purchase price against $260,000 of note principal. The Company's repurchase rights were changed on the remaining 7,423 shares of common stock owned by Mr. Sorensen, whereby the Company agreed not to repurchase the shares until February 28, 2003 at a repurchase price of the greater of the fair market value or the balance on the note receivable. Interest ceased to accrue on the remaining $787,000 balance of the note related to Mr. Sorensen's purchase of stock in 1999. Further, the put option was cancelled.

On January 22, 2001, we entered into a severance agreement with Mr. Moffitt. Under this agreement, we cancelled approximately $85,000 of accrued interest on a note receivable. We repurchased 3,125 shares of restricted stock for $483.13 per share and offset the purchase price against $1.5 million of note principal. We further agreed to cease charging interest on the remaining $302,000 principal balance of the note receivable related to 625 shares and to cease charging interest on the $262,000 principal balance related to Mr. Moffitt's purchase of stock in 1999. In addition, the Company's repurchase rights and Mr. Moffitt's put option were changed on the remaining 3,457 shares of common stock held by him. We agreed not to repurchase and Mr. Moffitt agreed not to exercise the put option on the shares until February 28, 2003. The repurchase price and the put option price were changed to be the greater of the fair value of the stock or the balance on the note receivable.

On February 1, 2001, we amended Mr. Durham's promissory notes that were issued in connection with his purchases of stock in 1999 and 2000. Under the amended notes receivable, interest ceased to accrue, effective December 31, 2000, on one note with a principal balance of $1.6 million and another note with a principal balance of $7.0 million. Further, the notes were modified to remove the full recourse provisions and modify the related pledge agreement.

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On April 21, 2001, we amended the terms of Mr. Knott's promissory note issued in connection with his purchase of stock in 2000. Further, Mr. Knott's note was modified to remove the full recourse provisions and modify the related pledge agreement. As a result of these modifications and the modifications to the other officer's notes in the first quarter of 2001, Mr. Knott's purchase of stock for a promissory note in 2000 will be accounted for as stock options, subject to variable accounting. In addition, interest income will not be recorded on this note with a principal balance of $3.7 million.

On June 10, 2002, we entered into a separation agreement with Mr. Durham. As of the date of the separation agreement, Mr. Durham owned 28,289 shares of common stock, 12,083 performance-vested shares, 2,417 time-vested shares, warrants to purchase 1,250.48 shares of common stock and 1,232 shares of preferred stock of Pliant. All of Mr. Durham's time-vested shares and 2,416 of Mr. Durham's performance-vested shares had vested as of the date of the separation agreement. Pursuant to the separation agreement, Mr. Durham agreed to convert one of his outstanding promissory notes issued as payment for a portion of his shares into two promissory notes. The first note (the "Vested Secured Note"), in the principal amount of $2,430,798, relates to Mr. Durham's time-vested shares and the vested portion of his performance-vested shares. The second note (the "Non-Vested Secured Note"), in the principal amount of $4,862,099, related to the 9,667 performance-vested shares which had not vested as of the date of the separation agreement. In addition to these notes, Mr. Durham had an additional outstanding promissory note (the "Additional Note"), with a principal amount of $1,637,974, relating to a portion of the shares of common stock held by Mr. Durham. In accordance with the separation agreement, we repurchased and cancelled Mr. Durham's 9,667 unvested shares in exchange for cancellation of the Non-Vested Secured Note on October 3, 2002.

The separation agreement preserved the put option established by Mr. Durham's employment agreement with respect to his shares. For purposes of this put option, the separation agreement provides that the price per share to be paid by us is $483.13 with respect to common stock, $483.13 less any exercise price with respect to warrants, and the liquidation preference with respect to preferred stock. On July 9, 2002, Mr. Durham exercised his put option with respect to 28,289 shares of common stock, 1,232 shares of preferred stock and warrants to purchase 1,250.48 shares of common stock. Mr. Durham's put option is subject to any financing or other restrictive covenants to which we are subject at the time of the proposed repurchase. Restrictive covenants under our credit facilities limit the number of shares we can currently repurchase from Mr. Durham. On October 3, 2002, as permitted by the covenants contained in our credit facilities, we purchased 8,204 shares from Mr. Durham for a purchase price of $3,963,599 less the outstanding amount of the Additional Note, which was cancelled. In December 2002 we purchased an additional 1,885 shares of common stock from Mr. Durham for an aggregate purchase price of approximately $910,700. As of December 31, 2004, our total remaining purchase obligation to Mr. Durham was approximately $10,623,097, excluding accrued preferred dividends. We were limited to a maximum purchase from Mr. Durham of $5,000,000 of shares in 2003, which purchase may only be made if we meet certain leverage ratios.

As of December 31, 2004 and 2003, there were a total of 29,073 outstanding common shares subject to put options as described above, of which 12,765 shares were acquired by the employees for cash from 1997 through 1999. As a result of the put options, the carrying value of all shares subject to put options will be adjusted to fair value at each reporting period with a corresponding offset to shareholders' equity for amounts related to the 12,765 shares and compensation expense for amounts related to the remaining shares until the notes receivable are paid in full.

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Preferred Stock We are authorized to issue up to 200,000 shares of preferred stock. As of December 31, 2003, 140,973 shares were issued and designated as Series A Cumulative Exchangeable Redeemable Preferred Stock (the "Series A Preferred Stock"). In connection with the Recapitalization, we sold 100,000 shares of the Series A Preferred Stock and detachable warrants to purchase 43,242 shares of common stock for net consideration of $98.5 million, net of issuance costs of $1.5 million. We allocated approximately $80.0 million to the Series A Preferred Stock and $18.5 million to the warrants based on the relative fair values of the instruments. In connection with the Uniplast acquisition we issued 30,983 shares of the Series A Preferred Stock (including 1,983 shares to employees) and detachable warrants to purchase shares of common stock for a consideration of $31.0 million, net of issue costs. We allocated $18.6 million to the Series A Preferred Stock, and $12.4 million to the warrants based on the relative fair values of the instruments. The common stock warrants have an exercise price of $0.01 per share and expire on May 31, 2011. In March 2003 we issued 10,000 shares of the Series A Preferred Stock and detachable warrants to purchase 43,962 shares of common stock. We allocated $9.5 million to the Series A Preferred Stock and $0.5 million to the warrants based on the relative fair values of the instrument. Direct issuance costs of $0.5 million were netted against the proceeds received.

Dividends on the Series A Preferred Stock accrue at an annual rate of 14%. We have the option to pay dividends in cash or to have the dividends accrue and compound quarterly. After May 31, 2005, however, the annual dividend rate increases to 16% unless we pay dividends in cash. The annual dividend rate also increases to 16% if we fail to comply with certain of our obligations or upon certain events of bankruptcy. The shares of Series A Preferred Stock are non-voting.

The Series A Preferred Stock is our most senior class of capital stock. We may, at our option, exchange the Series A Preferred Stock for 14% senior subordinated exchange notes so long as such exchange and the associated debt incurrence is permitted by our existing debt instruments. We must redeem the Series A Preferred Stock at a price equal to its liquidation preference of $1,000 per share, plus accumulated dividends, on May 31, 2011. On or after May 31, 2003, we may redeem the Series A Preferred Stock at our option, in whole or in part, at a redemption price equal to the sum of the liquidation preference plus accrued and unpaid dividends multiplied by the following percentages: 107% if redeemed prior to May 31, 2004; 103% if redeemed on or after May 31, 2004 and prior to May 31, 2005; and 100% if redeemed at any time on or after May 31, 2005.

As a result of the mandatory redemption features, as of December 31, 2004, the carrying value of the Series A Preferred Stock is net of $27.1 million unamortized discount due to detachable warrants to purchase common stock. This unamortized discount is being accreted towards the $141.0 million redemption value at May 31, 2011. In addition, the Series A Preferred Stock balance as of December 31, 2004 includes $109.6 million for accrued dividends.

On September 24, 2004, we adopted a 2004 Restricted Stock Incentive Plan, pursuant to which we sold to our President and Chief Executive Officer and selected additional officers of the Company, 704 shares of a total of 720 shares of a newly-created, non-voting Series B Redeemable Preferred Stock (the "Series B Preferred Stock") for a cash purchase price of $162 per share. These shares of Series B Preferred Stock were issued in private transactions with officers of the Company and therefore were exempt from the registration requirements of the Securities Act of 1933. On December 22, 2004, the remaining 16 authorized shares of Series B Preferred Stock were issued to an officer for a cash purchase price of $162 per share.

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On September 8, 2003, we entered into a separation agreement with Jack E. Knott. As of the date of the separation agreement, Mr. Knott owned 232 shares of our common stock, 6,458 performance-vesting shares (of which 1,291 had vested), 1,292 time-vested shares, options to purchase 8,902 shares of our common stock and 229 shares of our preferred stock. We cancelled 5,167 unvested performance vesting shares owned by Mr. Knott against a note receivable from Mr. Knott for $2.5 million. Pursuant to the terms of the severance agreement, and in addition to the benefits payable to Mr. Knott following a termination without cause under the terms of his employment agreement with us, we agreed: to extend the termination date of his right to exercise his vested options to acquire 8,902 shares of common stock until August 22, 2005; not to exercise our rights to redeem the common stock, vested performance-vesting shares, time-vested shares and preferred stock owned by him until the earlier of a transaction consisting of a sale of us or August 22, 2005; and to pay him a cash payment of $50,000.

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12. Stock Option Plans

Pursuant to the Recapitalization, we adopted a 2000 stock incentive plan, which, as amended, allows us to grant to employees nonqualified options to purchase up to 65,600 shares of common stock. The option price must be no less than fair market value on the date of grant. Unvested options are forfeited upon the employee's termination of employment. Vested options are forfeited, if not exercised 90 days after the employee's termination of employment. The plan is administered by the board of directors who determines the quantity, terms and conditions of an award, including any vesting conditions. The plan expires on either May 31, 2010 or a date which the board of directors, in its sole discretion, determines that the plan will terminate.

In August 2002, we adopted our 2002 Stock Incentive Plan. The 2002 plan authorizes grants of incentive stock options, nonqualified stock options and stock bonuses, as well as the sale of shares of common stock, to our employees, officers, directors and consultants of Pliant or any of its subsidiaries. A total of 4,793 shares are authorized for issuance under the 2002 plan. As of December 31, 2004, no options or shares had been granted or sold under the 2002 plan.

A summary of stock option activity under the 2000 plan is as follows:

		Option Share		Weighted Average Exercise Price
Outstanding at December 31, 2001		34,837		$	385.22
	Granted	20,425			483.13
	Exercised	—			—
	Forfeited or cancelled	(3,920	)		483.13

Outstanding at December 31, 2002		51,342			416.70
	Granted	250			483.13
	Exercised	—			—
	Forfeited or cancelled	(6,580	)		483.13

Outstanding at December 31, 2003		45,012			407.25
	Granted	3,850			483.13
	Exercised	—			—
	Forfeited or cancelled	(17,394	)		483.13

Outstanding at December 31, 2004		31,468			396.74
Exercisable at December 31, 2004		13,277			226.25

The weighted average remaining contractual life of the options is approximately five years at December 31, 2004. The options granted prior to January 1, 2001 pursuant to the 2000 plan, as amended, provide for vesting as follows: (1) one-sixth are "time-vested" options or shares, which vested on January 1, 2001, so long as the recipient was still our employee on such date, and (2) the remainder are "performance-vested" options or shares, which vest in increments upon the achievement of performance targets as follows: (a) vesting in full, if 100% or more of the applicable performance target is achieved as of the end of any calendar quarter during the option term and (b) partial vesting if more than 90% of the applicable performance target is achieved as of the end of any calendar quarter during the option term. Moreover, all performance-vested options or shares not previously vested in accordance with the preceding sentence will vest automatically in full on December 31, 2009 so long as the recipient is still our employee on such date. Options granted pursuant to the 2000 plan subsequent to January 1, 2001 vest similarly, except that all of the options are "performance-vested"

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options, which vest in increments upon the achievement of performance targets. As of December 31, 2004, 8,902 options are exercisable at $100 per share and 4,375 are exercisable at $483.13 per share.

13. Commitments and Contingencies

Environmental Contingencies Our operations are subject to extensive environmental laws and regulations concerning emissions to the air, discharges to surface and subsurface waters, and the generation, handling, storage, transportation, treatment, and disposal of waste materials, as adopted by various governmental authorities in the jurisdictions in which we operate. We make every reasonable effort to remain in full compliance with existing governmental laws and regulations concerning the environment.

Royalty Agreements We have entered into royalty agreements (the "Agreements") for the right to use certain patents in the production of our Winwrap stretch film. The Agreements require us to pay the patent holder a fee of $.05 for each pound of Winwrap produced and $.10 per pound for each pound of coreless Winwrap produced. The Agreements terminate upon the expiration of the related patents in 2009. During the years ended December 31, 2004, 2003 and 2002, we paid and expensed royalties of $1.6 million, $2.0 million, and $1.5 million, respectively, under the Agreements.

Litigation On June 14, 2004, we settled the complaint filed against us by S.C. Johnson & Sons, Inc. and S.C. Johnson Home Storage filed in the U.S. District Court for the District of Michigan, Northern Division (Case No. 01-CV-10343-BC) for $6.0 million plus legal fees which was within management's estimated costs of $7.2 million accrued in the fourth quarter 2003.

On February 26, 2003, former employees of our Fort Edward, NY manufacturing facility, which we acquired as part of the Decora acquisition, named us as defendants in a complaint filed in the Supreme court of the State of New York, County of Washington (Index No. 4417E). We received service of this complaint on April 2, 2003, and successfully removed the case to the United States District Court for the Northern District of New York (Case No. 1:03cv00533). The complaint alleges claims against us for conspiracy to defraud and breach of contract arising out of our court-approved purchase of the assets of Decora Industries, Inc. and Decora, Incorporated. Plaintiffs' complaint seeks compensatory and punitive damages and a declaratory judgment nullifying severance agreements for lack of consideration and economic duress. On December 15, 2004, the case was dismissed in response to our motions to dismiss. On January 13, 2005, the Plaintiff appealed the dismissal of the case to the United States Court of Appeals for the Second District. We intend to resist the plaintiffs' claims vigorously. We do not believe this proceeding will have a material adverse affect on our financial condition or results of operations.

14. Operating Segments

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During the fourth quarter of 2004, we reorganized our operations under four operating segments; our Specialty Products Group, which manufactures personal care, medical and agricultural films in it's Specialty Films division and printed rollstock, bags and sheets used to package food and consumer goods in the Printed Products division; our Industrial Films segment which manufactures stretch film used to bundle, unitize and protect palletized loads during shipping and storage and PVC films used by supermarkets, delicatessens and restaurants to wrap meat, cheese and produce; our Engineered Films segment which manufactures film for sale to converters of flexible packaging; and our Performance Films segment which manufactures a variety of barrier and custom film for smaller niche flexible packaging and industrial markets. Segment information in this report with respect to 2003 and 2002 has been restated to reflect this reorganization.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. Sales and transfers between our segments are eliminated in consolidation. We evaluate the performance of our operating segments based on net sales (excluding intercompany sales) and segment profit. The segment profit reflects income from continuing operations adjusted for interest expense, income taxes, depreciation, amortization, restructuring and other costs and other non-cash charges (principally the impairment of goodwill, intangible assets and fixed assets). Our reportable segments are managed separately with separate management teams, because each segment has differing products, customer requirements, technology and marketing strategies.

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Segment profit and segment assets as of and for the years ended December 31, 2004, 2003 and 2002 are presented in the following table (in thousands). Certain reclassifications have been made to the prior year amounts to be consistent with the 2004 presentation.

			Specialty Products Group		Industrial Films			Engineered Films		Performance Films		Corporate / Other			Total
2004
	Net sales to customers		$	390,733	$	254,104		$	218,963	$	98,148	$	6,732		$	968,680
	Intersegment sales			14,030		7,170			6,146		1,936		(29,282	)		—

		Total net sales		404,763		261,274			225,109		100,084		(22,550	)		968,680
	Depreciation and amortization			18,932		5,589			7,090		3,447		6,352			41,410
	Interest expense			4,467		29			646		13		140,523			145,678
	Segment profit (loss)			46,972		26,245			32,228		19,828		(30,645	)		94,628
	Segment total assets			375,033		105,543			140,799		68,190		87,527			777,092
	Capital expenditures			10,452		8,113			2,011		1,140		2,374			24,090
2003
	Net sales to customers		$	367,707	$	219,617		$	196,066	$	105,233	$	5,856		$	894,479
	Intersegment sales			16,974		1,792			5,043		475		(24,284	)		—

		Total net sales		384,681		221,409			201,109		105,708		(18,428	)		894,479
	Depreciation and amortization			21,970		7,316			6,486		3,486		12,482			51,740
	Interest expense			1,974		6			603		18		93,803			96,404
	Segment profit (loss)			48,981		27,182			34,054		24,049		(43,030	)		91,236
	Segment total assets			376,686		94,633			140,206		68,314		106,947			786,786
	Capital expenditures			6,254		4,213			1,746		3,821		1,005			17,039
2002
	Net sales to customers		$	346,635	$	191,378		$	205,352	$	98,625	$	8,917		$	850,907
	Intersegment sales			11,781		7,136			4,898		1,719		(25,534	)		—

		Total net sales		358,416		198,514			210,250		100,344		(16,617	)		850,907
	Depreciation and amortization			19,620		5,326			6,105		3,461		11,206			45,718
	Interest expense			1,669		(100	)		534		19		73,142			75,264
	Segment profit (loss)			55,220		30,526			38,159		23,171		(28,227	)		118,849
	Segment total assets			408,652		95,130			148,134		72,481		128,806			853,203
	Capital expenditures			22,379		9,912			8,305		2,423		6,132			49,151

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A reconciliation of the totals reported for the operating segments to the totals reported in the consolidated financial statements is as follows (in thousands):

			2004			2003			2002
Profit or Loss
	Total segment profit		$	94,628		$	91,236		$	118,849
	Depreciation, amortization and impairments			(41,410	)		(51,739	)		(45,718	)
Impairment of Goodwill and Intangible assets				—			(18,255	)		(8,600	)
Restructuring and other costs				(2,108	)		(12,607	)		(30,066	)
	Interest expense			(145,678	)		(96,404	)		(75,264	)
	Other expenses and adjustments for non-cash charges and certain adjustments defined by our credit agreement			—			—			(1,167	)

		Loss from continuing operations before income taxes	$	(94,568	)	$	(87,769	)	$	(41,966	)

Assets
	Total assets for reportable segments		$	689,565		$	679,839		$	724,397
	Assets of discontinued operations			—			20,708			27,625
	Other unallocated assets			87,527			86,239			101,181

		Total consolidated assets	$	777,092		$	786,786		$	853,203

There were no sales to a single customer in 2004, 2003 or 2002 that was more than 10% of consolidated net sales.

Net sales and long-lived assets of our US and foreign operations are as follows:

			2004		2003		2002
Net Sales
	United States		$	779,966	$	724,048	$	695,435
	Foreign countries(1)			188,714		170,431		155,473

		Total	$	968,680	$	894,479	$	850,908

Long-lived assets
	United States			434,645		452,407
	Foreign countries			61,813		64,427

		Total	$	496,458	$	516,834

Total Assets
	United States			655,885		671,776
	Foreign countries			121,207		115,010

		Total	$	777,092	$	786,786

(1): Foreign countries include Australia, Canada, Germany and Mexico, none of which individually represents 10% of consolidated net sales or long-lived assets.

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15. Warrants Outstanding

The following warrants were issued and outstanding as of December 31:

		2004	2003
Issued with the senior subordinated notes		18,532	18,532
Issued in connection with recapitalization transaction		43,242	43,242
Issued in connection with Uniplast acquisition		31,003	31,003
Issued in connection with the March 2003 Preferred Stock issuance		43,962	43,962

	Total outstanding	136,739	136,739

As of December 31, 2004, 136,739 warrants were exercisable at an exercise price of $0.01 per share. The Company has reserved up to 136,739 shares of common stock for issuance upon the exercise of issued and outstanding warrants.

16. Estimated Fair Value of Financial Instruments

The estimated fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. In the case of cash and cash equivalents, accounts receivable and accounts payable, the carrying amount is considered a reasonable estimate of fair value. The fair value of fixed debt in 2004 and 2003 was obtained from market quotes. Fair value estimates are made at a specific point in time. Because no market exists for a significant portion of our financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments, interest rate levels, and other factors. These estimates are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined or relied on with any degree of certainty. Changes in assumptions could significantly affect the estimates. See Note 6 for interest rate derivative information.

Below is a summary of our financial instruments' carrying amounts and estimated fair values as of December 31, (in thousands):

			2004				2003
			Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
	Cash and cash equivalents		$	5,580	$	5,580	$	3,308	$	3,308
	Accounts receivable			117,087		117,087		95,606		95,606

		Total financial assets	$	122,667	$	122,667	$	98,914	$	98,914

Financial liabilities:
	Floating rate debt		$	24,000	$	24,000	$	219,575	$	219,575
	Fixed rate debt			818,348		865,583		564,082		562,800
	Accounts payable			96,282		96,282		89,800		89,800

		Total financial liabilities	$	938,630	$	985,865	$	873,457	$	872,175

F-41

17. Related-Party Transactions

J.P. Morgan Partner and Affiliates JPMorgan Chase Bank is the syndication agent, and its affiliate, J.P. Morgan Chase & Co., is a lender under our credit facilities. Both JPMorgan Chase Bank and J.P. Morgan Chase & Co. receive customary fees under the credit facilities for acting in such capacities including approximately $1.2 million in 2002 and $0.9 million in 2003 and $3.4 million in 2004. JPMorgan Chase Bank was also a lender under our prior credit facility, and as a result, received a portion of the proceeds from the financing for the Recapitalization and related transactions. Chase Securities Inc. was one of the initial purchasers in the offering of the $220.0 million aggregate principal amount of 13% senior subordinated notes due 2010, and was also the dealer manager for the debt tender offer and consent solicitation relating to our 9¹/8% senior subordinated notes due 2007 and received customary fees for acting in such capacities. Each of JPMorgan Chase Bank, J.P. Morgan Chase & Co. and Chase Securities Inc. are affiliates of Southwest Industrial Films, LLC, which owns approximately 55% of our outstanding common stock and currently has the right under the stockholders' agreement to appoint four of our directors, and of Flexible Films, LLC, which, together with affiliates, owns approximately 59% of our Preferred Stock, subject to certain preemptive rights with respect to 10,000 shares of Preferred Stock issued on March 25, 2003.

18. Accumulated Other Comprehensive Income/(Loss)

The components of accumulated other comprehensive income/(loss) as of December 31, were as follows (in thousands):

	2004			2003
Minimum pension liability, net of taxes of $575 and $575	$	(5,352	)	$	(1,464	)
Fair value change in interest rate derivatives classified as cash flow hedges, net of taxes of $0 and $1,420		—			(2,220	)
Foreign currency translation adjustments		(6,491	)		(8,237	)

Accumulated other comprehensive income/(loss)	$	(11,843	)	$	(11,921	)

Due to the February 2004 termination of the credit facilities that existed at December 31, 2003, the balance in the other comprehensive income related to interest rate derivatives of $2.2 million ($3.6 million pre-tax) was charged to interest expense in the first quarter of 2004.

19. Condensed Consolidating Financial Statements

The following condensed consolidating financial statements present, in separate columns, financial information for (i) Pliant Corporation (on a parent only basis) with its investment in its subsidiaries recorded under the equity method, (ii) guarantor subsidiaries (as specified in the Indenture dated May 31, 2000 (the "2000 Indenture") relating to Pliant Corporation's $220 million senior subordinated notes due 2010 (the "2000 Notes") and the Indenture, dated April 10, 2002 (the "2002 Indenture" and, together with the 2000 Indenture, the "Indentures"), relating to Pliant's $100 million senior subordinated notes due 2010 (the "2002 Notes" and, together with the 2000 Notes, the "Notes") on a combined basis, with any investments in non-guarantor subsidiaries specified in the Indentures recorded under the equity method, (iii) direct and indirect non-guarantor subsidiaries on a combined basis, (iv) the eliminations necessary to arrive at the information for Pliant Corporation and its subsidiaries on a consolidated basis, and (v) Pliant Corporation on a consolidated basis, in each case as of December 31, 2004 and 2003 and for the years ended December 31, 2004, 2003 and 2002. The Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary and each guarantor subsidiary is 100% owned, directly or indirectly, by Pliant Corporation within the meaning of Rule 3-10(h)(1) of Regulation S-X. There are no contractual restrictions limiting transfers of cash from guarantor and non-guarantor subsidiaries to Pliant Corporation except from our Alliant joint venture. The condensed consolidating financial statements are presented herein, rather than separate financial statements for each of the guarantor subsidiaries, because management believes that separate financial statements relating to the guarantor subsidiaries are not material to investors.

F-42

Condensed Consolidating Balance Sheet
As of December 31, 2004 (In Thousands)

			Pliant Corporation Parent Only			Combined Guarantors			Combined Non-Guarantors			Eliminations			Consolidated Pliant Corporation
ASSETS
Current assets:
	Cash and cash equivalents		$	—		$	704		$	4,876		$	—		$	5,580
	Receivables			95,439			7,861			22,095			—			125,395
	Inventories			74,672			7,411			12,217			—			94,300
	Prepaid expenses and other			2,764			370			898			—			4,032
	Income taxes receivable			138			223			—			—			361
	Deferred income taxes			12,741			—			(780	)		—			11,961

		Total current assets		185,754			16,569			39,306			—			241,629
Plant and equipment, net				240,599			17,127			39,419			—			297,145
Goodwill				167,583			13,331			1,323			—			182,237
Intangible assets, net				5,328			11,692			56			—			17,076
Investment in subsidiaries				(28,793	)		—			—			28,793			—
Other assets				35,588			—			3,417			—			39,005

	Total assets		$	606,059		$	58,719		$	83,521		$	28,793		$	777,092

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
	Trade accounts payable		$	76,515		$	5,848		$	13,919		$	—		$	96,282
	Accrued liabilities			56,639			3,554			4,645			—			64,838
	Current portion of long-term debt			1,994			—			—			—			1,994
	Due to (from) affiliates			(133,109	)		75,190			57,919			—			—

		Total current liabilities		2,039			84,592			76,483			—			163,114
Long-term debt, net of current portion				840,354			—			—			—			840,354
Other liabilities				23,608			—			2,846			—			26,454
Deferred income taxes				24,354			3,938			3,141			—			31,433
Shares subject to mandatory redemption				229,910			—			—			—			229,910

		Total liabilities		1,120,265			88,530			82,470			—			1,291,265

Minority interest				—			—			33			—			33
Redeemable stock:
	Preferred stock			117			—			—			—			117
	Common stock			6,645			—			—			—			6,645

		Total redeemable stock		6,762			—			—			—			6,762

Stockholders' (deficit):
	Common stock			103,376			14,020			29,302			(43,322	)		103,376
	Warrants to purchase common stock			39,133			—			—			—			39,133
	Retained earnings (deficit)			(650,974	)		(45,237	)		(22,767	)		68,004			(650,974	)
	Stockholders' notes receivable			(660	)		—			—			—			(660	)
	Accumulated other comprehensive loss			(11,843	)		1,406			(5,517	)		4,111			(11,843	)

Total stockholders' (deficit)				(520,968	)		(29,811	)		1,018			28,793			(520,968	)

	Total liabilities and stockholders' (deficit)		$	606,059		$	58,719		$	83,521		$	28,793		$	777,092

F-43

Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2004 (In Thousands)

		Pliant Corporation Parent Only			Combined Guarantors			Combined Non-Guarantors			Eliminations			Consolidated Pliant Corporation
Net sales		$	796,794		$	75,931		$	125,335		$	(29,380	)	$	968,680
Cost of sales			671,297			66,431			118,471			(29,380	)		826,819

	Gross profit		125,497			9,500			6,864			—			141,861
Total operating expenses			76,869			4,026			9,119			—			90,014

	Operating income (loss)		48,628			5,474			(2,255	)		—			51,847
Interest expense			(140,566	)		(646	)		(4,466	)		—			(145,678	)
Equity in earnings of subsidiaries			(30,004	)		—			—			30,004			—
Other income (expense), net			8,139			(3,278	)		(5,598	)		—			(737	)

	Income (loss) from continuing operations before income taxes		(113,803	)		1,550			(12,319	)		30,004			(94,568	)
Income tax (benefit) expense			119			867			603			—			1,589

Loss from continuing operations			(113,922	)		683			(12,922	)		30,004			(96,157	)
Loss from discontinued operations			—			(17,765	)		—			—			(17,765	)

Net income (loss)		$	(113,922	)	$	(17,082	)	$	(12,922	)	$	30,004		$	(113,922	)

F-44

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2004 (In Thousands)

		Pliant Corporation Parent Only			Combined Guarantors			Combined Non-Guarantors			Eliminations		Consolidated Pliant Corporation
Cash flows from continuing operating activities:		$	(35,311	)	$	3,305		$	30,562		$	—	$	(1,444	)

Cash flows from continuing investing activities:
	Capital expenditures for plant and equipment		(17,086	)		(517	)		(6,487	)		—		(24,090	)
	Proceeds from sale of assets		6,450			—			—			—		6,450

	Net cash used in investing activities		(10,636	)		(517	)		(6,487	)		—		(17,640	)

Cash flows from continuing financing activities:
	Payment of capitalized fees		(9,864	)		—			—			—		(9,864	)
	Net proceeds from issuance of preferred stock		117			—			—			—		117
	Proceeds from issuance of senior discount notes		225,299			—			—			—		225,299
	Borrowings/(payments) on long-term debt		(165,922	)		—			(24,163	)		—		(190,085	)

	Net cash provided by (used) in continuing financing activities		49,630			—			(24,163	)		—		25,467

Cash used in discontinued operations			(3,952	)		(892	)		—			—		(4,843	)

Effect of exchange rate changes on cash and cash equivalents			269			(2,384	)		2,848			—		733

Net (decrease)/increase in cash and cash equivalents			—			(488	)		2,760			—		2,272
Cash and cash equivalents at beginning of the year			—			1,192			2,116			—		3,308

Cash and cash equivalents at end of the year		$	—		$	704		$	4,876		$	—	$	5,580

F-45

Condensed Consolidating Balance Sheet
As of December 31, 2003 (In Thousands)

			Pliant Corporation Parent Only			Combined Guarantors			Combined Non-Guarantors			Eliminations			Consolidated Pliant Corporation
ASSETS
Current assets:
	Cash and cash equivalents		$	—		$	552		$	2,756		$	—		$	3,308
	Receivables			79,685			6,259			21,798			—			107,742
	Inventories			63,954			6,155			14,016			—			84,125
	Prepaid expenses and other			2,626			406			777			—			3,809
	Income taxes receivable			167			525			744			—			1,436
	Deferred income taxes			10,934			—			(1,517	)		—			9,417
	Discontinued current assets			—			15,294			—			—			15,294

		Total current assets		157,366			29,191			38,574			—			225,131
Plant and equipment, net				253,601			11,999			49,820			—			315,420
Goodwill				182,162			—			—			—			182,162
Intangible assets, net				19,252			—			—			—			19,252
Investment in subsidiaries				(916	)		—			—			916			—
Other assets				36,125			—			4,047			—			40,172
Discontinued noncurrent assets				500			4,149			—			—			4,649

	Total assets		$	648,090		$	45,339		$	92,441		$	916		$	786,786

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
	Trade accounts payable		$	66,839		$	4,701		$	18,260		$	—		$	89,800
	Accrued liabilities			53,714			3,139			6,793			—			63,646
	Current portion of long-term debt			1,033			—			—			—			1,033
	Due to (from) affiliates			(72,692	)		42,738			29,954			—

		Total current liabilities		48,894			50,578			55,007			—			154,479
Long-term debt, net of current portion				758,461			—			24,163			—			782,624
Other liabilities				24,952			—			2,541			—			27,493
Deferred income taxes				21,676			2,502			3,614			—			27,792

		Total liabilities		853,983			53,080			85,325			—			992,388

Minority interest				—			—			291			—			291
Redeemable stock:
	Preferred stock			188,223			—			—			—			188,223
	Common stock			13,008			—			—			—			13,008

		Total redeemable stock		201,231			—			—			—			201,231

Stockholders' (deficit):
	Common stock			103,376			14,020			29,302			(43,322	)		103,376
	Warrants to purchase common stock			39,133			—			—			—			39,133
	Retained earnings (deficit)			(537,052	)		(21,750	)		(16,250	)		38,000			(537,052	)
	Stockholders' notes receivable			(660	)		—			—			—			(660	)
	Accumulated other comprehensive loss			(11,921	)		(11	)		(6,227	)		6,238			(11,921	)

Total stockholders' (deficit)				(407,124	)		(7,741	)		6,825			916			(407,124	)

	Total liabilities and stockholders' (deficit)		$	648,090		$	45,339		$	92,441		$	916		$	786,786

F-46

Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2003 (In Thousands)

		Pliant Corporation Parent Only			Combined Guarantors			Combined Non-Guarantors			Eliminations			Consolidated Pliant Corporation
Net sales		$	729,528		$	75,767		$	113,839		$	(24,655	)	$	894,479
Cost of sales			609,085			67,677			106,038			(24,655	)		758,145

	Gross profit		120,443			8,090			7,801			—			136,334
Total operating expenses			94,853			10,907			22,411			—			128,171

	Operating income (loss)		25,590			(2,817	)		(14,610	)		—			8,163
Interest expense			(93,821	)		(603	)		(1,980	)		—			(96,404	)
Equity in earnings of subsidiaries			(55,057	)		—			—			55,057			—
Other income (expense), net			7,238			(5,214	)		(1,552	)		—			472

	Income (loss) before income taxes		(116,050	)		(8,634	)		(18,142	)		55,057			(87,769	)
Income tax (benefit) expense			(1,953	)		5,159			1,984			—			5,190

Loss from continuing operations			(114,097	)		(13,793	)		(20,126	)		55,057			(92,959	)
Loss from discontinued operations			156			(21,499	)		—			—			(21,343	)

Net income (loss)		$	(113,941	)	$	(35,292	)	$	(20,126	)	$	55,057		$	(114,302	)

F-47

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2003 (In Thousands)

		Pliant Corporation Parent Only			Combined Guarantors			Combined Non-Guarantors			Eliminations		Consolidated Pliant Corporation
Cash flows from continuing operating activities:		$	(14,405	)	$	(9,262	)	$	9,447		$	—	$	(14,220	)

Cash flows from continuing investing activities:
	Capital expenditures for plant and equipment		(10,288	)		(1,335	)		(5,416	)		—		(17,039	)

	Net cash used in continuing investing activities		(10,288	)		(1,335	)		(5,416	)		—		(17,039	)

Cash flows from financing activities:
	Payment of capitalized fees		(10,801	)		—			—			—		(10,801	)
	Net proceeds from issuance of common and preferred stock		9,532			—			—			—		9,532
	Payment/receipt of dividend		2,499			—			(2,499	)		—		—
	Borrowings/(payments) on long-term debt		47,905			—			(629	)		—		47,276

	Net cash provided by (used) in continuing financing activities		49,135			—			(3,128	)		—		46,007

Cash provided by (used) in discontinued operations			(24,485	)		9,724			—			—		(14,761	)

Effect of exchange rate changes on cash and cash equivalents			747			1,382			(443	)		—		1,686

Net (decrease)/increase in cash and cash equivalents			704			509			460			—		1,673
Cash and cash equivalents at beginning of the year			(184	)		163			1,656			—		1,635

Cash and cash equivalents at end of the year		$	520		$	672		$	2,116		$	—	$	3,308

F-48

Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2002 (In Thousands)

		Pliant Corporation Parent Only			Combined Guarantors			Combined Non-Guarantors			Eliminations			Consolidated Pliant Corporation
Net sales		$	695,002		$	75,153		$	107,373		$	(26,620	)	$	850,908
Cost of sales			567,702			63,173			89,421			(26,620	)		693,676

	Gross profit		127,300			11,980			17,952			—			157,232
Total operating expenses			103,830			1,722			20,660			—			126,212

	Operating income		23,470			10,258			(2,708	)		—			31,020
Interest expense			(73,035	)		(535	)		(1,694	)		—			(75,264	)
Equity in earnings of subsidiaries			(5,159	)		—			—			5,159			—
Other income (expense), net			8,277			(5,418	)		(581	)		—			2,278

Income (loss) from continuing operations before income taxes			(46,447	)		4,305			(4,983	)		5,159			(41,966	)
Income tax (benefit) expense			(5,054	)		770			2,822			—			(1,462	)

Income (loss) from continuing operations			(41,393	)		3,535			(7,805	)		5,159			(40,504	)
Loss from discontinued operations			(2,037	)		(889	)		—			—			(2,926	)

Net income (loss)		$	(43,430	)	$	2,646		$	(7,805	)	$	5,159		$	(43,430	)

F-49

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2002 (In Thousands)

		Pliant Corporation Parent Only			Combined Guarantors			Combined Non-Guarantors			Eliminations		Consolidated Pliant Corporation
Cash flows from continuing operating activities:		$	25,813		$	3,761		$	22,845		$	—	$	52,419

Cash flows from continuing investing activities:
	Capital expenditures for plant and equipment		(35,181	)		(5,649	)		(8,321	)		—		(49,151	)
	Acquisition, net of cash acquired		(8,794	)		(14,370	)		—			—		(23,164	)
	Asset transfer		(9,116	)		9,762			(646	)		—		—
	Proceeds from sale of assets		15,033			3,589			(1,500	)		—		17,122

	Net cash used in continuing investing activities		(38,058	)		(6,668	)		(10,467	)		—		(55,193	)

Cash flows from financing activities:
	Payment of capitalized fees		(7,439	)		—			—			—		(7,439	)
	Net proceeds from issuance of common and preferred stock		(3,227	)		—			—			—		(3,227	)
	Borrowings/(payments) on long-term debt		31,266			—			(8,208	)		—		23,058

	Net cash provided by (used in) continuing financing activities		20,600			—			(8,208	)		—		12,392

Cash used in discontinued operations			(15,811	)		6,946			—			—		(8,865	)

Effect of exchange rate changes on cash and cash equivalents			7,272			(5,149	)		(6,059	)		—		(3,936	)

Net (decrease)/increase in cash and cash equivalents			(184	)		(1,110	)		(1,889	)		—		(3,183	)
Cash and cash equivalents at beginning of the year			—			1,934			2,884			—		4,818

Cash and cash equivalents at end of the year		$	(184	)	$	824		$	995		$	—	$	1,635

F-50

20. OTHER INCOME/EXPENSE

Other expense for the year ended December 31, 2004 includes $1.3 million loss on the sale of real property, $0.1 million currency gain, and $0.5 million other less significant items. Other income for the year ended December 31, 2003 includes $1.4 million loss on disposal of real property, $0.2 million currency gain, $0.1 million royalty income, $0.2 million rental income, and $1.4 million other less significant items. Other income for the year ended December 31, 2002 includes a cash settlement with a customer of $0.7 million and $1.6 of other less significant items.

21. SELECTED QUARTERLY INFORMATION—UNAUDITED

Selected quarterly financial information for the years ended December 31, 2004 and 2003 are as follows (in thousands):

	Quarter Ended
	December 31, 2004			September 30, 2004			June 30, 2004			March 31, 2004
Net sales previously reported	$	253,536		$	243,160		$	242,696		$	244,167
Net sales discontinued operations		—			—			(7,511	)		(7,368	)
Net sales restated		253,536			243,160			235,185			236,799
Gross profit previously reported		29,982			36,219			35,551			36,792
Gross profit discontinued operations		—			—			1,776			1,541
Gross profit restated		29,982			36,219			37,327			38,333
Net income/(loss)		(29,638	)		(32,156	)		(21,369	)		(30,759	)

	Quarter Ended
	December 31, 2003			September 30, 2003			June 30, 2003			March 31, 2003
Net sales previously reported	$	223,604		$	238,718		$	226,573		$	240,511
Net sales discontinued operations		(6,266	)		(11,129	)		(8,743	)		(8,789	)
Net sales restated		217,338			227,589			217,830			231,722
Gross profit previously reported		22,472			34,387			36,241			42,797
GE Lease Reclass from SG&A		(1,002	)		(1,002	)		(1,094	)		(936	)
Gross profit discontinued operations		2,828			3,534			(1,017	)		(874	)
Gross profit restated		24,298			36,919			34,130			40,987
Net income/(loss)		(67,957	)		(20,101	)		(18,901	)		(7,343	)

Substantially all the assets of Pliant Solutions, previously reported as a separate operating segment, were sold in the third quarter of 2004 and its operating results reported as discontinued operations. The net loss for the quarter ended December 31, 2003 reflects the impairment of Goodwill and Intangible assets discussed in Note 5, the impairment of fixed assets discussed in Note 4, and the provision for litigation discussed in Note 12. The quarter ended December 31, 2004 includes $4.5 million expense for an error related to accrued vacation not previously recorded. The amount does not affect historical or future cash flows and its effect on operations and financial position is immaterial.

22. SUBSEQUENT EVENT—ALLIANT JOINT VENTURE

On January 5, 2005, we terminated our joint venture with Supreme Plastics Group PLC by purchasing all of the equity interests in the joint venture Supreme Plastics Group PLC owned for $400,000. As of January 5, 2005, Alliant Company LLC became a wholly-owned subsidiary of the Company. On January 5, 2005, Pliant Corporation signed a nonbinding letter of intent to sell the intellectual property, working capital, and equipment assets used in the Alliant operation to an independent third party for a purchase price of $6.3 million, subject to certain adjustments. Although a purchase agreement is being negotiated, there is no assurance if or when this sale will be completed. Any such sale will require the consent of or waivers by the Company's lenders, who may require that the proceeds of that sale be used to repay indebtedness.

F-51

PLIANT CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2004, 2003 and 2002
(In Thousands)

Description	Balance at Beginning of Year		Additions Charged to Profit & Loss		Write-offs			Foreign Currency impact		Balance at End of Year
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
2004	$	4,736	$	1,600	$	(1,878	)	$	31	$	4,489
2003	$	4,627	$	1,667	$	(1,700	)	$	142	$	4,736
2002	$	2,438	$	2,635	$	(549	)	$	103	$	4,627

	Balance at Beginning of Year	Additions Charged To Continuing Operations	Additions Charged To Discontinued Operations	Balance at End of Year
INCOME TAX VALUATION ALLOWANCE
2004	39,693	15,074	6,927	61,694
2003	10,775	20,594	8,324	39,693
2002	1,868	7,766	1,141	10,775

S-1

INDEX TO EXHIBITS

	Exhibit Number
	2.1		Recapitalization Agreement, dated as of March 31, 2000 (the "Recapitalization Agreement"), among Pliant Corporation, Chase Domestic Investments, L.L.C., Richard P. Durham as Representative, and the shareholders of Pliant Corporation signatory thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Pliant Corporation on April 12, 2000).
	2.2		Amendment No. 1, dated as of April 3, 2000, to the Recapitalization Agreement (incorporated by reference to Exhibit 2.2 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	2.3		Amendment No. 2, dated as of May 31, 2000, to the Recapitalization Agreement (incorporated by reference to Exhibit 2.3 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	3.1		Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	3.2		Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.2 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	3.3		Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.3 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	3.4		Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.4 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	3.5		Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.5 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	3.6		Fourth Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation's Current Report on Form 8-K filed on September 30, 2004).
	3.7		Second Amended and Restated Bylaws of Pliant Corporation (incorporated by reference to Exhibit 3.6 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	4.1		Indenture, dated as of May 31, 2000, among Pliant Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	4.2		First Supplemental Indenture, dated as of July 16, 2001, among Pliant Corporation, the New Note Guarantors party thereto, the existing Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.3 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	4.3		Form of 2000 Notes (incorporated by reference to Exhibit B to Exhibit 4.1).
	4.4		Indenture, dated as of April 10, 2002, among Pliant Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.4 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-86532)).

	4.5		Form of 2002 Note (incorporated by reference to Exhibit B to Exhibit 4.4).
	4.6		Indenture, dated as of May 30, 2003, among Pliant Corporation, the Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.6 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.7		Form of Senior Secured Note (incorporated by reference to Exhibit B to Exhibit 4.6) (incorporated by reference to Exhibit 4.6 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.8		Form of Indenture, dated as of February 17, 2004, among Pliant Corporation, the Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.8 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.9		Form of Senior Secured Discount Note (incorporated by reference to (incorporated by reference to Exhibit B to Exhibit 4.8 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.10		Second Priority Security Agreement, dated as of May 30, 2003, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.8 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.11		Form of Security Agreement dated as of February 17, 2004, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.11 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.12		Form of Canadian Security Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the guarantors party thereto, and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.12 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.13		Second Priority Pledge Agreement, dated as of May 30, 2003, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.9 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.14		Form of Pledge Agreement dated as of February 17, 2004, among Pliant Corporation, the subsidiary pledgors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.14 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.15		Form of Canadian Pledge Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the pledgors party thereto, and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.15 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.16		Exchange and Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, the Note Guarantors party thereto, and Chase Securities, Inc. and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.3 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	4.17		Exchange and Registration Rights Agreement, dated as of April 10, 2002, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities, Inc. and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.7 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-86532)).

	4.18		Exchange and Registration Rights Agreement, dated as of May 30, 2003, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities Inc., Deutsche Bank Securities, Inc. and Credit Suisse First Boston LLC, as Initial Purchasers (incorporated by reference to Exhibit 4.12 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	4.19		Form of Exchange and Registration Rights Agreement, dated as of February 17, 2004, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities Inc., Credit Suisse First Boston LLC and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.19 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	4.20		Fourth Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation's Current Report on Form 8-K filed on September 30, 2004).
	10.1		Note Warrant Agreement, dated as of May 31, 2000, among Pliant Corporation and The Bank of New York, as Warrant Agent, relating to the 220,000 Note Warrants (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.2		Stockholders' Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrant holders listed on the signature pages thereto (incorporated by reference to Exhibit 10.2 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.3		Amendment No. 1 and Waiver, dated as of July 16, 2001, to the Stockholder's Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.3 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	10.4		Amendment No. 2, dated as of December 19, 2001, to the Stockholder's Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.4 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
	10.5		Amendment No. 3, dated as of March 25, 2003, to the Stockholder's Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.5 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.6		Amendment No. 4, dated as of June 5, 2003, to the Stockholder's Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.6 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-106432)).
	10.7		Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.3 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).

	10.8		Amendment No. 1, dated as of June 13, 2000, to the Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.4 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.9		Amendment No. 2, dated as of March 25, 2003, to the Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.8 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.10		Securities Purchase Agreement, dated as of May 31, 2000, among Pliant Corporation and each of the purchasers of Pliant Corporation's preferred stock listed on the signature pages thereto (incorporated by reference to Exhibit 10.5 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.11		Amendment No. 1 and Waiver, dated as of July 16, 2001, to the Securities Purchase Agreement dated as of May 31, 2000 among Pliant Corporation, and each of the purchasers of Pliant Corporation's preferred stock listed on the signature pages thereto (incorporated by reference to Exhibit 10.7 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	10.12		Warrant Agreement, dated as of May 31, 2000, among Pliant Corporation and Chase Domestic Investments, L.L.C. (incorporated by reference to Exhibit 10.6 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.13		Amendment No. 1, dated as of July 16, 2001, to the Warrant Agreement dated as of May 31, 2000 among Pliant Corporation and the initial warrantholders listed in Schedule I thereto (incorporated by reference to Exhibit 10.9 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	10.14		Amendment No. 2, dated as of March 25, 2003, to the Warrant Agreement dated as of May 31, 2000 among Pliant Corporation and the initial warrantholders listed in Schedule I thereto (incorporated by reference to Exhibit 10.13 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.15		Securities Purchase Agreement, dated as of July 16, 2001, among Pliant Corporation and the purchasers of Pliant Corporation's preferred stock listed on the schedules thereto (incorporated by reference to Exhibit 10.10 to Pliant Corporation's Registration Statement on Form S-1 (File No. 333-65754)).
	10.16		Securities Purchase Agreement, dated as of March 25, 2003, among Pliant Corporation and the Purchasers named therein (incorporated by reference to Exhibit 10.15 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.17		Securities Purchase Agreement, dated as of March 25, 2003, between Pliant Corporation and J.P. Morgan Partners (BHCA), L.P. (incorporated by reference to Exhibit 10.16 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.18		Form of Purchase Agreement, dated as of February 6, 2004, among Pliant Corporation, J.P. Morgan Securities Inc., Credit Suisse First Boston LLC and Deutsche Bank Securities Inc. (incorporated by reference to Exhibit 10.18 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).

	10.19		Form of Credit Agreement, dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiary borrowers party thereto, the various lenders party thereto, Credit Suisse First Boston, as Administrative Agent and Documentation Agent, Deutsche Bank Trust Company Americas, as Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent (incorporated by reference to Exhibit 10.19 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.20		Form of Consent and Amendment, dated as of March 8, 2004, to the Credit Agreement dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiary borrowers party to the Credit Agreement, the financial institutions party to the Credit Agreement as Lenders, Credit Suisse First Boston, as Administrative Agent and Documentation Agent, Deutsche Bank Trust Company Americas, as Collateral Agent, General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent (incorporated by reference to Exhibit 10.20 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.21		Form of Amended and Restated Intercreditor Agreement, dated as of February 17, 2004, among Deutsche Bank Trust Company Americas, as Credit Agent, Wilmington Trust Company, as Second Priority Noteholder Agent and as 2004 Noteholder Agent, and Pliant Corporation (incorporated by reference to Exhibit 10.21 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.22		Form of Guarantee Agreement, dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiaries guarantors party thereto and Credit Suisse First Boston, as Administrative Agent (incorporated by reference to Exhibit 10.22 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.23		Form of Domestic Security Agreement, dated as of February 17, 2004, among Pliant Corporation, the subsidiary guarantors party thereto and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.23 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.24		Form of Canadian Security Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the guarantors party thereto, and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.24 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.25		Form of Domestic Pledge Agreement, dated as of February 17, 2004, among Pliant Corporation, the subsidiary pledgors party thereto and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.25 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.26		Form of Canadian Pledge Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the pledgors party thereto, and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.26 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.27		Form of Indemnity, Subrogation and Contribution Agreement, dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiary guarantors party thereto and Credit Suisse First Boston, as Administrative Agent (incorporated by reference to Exhibit 10.27 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.28		Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.12 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).

	10.29		Amendment No. 1, dated as of February 1, 2001, to the Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.14 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	10.30		Separation Agreement, dated as of June 10, 2002, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
	10.31		Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.13 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.32		Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.14 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.33		Letter Agreement, dated as of December 27, 2000, terminating the Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.17 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	10.34		Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.15 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.35		Letter Agreement, dated as of January 22, 2001, terminating the Employment Agreement, dated as of May 31, 2000, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.19 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	10.36		Employment Agreement, dated as of March 30, 2001, between Pliant Corporation and Brian E. Johnson (incorporated by reference to Exhibit 10.30 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
	10.37		Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.16 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.38		Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.17 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.39		Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.18 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.40		Stock Redemption Agreement, dated as of December 27, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.23 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
	10.41		Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.19 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.42		Stock Redemption Agreement, dated as of February 1, 2001, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.25 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).

	10.43		Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Richard P. Durham (incorporated by reference to Exhibit 10.20 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.44		Amendment No. 1, dated as of March 1, 2001, to the Pledge Agreement dated as of May 31, 2000, among Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.35 to Post-Effective Amendment No. 2 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.45		Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Jack E. Knott (incorporated by reference to Exhibit 10.21 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.46		Amendment No. 1, dated as of April 1, 2001, to the Pledge Agreement dated as of May 31, 2000, among Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.36 to Post-Effective Amendment No. 2 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.47		Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Scott K. Sorensen (incorporated by reference to Exhibit 10.22 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.48		Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Ronald G. Moffitt (incorporated by reference to Exhibit 10.23 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008) ).
	10.49		1998 Pliant Corporation Stock Option Plan (incorporated by reference to Exhibit 10.10 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 1998).
	10.50		Pliant Corporation Management Incentive Plan for Senior Divisional Management (1999) (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
	10.51		Pliant Corporation 2000 Stock Incentive Plan (as amended and restated through April 17, 2002) (incorporated by reference to Exhibit 10.54 to Pliant Corporation's Annual report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
	10.52		Second Amended and Restated Stock Option Agreement, dated as of May 31, 2000 between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.27 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-42008)).
	10.53		Pliant Corporation Management Incentive Plan (2000) (incorporated by reference to Exhibit 10.2 to Pliant Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
	10.54		Pliant Corporation Management Incentive Plan (2001) (incorporated by reference to Exhibit 10.48 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
	10.55		Pliant Corporation Management Incentive Plan (2002) (incorporated by reference to Exhibit 10.49 to Pliant Corporation's Annual Report on Form 10-K for the year ended December 31, 2001).
	10.56		Pliant Corporation Management Incentive Plan (2003) (incorporated by reference to Exhibit 10.56 to Pliant Corporation's Annual Report on Form 10-K filed on March 26, 2004).
	10.57		Pliant Corporation 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).

	10.58		Consulting Agreement dated as of August 24, 2003, between Pliant corporation and Edward A. Lapekas (incorporated by reference to Exhibit 10.63 to Post-Effective Amendment No. 1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-107843).
	10.59		Separation Agreement, dated as of September 8, 2003, between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.64 to Post-Effective Amendment No. 1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-107843).
	10.60		Separation Agreement, dated as of September 8, 2003, between Pliant Corporation and Elise H. Scroggs (incorporated by reference to Exhibit 10.65 to Post-Effective Amendment No. 1 to Pliant Corporation's Registration Statement on Form S-4 (File No. 333-107843).
	10.61*		Employment Agreement, dated January 1, 2004, between Pliant Corporation and Harold Bevis
	10.62*		Release Agreement, dated December 31, 2004, between Pliant Corporation and Brian Johnson
	10.63*		Letter Agreement, dated January 26, 2005, between Pliant Corporation and James Ide
	10.64*		Severance and Release Agreement, dated as of March 18, 2005, between Pliant Corporation and Lori Roberts
	10.65*		Pliant Corporation 2004 Management Incentive Compensation Plan
	10.66*		Pliant Corporation 2004 MIP Long Term Incentive Plan
	10.67		Pliant Corporation 2004 Restricted Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Current Report on Form 8-K filed on September 30, 2004).
	10.68*		Pliant Corporation 2004 Restricted Stock Incentive Plan Form of Restricted Stock Agreement
	10.69*		Fourth Amendment to the Pliant Corporation Defined Benefit Pension Plan
	10.70*		Buy Out Agreement, dated January 5, 2005, among Pliant Corporation, Pliant Investment, Inc. and Supreme Plastics Group PLC
	10.71*		Assignment of Limited Liability Company Interests, dated January 5, 2005, between Pliant Investment, Inc. and Supreme Plastics Group PLC
	10.72		Agreement for Purchase and Sale of Assets, dated July 12, 2004, among Pliant Corporation, Pliant Solutions Corporation and Kittrich Corporation (incorporated by reference to Exhibit 10.1 to Pliant Corporation's Current Report on Form 8-K filed on October 6, 2004).
	10.73		Form of Amendment to Credit Agreement (incorporated by reference to Exhibit 10.61 to Pliant Corporation's Current Report on Form 8-K filed on December 23, 2004).
	21.1*		Subsidiaries of Pliant Corporation.
	31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
	31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
	32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*: Filed with this report.

QuickLinks

PART I
PART II

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

ITEM 9A. CONTROLS AND PROCEDURES

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11. EXECUTIVE COMPENSATION

Aggregated option exercises in last fiscal year and FY-end option values
Long-Term Incentive Plans—Awards in 2004

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

SIGNATURES
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
PLIANT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2004 and 2003 (Dollars in Thousands, Except per Share Data)
PLIANT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2004, 2003 and 2002 (Dollars in Thousands)
PLIANT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) For the Years Ended December 31, 2004, 2003 and 2002 (In Thousands)
PLIANT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) For the Years Ended December 31, 2004, 2003 and 2002 (In Thousands)
PLIANT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2004, 2003 and 2002 (Dollars in Thousands)
PLIANT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EX-10.61 2 a2154755zex-10_61.txt EXHIBIT 10.61 Exhibit 10.61 EMPLOYMENT AGREEMENT (this "AGREEMENT") dated as of January 1, 2004 (the "AGREEMENT DATE"), between PLIANT CORPORATION, a Utah corporation (the "COMPANY") and HAROLD BEVIS (the "EXECUTIVE"). Each of the Company and its Subsidiaries is engaged in the business (the "BUSINESS") of producing and distributing polymer-based, value-added films and flexible packaging products for food, personal care, medical, agricultural, industrial and other applications. The Executive is, and prior to the Agreement Date has been, an employee and officer of the Company and as such has substantial experience that is valuable to the Business and the Company. The Company desires to employ the Executive, and the Executive desires to accept such employment, on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as set forth below. SECTION 1. EMPLOYMENT. The Company hereby employs the Executive, and the Executive accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Agreement Date and ending on the Termination Date determined pursuant to Section 4(a) (the "EMPLOYMENT PERIOD"). SECTION 2. BASE SALARY AND BENEFITS. (a) During the Employment Period, the Executive's base salary shall be $650,000 per annum (the "BASE SALARY"), which salary shall be payable in such installments as is customary for senior executives of the Company, but not less frequently than monthly. In addition, during the Employment Period, (i) the Executive shall participate in all bonus and incentive plans or arrangements which may be provided by the Company from time to time to its senior executives, with award opportunities commensurate with Executive's position, duties and responsibilities, excluding the Management Incentive Plan, the Pliant 2000 Stock Incentive Plan, the Pliant 2002 Stock Incentive Plan and any other equity based incentive or compensation plans, but including the Pliant 2004 Restricted Stock Incentive Plan; (ii) the Executive shall be entitled to participate in all savings and retirement plans which may be provided by the Company from time to time to its senior executives; (iii) the Executive and the Executive's spouse and children shall be eligible to participate in, and receive all benefits under, welfare and insurance benefit plans which may be provided from time to time by the Company (including, without limitation, medical, prescription, dental, disability, individual life, group life, dependent life, accidental death and travel accident plans) to senior executives of the Company and their spouses and children generally, in accordance with the terms of such plans; (iv) the Executive shall be entitled to fringe benefits which may be provided by the Company from time to time in accordance with the most favorable fringe benefit plans made available to senior executives of the Company, generally; and (v) the Executive shall be entitled to an office of a size and with furnishings and other appointments, and to secretarial and other assistance, which may be provided by the Company from time to time, in each case, in accordance with the most favorable policies applicable to senior executives of the Company generally. The Executive acknowledges that the current office, furnishings, appointments and secretarial and other assistance provided to him by the Company satisfies the requirements set forth in Section 2(a)(v). The Executive shall be entitled to take four weeks of paid vacation annually, or any greater amount of paid vacation to which he is entitled under the Company's vacation policy as in effect during the Employment Period. The Board shall conduct a review of, and may increase (but not decrease), the Executive's Base Salary on an annual or more frequent basis. (b) In addition to the Base Salary and other benefits specified in Section 2(a), the Company shall pay to the Executive a cash incentive bonus ("BONUS COMPENSATION") for each calendar year ending during the Employment Period. The amount of Bonus Compensation, if any, payable to the Executive shall be determined and calculated in accordance with SCHEDULE I attached hereto. Accrued Bonus Compensation for any calendar year shall be due and payable in no event later than ten Business Days following the Company's receipt from its public accountants of the audited consolidated financial statements of the Company for such calendar year. Notwithstanding the foregoing, if the Executive's employment with the Company is terminated for any reason, the Company will not pay the Executive any Bonus Compensation with respect to the calendar year in which the Executive's employment is terminated (other than pursuant to Section 5(a)(iii) and 5(b)(iv)) or for any calendar year ending thereafter. (c) The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. (d) The Company shall deduct from any payments to be made by it to the Executive under this Agreement any amounts required to be withheld in respect of any Taxes. (e) Concurrently with the execution of this Agreement, the Company has established the Pliant 2004 Restricted Stock Incentive Plan, a copy of which is attached hereto as EXHIBIT A, which provides for the issuance to eligible employees of the Company of up to 720 shares of Series B Redeemable Preferred Stock (the "SERIES B PREFERRED STOCK") and the Company shall issue, and the Executive shall purchase 480 shares of Series B Preferred Stock pursuant to the Restricted Stock Agreement substantially in the form attached hereto as EXHIBIT B. SECTION 3. POSITION AND DUTIES. (a) The Company employs the Executive as the President and Chief Executive Officer. His responsibilities and duties will be commensurate with the title of his position, and will include those duties and responsibilities normally performed by the Chief Executive Officer of a private corporation in the Business, including the management and direction of the affairs of the Company on a day to day basis and such other duties as the Board shall assign to the Executive from time to time. The Executive shall also have the non-exclusive authority to call and agenda items for meetings of the Board, so long as the Executive is a member of the Board and the Chief Executive Officer of the Company. All operations and staff personnel shall report directly to the Executive or through one or more officers designated by the Executive who shall report directly to the Executive. The Executive will report directly and exclusively to the Board. The Executive will perform his duties from the Schaumburg, Illinois location of the Company. (b) The Executive acknowledges and agrees to discharge his duties and otherwise act in a manner consistent with the best interests of the Company and its Subsidiaries. During the Employment Period, the Executive shall devote his best efforts, on a full-time basis, to the performance of his duties and responsibilities under this Agreement (except for vacations to which he is entitled pursuant to Section 2(a), illness or incapacity or other personal or personal investment activities that do not interfere with his full and timely performance of his duties and responsibilities under this Agreement). During the Employment Period, the Executive may, subject to Section 8, (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (iii) manage personal investments, so long as such activities, either individually or in the aggregate, do not materially conflict with the performance of the Executive's duties under this Agreement. SECTION 4. TERMINATION. (a) TERMINATION DATE. The Executive's employment under this Agreement shall terminate upon the earliest to occur (the date of such occurrence being the "TERMINATION DATE") of (i) the fourth anniversary of the Agreement Date (an "EXPIRATION"), (ii) the effective date of the Executive's resignation (a "RESIGNATION"), (iii) the effective date of the Executive's Resignation for Good Reason, (iv) the Executive's death, (v) the Executive's Disability, (vi) the Executive's Retirement, (vii) the effective date of a termination of the Executive's employment for Cause by the Company (including by the Board) (a "TERMINATION FOR CAUSE"), and (viii) the effective date of a termination of the Executive's employment by the Company (including by the Board) for reasons that do not constitute Cause (a "TERMINATION WITHOUT CAUSE"). The effective date of the Executive's Resignation or the Executive's Retirement shall be as determined under Section 4(b); the effective date of a Resignation for Good Reason shall be as determined under Section 4(c); the effective date of the Executive's Disability shall be the date specified in a Notice of Termination delivered to the Executive by the Company; and the effective date of a Termination for Cause or a Termination Without Cause shall be the date specified in the Notice of Termination delivered to the Executive by the Company. (b) RESIGNATION OR RETIREMENT. The Executive shall give the Company and the Board at least ninety (90) days' prior written notice of a Resignation or Retirement, with the effective date of such Resignation or Retirement specified therein. The Board may, in its discretion, accelerate the effective date of a Resignation, but not of a Retirement. (c) RESIGNATION FOR GOOD REASON. Except for a Resignation for Good Reason effected pursuant to Section 18(e), the Executive will give the Company and the Board at least thirty (30) days' prior written notice of a Resignation for Good Reason. Such notice may be provided only after the Company shall fail to cure or remedy the events described in the definition of "Resignation for Good Reason" (other than in clause (e) thereof) during the Cure Period. SECTION 5. EFFECT OF TERMINATION; SEVERANCE. (a) In the event of a Termination Without Cause or a Resignation for Good Reason, the Executive or his beneficiaries or estate shall receive the following: (i) a lump sum payment of the unpaid portion of the Base Salary, computed on a PRO RATA basis to the Termination Date, payable on the Company's next payroll date; (ii) the monthly portion of the Base Salary, payable each month for the period beginning on the Termination Date and ending on the second anniversary of the Termination Date; PROVIDED, HOWEVER, that in the event of a breach by the Executive of Sections 6, 7, 8 or 9 on or after the Termination Date, the provisions of Section 11 shall apply; (iii) an amount equal to the Bonus Compensation that was paid or is payable to the Executive for the year preceding the calendar year in which the Termination Date occurs, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365, payable in accordance with Section 2(b); PROVIDED HOWEVER, that in the event of a breach by the Executive of Sections 6, 7, 8 or 9 on or after the Termination Date, the provisions of Section 11 shall apply; (iv) a lump sum reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(c), payable on the next payroll date following the date on which such reimbursement expense request is submitted to the Company; and (v) continued participation in the Company's comprehensive medical and dental plan for the period beginning on the Termination Date and ending on the second anniversary of the Termination Date, with the COBRA continuation coverage qualifying event, connected with the Executive's termination occurring when he loses coverage at the end of that two-year period. If it is unable to obtain the consent of its medical and/or dental plan insurer to provide coverage under this clause (v), the Company may instead pay the full premium cost of other medical and dental insurance that provides comparable coverage for the required two year period, and require the Executive to pay an amount equal to the then-current COBRA continuation premium for the period commencing on the second anniversary of the Termination Date during which (d) Notwithstanding any other term of this Agreement to the contrary, but subject to Section 11 hereof, upon termination of the Executive's employment for any reason, the Executive will in all events receive, when they would otherwise be then due and owing, any amounts he will have accrued and vested in under the Pliant 2004 Restricted Stock Incentive Plan, the Company's qualified and nonqualified retirement plans, all statutory rights to receive or purchase welfare benefits, reimbursement for unreimbursed expenses in accordance with the policies of the Company in effect as of the Termination Date, accrued vacation pay, and any other employee benefits owing to him as of the Termination Date, all as determined in accordance with the applicable terms of the plans themselves and the laws applicable to them. In addition, the Company shall continue (i) to indemnify the Executive for acts and omissions which occurred prior to the Termination Date, subject to and in accordance with the terms of the Company's organizational documents referred to in Section 15(b) as they are in effect on the Termination Date and (ii) to retain coverage for the Executive under the Company's directors and officers liability insurance policies as provided in Section 15(a). (e) If the Executive is employed as the President and Chief Executive Officer of the Company following an Expiration (such period, the "POST-EMPLOYMENT AGREEMENT Period") and no other event of termination of employment under this Agreement has occurred prior to such Expiration, the Executive shall be employed by the Company as an "at-will" employee during the Post-Employment Agreement Period. Accordingly, the Executive's employment may be terminated at any time during the Post-Employment Agreement Period, for any reason. If the Executive's employment with the Company is terminated by the Company at any time during the Post-Employment Agreement Period for reasons that constitute a Termination without Cause, the Executive or his beneficiaries or estate shall receive the monthly portion of the Base Salary, payable monthly, during the period beginning on the date his employment with the Company is terminated and ending on the first anniversary thereof; PROVIDED, HOWEVER, that in the event of a breach by the Executive of Sections 6, 7, 8 or 9, the provisions of Section 11 shall apply. (f) The Executive, so long as he is employed by the Company as President and Chief Executive Officer, regardless of whether or not this Agreement shall terminate or an Expiration shall occur, shall be elected to the Board and shall be a member of the Board pursuant and subject to Section 4.1(a)(iii) of the Stockholders Agreement. Upon termination of his employment with the Company for any reason, the Executive shall be deemed to have automatically resigned as an officer, manager, member, and director of the Company and its Subsidiaries and the Executive shall execute and deliver to the Company documentation evidencing such resignations (but the failure to execute and deliver such documentation shall not affect such deemed resignations). The resignations effected by this Section 5(f) shall not constitute a "Resignation for Good Reason" or a "Resignation" hereunder. SECTION 6. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. The Executive will not disclose or use at any time, either during the Employment Period or thereafter, any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except, during the Employment Period, to the extent that such disclosure or use is directly related to and reasonably consistent with the Executive's performance of duties assigned to the Executive by the Company, and except in connection with enforcing the Executive's rights under this Agreement or if compelled by a court or governmental agency. SECTION 7. INVENTIONS AND PATENTS. The Executive agrees that all Work Product belongs to the Company. The Executive will perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance to the Company in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. SECTION 8. NON-COMPETE, NON-SOLICITATION, NON-DISPARAGEMENT. The Executive acknowledges and agrees that during the course of such Executive's association with the Company or any of its Subsidiaries, the Executive has had the opportunity to develop relationships with existing employees, customers and other business associates of the Company and its Subsidiaries which relationships constitute goodwill of the Company and its Subsidiaries, and the Company and its Subsidiaries would be irreparably damaged if the Executive were to take actions that would damage or misappropriate such goodwill. Accordingly, from and after the Agreement Date, the Executive covenants and agrees to comply with the terms and provisions set forth in this Section 8. (a) The Executive acknowledges that the Company and its Subsidiaries currently conduct the Business throughout the world (the "TERRITORY"). Accordingly, during the period (the "NON-COMPETE PERIOD") commencing on the Agreement Date and ending on the first anniversary of the Termination Date, the Executive shall not, without the consent of the Company, directly or indirectly, enter into, engage in, assist, give or lend funds to or otherwise finance, be employed by or consult with, or have a financial or other interest (other than (i) an ownership interest of less than 1% of the outstanding common equity securities in any publicly traded company and (ii) an investment by the Executive in the restaurant business operated by the Executive's brother) in, any business which competes with the Business, whether for or by himself or as an independent contractor, agent, stockholder, partner or joint venturer for any other Person. To the extent that the covenant provided for in this Section 8(a) may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of this Section 8(a), and to add or delete specific words or phrases. This Section 8(a) as modified shall then be enforced. (b) The Executive covenants and agrees that during the Non-Compete Period, the Executive will not, directly or indirectly, either for himself or for any other Person (i) solicit any employee of the Company or any of its Subsidiaries to terminate his or her employment with the Company or any of its Subsidiaries, (ii) solicit any customer of the Company or any of its Subsidiaries to purchase products or services of or on behalf of the Executive or such other Person that are competitive with the products or services provided by the Company or any of its Subsidiaries or (iii) take any action (not otherwise described in Section 8(b)(i) and (ii)) intended to cause injury to the relationships between the Company or any of its Subsidiaries or any of their employees and any lessor, lessee, vendor, supplier, customer, distributor, employee, consultant or other business associate of the Company or any of its Subsidiaries as such relationship relates to the Company's or any of its Subsidiaries' conduct of the Business. Notwithstanding the foregoing, the restrictions set forth in Section 8(b)(i) shall expire on the first anniversary of a Liquidation Event. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the Business, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits under this Agreement and the Pliant 2004 Restricted Stock Incentive Plan to clearly justify such restrictions which, in any event, he does not believe would prevent him from otherwise earning a living. SECTION 9. DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. The Executive shall deliver to the Company at the termination of the Employment Period or at any time the Company may request, all property belonging to the Company or its Subsidiaries, including memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or Work Product which he may then possess or have under his control regardless of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. SECTION 10. INSURANCE. The Company may, for its own benefit, maintain "keyman" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. SECTION 11. ENFORCEMENT. Because the Executive's services are unique and because the Executive has access to Confidential Information and Work Product, the parties hereto agree that money damages would be an inadequate remedy for any breach of Sections 5(f), 6, 7, 8 or 9 of this Agreement. Therefore, in the event of a breach or threatened breach of Sections 5(f), 6, 7, 8 or 9 of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, such Sections. In addition to the foregoing, and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if the Executive violates any provision of the foregoing Sections 5(f), 6, 7, 8 or 9, the Company shall have the right to set-off any payments then or thereafter due from the Company to the Executive pursuant to Section 5(a)(ii), Section 5(a)(iii), 5(b)(iv) and the Pliant 2004 Restricted Stock Incentive Plan against any damages and costs or expenses incurred by the Company or its Subsidiaries by such violation, in each case without limiting or affecting the Executive's obligations under such Sections 5(f), 6, 7, 8 and 9 or the Company's other rights and remedies available at law or equity. SECTION 12. REPRESENTATIONS. (a) Each party hereby represents and warrants to the other party that the execution, delivery and performance of this Agreement by such party does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which such party is a party or any judgment, order or decree to which such party is subject. (b) The Executive represents and warrants to the Company that the Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any Person other than the Company. (c) The Company represents that the execution, delivery and performance of this Agreement by the Company has been duly and validly authorized by the Board. SECTION 13. EXPENSE REIMBURSEMENT AND DEFAULT INTEREST. (a) The Company will reimburse the Executive for reasonable legal fees and expenses incurred by the Executive in connection with the negotiation and execution of this Agreement. (b) If the Company fails to pay any amount due to the Executive under this Agreement within thirty (30) days after such amount became due and owing hereunder, interest shall accrue on such amount from the date it became due and owing until the date of payment at an annual rate (based on a 365 day year) equal to the prime lending rate publicly announced from time to time by Credit Suisse First Boston in effect at its principal office in New York City during the period of such nonpayment plus two percent. SECTION 14. NO MITIGATION The Executive shall not have any duty to mitigate the amounts payable by the Company under this Agreement upon any termination of employment by seeking new employment following termination. Except as specifically otherwise provided in this Agreement, all amounts payable pursuant to this Agreement shall be paid without reduction to the extent of any amounts of salary, compensation or other amounts which may be paid or payable to the Executive as the result of the Executive's employment by another employer or self employment. SECTION 15. INDEMNIFICATION. (a) During the Employment Period, the Company shall maintain directors and officers liability insurance covering the Executive through the second anniversary of the Termination Date. Such insurance shall provide coverage in amounts and on terms and conditions customary for a private corporation in the Business. The Executive confirms that the current directors and officers liability insurance policy satisfies the foregoing requirements. (b) During the Employment Period, the Company shall not amend Article VI of its Third Amended and Restated Articles of Incorporation or Article V of it Second Amended matter of a Termination for Cause in order to offer or present his perspective on any of the matters which are the subject of a Termination for Cause. In the event of a dispute between the Executive and the Company regarding whether "Cause" exists, any determination by the Board shall be subject to de novo review by any forum deciding the disputed issue; PROVIDED, HOWEVER, that such de novo review shall not otherwise change or shift the burden of proof in connection with any dispute resolution proceeding. "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985. "CODE" means the Internal Revenue Code of 1986 and the regulations thereunder, as amended and in effect from time to time. "COMMON STOCK" means the common stock of the Company, no par value per share. "CONFIDENTIAL INFORMATION" means information that is not known to the public, that is used, developed or obtained by the Company or any of its Subsidiaries in connection with the Business, and that the Executive learns in the course of performing services for the Company or any of its Subsidiaries, including, but not limited to, (a) information, observations, procedures and data obtained by the Executive while employed by the Company (including those obtained prior to the Agreement Date) concerning the business or affairs of the Company or any of its Subsidiaries, (b) products or services of the Company or any of its Subsidiaries, (c) costs and pricing structures of the Company or any of its Subsidiaries, (d) analyses of the Company or any of its Subsidiaries, (e) drawings, photographs and reports of the Company or any of its Subsidiaries, (f) computer software, including operating systems, applications and program listings of the Company or any of its Subsidiaries, (g) flow charts, manuals and documentation of the Company or any of its Subsidiaries, (h) data bases of the Company or any of its Subsidiaries, (i) accounting and business methods of the Company or any of its Subsidiaries, (j) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice of the Company or any of its Subsidiaries, (k) customers and customer lists of the Company or any of its Subsidiaries, (l) other copyrightable works of the Company or any of its Subsidiaries, (m) all production methods, processes, technology and trade secrets of the Company or any of its Subsidiaries, and (n) all similar and related information of the Company or any of its Subsidiaries in whatever form. Confidential Information will not include any information that is now or later becomes part of the public domain, without breach of this Agreement by the Executive. "DISABILITY" means any medically determinable physical or mental impairment that has lasted, or is reasonably expected to last, for a period of at least six (6) months, can reasonably be expected to be permanent or of indefinite duration, and renders the Executive unable to perform his duties hereunder, as certified by a physician jointly selected by the Company and the Executive or the Executive's legal representative. "JPMP" means J.P. Morgan Partners (BHCA), L.P., a Delaware limited partnership. "LIQUIDATION EVENT" means the consummation of (a) the transfer (in one or a series of related transactions) of all or substantially all of the Company's consolidated assets to a Person or a group of Persons acting in concert (other than to a Subsidiary of the Company, JPMP or any of their respective affiliates); (b) the sale or transfer (in one or a series of related transactions) of a majority of the outstanding Common Stock to one Person or a group of Persons acting in concert (other than to JPMP or any of its affiliates); or (c) the merger or consolidation of the Company with or into another Person (other than to JPMP or any of its affiliates), in the case of clauses (b) and (c) above, under circumstances in which the holders of a majority of the voting power of the outstanding Common Stock immediately prior to such transaction own less than a majority in voting power of the outstanding Common Stock or other voting securities of the surviving or resulting corporation or acquirer, as the case may be, immediately following such transaction. "NOTICE OF TERMINATION" means a written notice delivered by the Company to the Executive which sets forth (a) the specific termination provisions in this Agreement relied upon by the Company to effect a termination of the Executive's employment hereunder, (b) in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under such termination provision, as applicable, and (c) if the Termination Date is other than the date of receipt of such Notice of Termination, the Termination Date. "PERSON" shall be construed as broadly as possible and shall include an individual person, a partnership (including a limited liability partnership), a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental authority. "RESIGNATION FOR GOOD REASON" occurs if the Executive terminates his employment with the Company and the Subsidiaries in accordance with Section 4(c) because, without Executive's express written consent, any of the events described below occurs during the Employment Period and, with respect to the events described in clauses (a) through (d) below, the Company fails to cure or remedy the same within thirty days (the "CURE PERIOD") after receiving written notice thereof from the Executive, which the Executive shall deliver within ninety (90) days following the occurrence of any of such events; it being agreed that the failure by the Executive to provide such notice during such 90 day period shall preclude the Executive from invoking any such events as the basis for a Resignation for Good Reason: (a) the assignment to the Executive of any material duty materially inconsistent with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a); (b) the material breach by the Company of any material provision of this Agreement (it being agreed that the failure to elect or re-elect the Executive to the Board in accordance with Section 5(f) during the Employment Period and the failure to appoint or re-appoint the Executive as the President and Chief Executive Officer of the Company in accordance with Section 3(a) during the Employment Period shall constitute a material breach by the Company of a material provision of this Agreement); (f) PAYMENTS TO BENEFICIARY. If the Executive dies before receiving amounts to which the Executive is entitled under this Agreement, such amounts shall be paid in accordance with the terms of this Agreement to the beneficiary designated in writing by the Executive, or if none is so designated, to the Executive's estate. (g) SURVIVAL OF THE EXECUTIVE'S RIGHTS. All of the Company's and Executive's rights hereunder shall survive any termination of the relationship of the Executive with the Company, other than those which expressly terminate, or are contemplated to terminate hereunder, upon a termination of employment. (h) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof. (i) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Illinois without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Illinois. (j) SELECTION OF JURISDICTION. WITH RESPECT TO ANY LAWSUIT OR PROCEEDING ARISING OUT OF OR BROUGHT WITH RESPECT TO THIS AGREEMENT, EACH OF THE PARTIES HERETO IRREVOCABLY (a) SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS; (b) WAIVES ANY OBJECTION IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT; (c) WAIVES ANY CLAIM THAT SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM; AND (d) FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDINGS, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. (k) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. (l) MUTUAL CONTRIBUTION. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. (m) DESCRIPTIVE HEADINGS; NOUNS AND PRONOUNS. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa. ******* IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above. PLIANT CORPORATION By: /s/ Lori G. Roberts ------------------------------------- Name: Lori G. Roberts Title: Senior Vice President Human Resources EXECUTIVE /s/ Harold Bevis ------------------------------------- Harold Bevis SCHEDULE I BONUS COMPENSATION The Executive's annual target bonus (the "TARGET BONUS") shall be 100% of Base Salary in effect as of the last day of the Employment Period in the fiscal year to which the annual Target Bonus relates, and shall be declared by the Board based upon the achievement of (a) "EBITDA" and cash flow hurdles to be set forth in the Company's Management Compensation Program ("PERFORMANCE OBJECTIVES") and (b) no more than four annual qualitative individual business objectives ("QUALITATIVE OBJECTIVES"). The Performance Objectives and the Qualitative Objectives shall be mutually established or revised by the Board and the Executive in good faith each year; provided, however, that at no time shall the annual Target Bonus payable upon (i) achievement of 100% of the Performance Objectives equal less than 80% of the Base Salary and (ii) achievement of the Qualitative Objectives equal less than 20% of the Base Salary. At no time shall the annual Target Bonus payable with respect to the Performance Objectives and the Qualitative Objectives equal less than 100% of the Base Salary, in the aggregate. PERFORMANCE OBJECTIVES. For 2004, the Executive's guaranteed minimum annual Target Bonus payable with respect to Performance Objectives shall be equal to 80% of the Base Salary. For subsequent years, 35% ("THRESHOLD BONUS PERCENTAGE") of the Base Salary shall be paid for threshold achievement of 85% ("THRESHOLD ACHIEVEMENT PERCENTAGE") of the Performance Objectives for such year; 80% of Base Salary shall be paid for 100% ("TARGET ACHIEVEMENT PERCENTAGE") of the Performance Objectives for such year; and the amount of the annual Target Bonus for performance between the Threshold Achievement Percentage and Target Achievement Percentage of the Performance Objectives shall be subject to linear interpolation. For 2004 and subsequent years, 180% ("MAXIMUM BONUS PERCENTAGE") of Base Salary shall be paid for achievement of 115% ("MAXIMUM ACHIEVEMENT PERCENTAGE") of the Performance Objectives; and the amount of the annual Target Bonus for performance between the Target Achievement Percentage and Maximum Achievement Percentage of the Performance Objectives shall be subject to linear interpolation. Notwithstanding the foregoing, for any year after 2004, the Board and the Executive may by mutual consent modify the Threshold Bonus Percentage, the Threshold Achievement Percentage, the Maximum Bonus Percentage and/or the Maximum Achievement Percentage. QUALITATIVE OBJECTIVES. For 2004, the guaranteed minimum annual Target Bonus payable with respect to the Qualitative Objectives shall be equal to 20% of the Base Salary. At the beginning of each subsequent year, the Board and the Executive shall mutually agree on the Qualitative Objectives for such year and the appropriate percentage of Base Salary to be paid upon attainment of each such Qualitative Objective. EXHIBIT A 2004 RESTRICTED STOCK INCENTIVE PLAN Ex. A EX-10.62 3 a2154755zex-10_62.txt EXHIBIT 10.62 Exhibit 10.62 RELEASE AGREEMENT This Release Agreement (this "AGREEMENT") is entered into effective as of December 31, 2004 (the "EFFECTIVE DATE"), by and between BRIAN JOHNSON, an individual ("EXECUTIVE") and PLIANT CORPORATION, a Utah corporation ("PLIANT"). RECITALS WHEREAS, Executive has been employed by Pliant pursuant to an Employment Agreement dated March, 2001 (the "EMPLOYMENT AGREEMENT") and has served as an officer of Pliant and as an officer, director and/or manager of certain of Pliant's direct and indirect subsidiaries (collectively, the "SUBSIDIARIES"); and WHEREAS, Pliant has determined that it is in the parties' best interests to terminate Executive's employment with Pliant and his officer, director and manager positions with Pliant and each of the Subsidiaries, in each case as of the Effective Date; and WHEREAS, Executive and Pliant agree that the employment relationship between Executive and Pliant shall be severed as set forth herein; and WHEREAS, in consideration of this Agreement and the releases, acknowledgements and agreements by Executive set forth herein, Pliant has agreed to make certain payments to Executive, which payments Executive is not otherwise entitled to receive. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the premises, covenants, payments and agreements contained herein, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, Pliant and Executive agree as follows: 1. TERMINATION DATE. The employment relationship between Executive and Pliant is hereby terminated as of the Effective Date. Executive hereby resigns each of his officer, director and manager positions with the Parent and each of the Subsidiaries, effective as of the Effective Date. 2. ACKNOWLEDGEMENTS BY EXECUTIVE. Executive acknowledges and agrees that: (i) the Non-Compete, Non-Solicitation and Non-Disparagement provisions of Section 9 of the Employment Agreement remain in full force and effect in accordance with the terms thereof (the collectively the "NONCOMPETE AGREEMENT"), and Executive will abide by the terms thereof; (ii) the Nondisclosure and Nonuse of Confidential Information provisions of Section 7 of the Employment Agreement (the "NONDISCLOSURE AGREEMENT") and the Inventions and Patents provisions of Section 8 of the Employment Agreement (the "INVENTIONS AGREEMENT") remain in full force and effect in accordance with the terms thereof, and Executive will abide by the terms thereof; (iii) other than the payments and benefits expressly required pursuant to SECTIONS 3, 4, 5, AND 6 below, Pliant has paid Executive all compensation and other amounts due and owing to Executive related to any employment, officer, director or manager relationship or otherwise, including, without limitation, all salary, commissions, bonuses, sick pay and vacation pay, and no other amounts are owed to Executive by Pliant or any of the Subsidiaries for any reason whatsoever; (iii) other than the 18 shares of Pliant Series A Preferred Stock, the Warrants to purchase 18.270 shares of [PLIANT COMMON STOCK] and the option to purchase 1,000 shares of Pliant Common Stock pursuant to Pliant's 2000 Stock Incentive Plan and the Option Agreement related thereto (together, such shares, Warrants and option are referred to herein as the "EQUITY INTERESTS"), Executive has no equity or similar interest whatsoever in Pliant or any of the Subsidiaries; (iv) the Equity Interests are, as of the Effective Date, subject to the Stockholders Agreement, dated May 31, 2000, among Pliant and certain of its stockholders signatories thereto (the "STOCKHOLDERS AGREEMENT") and the Equity Interests will remain subject to the Stockholders Agreement on and after the Effective Date; (v) Pliant's 2000 Stock Incentive Plan and the Option Agreement related thereto remain in full force and effect in accordance with the terms thereof, and Executive will abide by the terms thereof; (vi) Executive has no right to any future position (including, without limitation, employee, officer, director or manager) with Pliant or any of the Subsidiaries; (vii) except as expressly provided in SECTION 5 below or as provided by applicable law, upon the Effective Date Executive is no longer eligible to participate in or receive benefits under any applicable benefit plans, including, without limitation, health insurance plans, dental insurance plans, life insurance plans, short and long term disability plans, 401 (k) plans and any other benefit plans or programs available to employees of Pliant (directly or indirectly); and (viii) as of the Effective Date, Executive is no longer an employee of Pliant and may under no circumstances represent himself to be in any way connected with or a representative of Pliant or any of the Subsidiaries. Executive further acknowledges and agrees that all or certain portions of the payments and accommodations required pursuant to SECTIONS 3,4, 5 AND 6 below are amounts or benefits to which he would not otherwise be entitled and such payments and benefits are being provided by Pliant pursuant to the terms of this Agreement in consideration of the agreements, acknowledgements, covenants and releases contained herein. 3. SEVERANCE PAYMENTS. Provided Executive has not cancelled this Agreement pursuant to SECTION 16 below, Pliant shall continue to pay Executive his current monthly base salary (less applicable withholding) as in effect on the Effective Date for a period commencing on the Effective Date and ending December 31, 2005 (the "SEVERANCE PAYMENTS"). 4. BONUS PAYMENTS. Provided Executive has not cancelled this Agreement pursuant to SECTION 16 below, Pliant shall pay Executive, on or before March 31, 2005, an amount equal to the bonus to which Executive would be entitled with respect to calendar year 2004 under Pliant's Management Incentive Plan if Executive remained employed by Pliant through March 31,2005 (the "BONUS PAYMENT"). 5. MEDICAL AND DENTAL BENEFITS. Provided Executive has not cancelled this Agreement pursuant to SECTION 16 below, Executive shall be entitled to continue participation in the Pliant medical and dental plans in which Executive participates immediately prior to the Effective Date for a period of up to twelve months (12) months commencing on the Effective Date and ending December 31, 2005. At all times during such period, Executive shall continue to be responsible for, and shall pay to Pliant on a monthly basis (which payments may be offset by Pliant from the Severance Payments), the then current active employee contribution rate amounts under such plans. Commencing December 31, 2005, Executive shall be eligible for extended continuation coverage under such plans for a period of eighteen (18) months. At all times during such extended continuation period, Executive shall be responsible for, and shall pay 2 to Pliant on a monthly basis, the then current COBRA contribution rate amounts. The medical and dental benefits described in this SECTION 5 are referred to in this Agreement as the "CONTINUED MEDICAL AND DENTAL BENEFITS"). Notwithstanding anything in this Agreement to the contrary, the Continued Medical and Dental Benefits, and Executive's right to participation in the plans related thereto, shall terminate immediately in the event Executive obtains alternative employment which offers comparable coverage, obtains alternative comparable medical and/or dental coverage prior to the expiration of such rights or as otherwise required under applicable law. 6. OUTPLACEMENT SERVICE BENEFITS. Provided Executive has not cancelled this Agreement pursuant to SECTION 16 below, Executive shall be entitled to receive outplacement services from Scherer Schneider Paulick for a period of six (6) months commencing on the Effective Date; PROVIDED, HOWEVER, that Pliant's obligations pursuant to this SECTION 6 shall in no event exceed $20,000( the "OUTPLACEMENT BENEFITS"). 7. RELEASE. In consideration of the payments by and agreements of Pliant contained herein, Executive agrees to forever RELEASE and DISCHARGE Pliant, the Subsidiaries, J.P. Morgan Partners, LLC and each of their respective direct and indirect parents, subsidiaries and affiliates, as well as all of their respective shareholders, members, directors, officers, managers, employees, agents and attorneys (hereinafter collectively referred to as the "RELEASED PARTIES") and the heirs, executors, administrators, successors and assigns of the Released Parties from any and all charges, complaints, claims, promises, suits, debts, sums of money, accounts, covenants, contracts, controversies, damages, judgments, rights, obligations, agreements and causes of action, whether known or unknown, whether contingent or liquidated, whether by apportionment or otherwise, of every kind, nature or description arising by reason of any matter, cause or thing whatsoever at any time from the beginning of the World to the Effective Date. This release includes, but is not limited to: any payments required pursuant to the Employment Agreement or the Management Incentive Plan; any claims as a stockholder of the Company; any claims relating in any way to Pliant's Series B Preferred Stock (including, without limitation, any claim for entitlement to any shares thereof); any claims relating in any way to Pliant's 2000 Stock Incentive Plan, any Option Agreement relating thereto, or any option or other right arising thereunder (which Executive acknowledges and agrees terminate in their entirety upon termination of Executive's employment by Pliant); any claims for continued employment, employment pay, incentive pay, performance bonuses, commissions, vacation pay, sick pay, severance pay and benefits (except accrued retirement benefits); any rights arising out of alleged violations or breaches of any express or implied agreements; breach of the implied covenant of good faith and fair dealing; any legal restrictions on the Released Parties' rights to terminate employees; any tort; negligent or intentional misrepresentation; wrongful discharge; intentional or negligent interference with contractual relations; intentional or negligent infliction of emotional distress; whistleblowing; or past violation of any statute including: Title VII of the Civil Rights Act, the Age Discrimination in Employment Act as amended by the Older Worker Benefit Protection Act; ERISA, COBRA, and any other federal, state or local rule, regulation or law. Executive promises not to initiate a lawsuit or bring a claim against the Released Parties, in any court or otherwise, relating to any action released under this SECTION 7, under any common law claim, whether in law or equity, or federal, state or local statute, ordinance or rule of law. Executive also waives any remedy or recovery in any action that may be brought on his behalf by any government agency or other person. Notwithstanding the foregoing, Executive reserves 3 all rights relating to the Severance Payments, the Bonus Payment, the Continued Medical and Dental Benefits and the Outplacement Benefits. 8. INJUNCTIVE RELIEF. Executive acknowledges that any breach of this Agreement would cause irreparable injury to Pliant and/or the Released Parties and that their remedy at law would be inadequate and, accordingly, consents to and agrees that temporary and permanent injunctive relief may be granted in any proceeding which may be brought to enforce this Agreement, without the necessity of proof of actual damage or posting of any bond. 9. DISPARAGEMENT/CONFIDENTIALITY. The parties agree that neither will make any disparaging remarks or statements about the other to any third parties. The parties agree to keep the existence and terms of this Agreement totally confidential except (i) in Executive's case, with regard to members of his immediate family, his lawyer(s), his accountant(s), his financial/tax advisor(s) and as compelled by court process, and (ii) in Pliant's case, with regard to Pliant's current, future and prospective principals, affiliates, direct or indirect subsidiaries, officers, directors, shareholders, employees, lawyers, accountants, investment bankers, lenders, and other agents (in each case, including, without limitation, the Released Parties) and as compelled by court process. The parties further agree to inform each of these individuals and entities of the existence of this confidentiality provision and that the respective parties shall be responsible in the event any one or more of these individuals or entities provides this information to any other person or entity. 10. CERTAIN REMEDIES. In the event Executive violates the terms of SECTION 9 of this Agreement or otherwise breaches this Agreement, the Noncompete Agreement, the Nondisclosure Agreement or the Invention Agreement, Executive (i) shall immediately forfeit all right to future benefits under this Agreement (including, without limitation the Severance Payments, Bonus Payment and Continued Medical and Dental Benefits) and any Severance Payments, Bonus Payment and payments in respect of the Continued Medical and Dental Benefits shall be immediately recoverable by Pliant from Executive; and (ii) must pay reasonable attorneys' fees and all other costs incurred by Pliant as a result of Executive's breach. Nothing in this SECTION 10 or elsewhere in this Agreement shall limit in any way the rights or remedies of any Released Party against Executive at any time with respect to this Agreement, Executive's obligations under the Employment Agreement (including, without limitation, the Noncompete Agreement, the Nondisclosure Agreement and the Inventions Agreement), or otherwise. 11. SEVERABILITY. In case any one or more of the provisions or parts of a provision or covenants contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement or any other jurisdiction, but this Agreement shall be reformed and construed in any such jurisdiction as if such invalid or illegal or unenforceable provision or part of a provision had never been contained herein and such provision or part shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted in such jurisdiction. 12. LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, AND NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF ILLINOIS, AND NO DEFENSE, 4 COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON. SUBJECT TO SECTION 13, THE PARTIES AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT MAY BE COMMENCED IN THE STATE COURTS, OR IN THE UNITED STATES DISTRICT COURTS IN THE STATE OF ILLINOIS. THE PARTIES CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 12 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY ACTION UNDER THIS AGREEMENT IN ANY OTHER JURISDICTION. 13. ARBITRATION. THE PARTIES HEREBY WAIVE AND SHALL NOT SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, CLAIM, COUNTERCLAIM, DEFENSE OR OTHER LITIGATION OR DISPUTE UNDER OR IN RESPECT OF THIS AGREEMENT. THE PARTIES AGREE THAT ANY SUCH DISPUTE RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, INCLUDING THE RULES FOR EMERGENCY MEASURES WHICH ARE HEREBY EXPRESSLY ADOPTED. SUCH ARBITRATION SHALL TAKE PLACE IN CHICAGO, ILLINOIS AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAWS OF THE STATE OF ILLINOIS. DECISIONS PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES. THE PREVAILING PARTY IN ARBITRATION SHALL BE ENTITLED TO RECOVER REASONABLE COSTS AND ATTORNEYS' FEES FROM THE OTHER PARTY. UPON THE CONCLUSION OF ARBITRATION, THE PARTIES MAY APPLY TO ANY APPROPRIATE COURT OF THE TYPE DESCRIBED IN SECTION 12 TO ENFORCE THE DECISION PURSUANT TO SUCH ARBITRATION. 14. MISCELLANEOUS. (a) Except for Executive's obligations pursuant to the Employment Agreement (including, without limitation, the Noncompete Agreement, the Nondisclosure Agreement and the Invention Agreement), the Stockholders Agreement and Pliant's 2000 Stock Incentive Plan and the Option Agreement related thereto, this Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein and may not be modified orally, but only by a writing subscribed by the party charged therewith. Except for Executive's obligations pursuant to the Employment Agreement, (including, without limitation, the Noncompete Agreement, the Nondisclosure Agreement and the Invention Agreement), and the Stockholders Agreement, this 5 Agreement supersedes all prior agreements and understandings (whether oral or written) between the parties with respect to such subject matter. (b) This Agreement constitutes the product of the negotiation of the parties hereto and the enforcement hereof shall be interpreted in a neutral manner, and not more strongly for or against any party based upon the draftsmanship hereof. (c) This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (d) Executive will furnish Pliant with such other and further documents, certificates and information as Pliant shall reasonably request in connection with this Agreement and the consummation of the transactions contemplated hereby. (e) This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by Executive. 15. THIRD PARTY BENEFICIARIES. The parties agree that the Released Parties shall be and hereby are third party beneficiaries to this Agreement with the same rights to enforce the terms of this Agreement as the parties hereto. Nothing contained herein shall be construed to impose any obligation on the Released Parties (other than Pliant as expressly set forth herein) with respect to or pursuant to this Agreement or any document or agreement referenced herein. 16. RELINQUISHMENT OF ADEA CLAIM. Executive agrees to relinquish any claims arising under the Age Discrimination in Employment Act (the "ADEA") and acknowledges receiving monies and other consideration in addition to that which Executive was already entitled to in order to release any claim Executive may have had under the ADEA. Under the ADEA, and the Older Workers Benefit Protection Act of 1999, Executive is allowed a period of forty five (45) days to consider this Agreement as it relates to any age discrimination claim. However, Executive specifically agrees to waive this forty five (45) day period in order to commence payment under this Agreement. Executive acknowledges that under the law, this Agreement does not become effective until the end of the seventh (7th) day following the date in which Executive signs this Agreement and during that seven (7) day period, Executive may revoke this Agreement. By signing below, Executive does not waive the seven (7) day period. In the event Executive revokes this Agreement within such period, Executive shall return to Pliant any and all sums paid to Executive by Pliant hereunder. Executive may consult with an attorney or other advisor before signing this Agreement, and by signing below, Executive acknowledges having had an opportunity to do so. 6 IN WITNESS WHEREOF, the parties hereto have made and entered into this Agreement as of the date first hereinabove set forth. I HAVE CAREFULLY READ THIS AGREEMENT; I FULLY UNDERSTAND WHAT IT MEANS, INCLUDING THE RELEASE SET FORTH IN SECTION 7, AND, MY ATTORNEY, IF APPLICABLE, HAS REVIEWED THE AGREEMENT WITH ME AND EXPLAINED ITS CONTENTS TO ME. REGARDLESS OF MY REPRESENTATION BY AN ATTORNEY OR DECISION NOT TO ENGAGE SUCH REPRESENTATION, I FULLY UNDERSTAND THE AGREEMENT'S CONTENTS AND THE EFFECTS THEREOF, AND I HAVE EXECUTED THE SAME OF MY OWN FREE WILL, WITHOUT ANY COERCION BY PLIANT OR ANY RELEASED PARTY. PLIANT: Pliant Corporation By: /s/ Lori G. Roberts ------------------------------------- Name: Lori G. Roberts ----------------------------------- Title: SVP - Human Resource ---------------------------------- EMPLOYEE: /s/ Brian Johnson ---------------------------------------- Brian Johnson 7 EX-10.63 4 a2154755zex-10_63.txt EXHIBIT 10.63 Exhibit 10.63 JAMES IDE 412 CUMNOCK RD. INVERNESS, IL 60067 Pliant Corporation 1475 Woodfield Dr. Schaumburg, IL 60173 January 26, 2005 As we discussed, I have elected to resign my employment at Pliant to pursue other interests. I have appreciated the opportunity to work at Pliant. Following is how I understand we will proceed with my termination: - - I will remain working at Pliant through the month of February (unless I am asked to leave sooner). I will keep Pliant's best interest in mind, and do what I can to minimize disruption and ensure a smooth and positive transition. - - I will receive the $70,000 bonus for 2004 which was guaranteed in my offer letter. - - We will mutually agree on wording for the internal announcement and external press release insofar as they relate to me or my reasons for resigning (which are indicated above). - - In the event I am asked about Pliant or why I resigned, I will indicate that my experience with the company, senior management and Board were positive, that I believe the turnaround is well under way, and that I left the company solely to pursue other interests which were a better fit to my long term personal goals. In the event of reference inquires, Pliant agrees to refer to the following accomplishments: upgrading the external reports (10-Q) and earnings disclosure; recognizing the liquidity implications of increasing resin costs and obtaining a bank amendment for an additional $25 million; leading a financial reporting system upgrade (Hyperion); bringing in three team members whom I'd worked with before; and leading the effort to maintain trade credit with Dow and Exxon. - - I will attempt to complete the 2005 Business Plan process on a best efforts basis Please countersign below if you agree with this handling. Sincerely, /s/ Jim Ide Jim Ide Pliant Corporation, by /s/ Harold Bevis ------------------------------- EX-10.64 5 a2154755zex-10_64.txt EXHIBIT 10.64 Exhibit 10.64 SEVERANCE AND RELEASE AGREEMENT This Severance and Release Agreement (this "AGREEMENT") is entered into effective as of March 18, 2005 (the "EFFECTIVE DATE"), by and between LORI ROBERTS, an individual ("EXECUTIVE") and PLIANT CORPORATION, a Utah corporation ("PLIANT"). RECITALS WHEREAS, Executive has been employed by Pliant as an employee at will and has served as an officer of Pliant and as an officer and/or manager of certain of Pliant's direct and indirect subsidiaries (collectively, the "SUBSIDIARIES"); and WHEREAS, Executive has decided to resign her positions as an officer and/or manager of Pliant and the Subsidiaries effective as of the Effective Date; and WHEREAS, Executive has decided for personal reasons to resign her employment with Pliant, thereby terminating the employment relationship between Executive and Pliant, effective as of April 1, 2005 (the "EMPLOYMENT RESIGNATION DATE"); and WHEREAS, Executive and Pliant agree that the employment relationship between Executive and Pliant shall be severed as set forth herein; and WHEREAS, Executive purchased 32 shares of Pliant's Series B Preferred Stock pursuant to the Pliant Corporation 2004 Restricted Stock Incentive Plan (the "PLAN" and the Restricted Stock Agreement, dated September 24, 2004, between Executive and Pliant (the "RESTRICTED STOCK AGREEMENT"); and WHEREAS, upon such termination of Executive's employment with Pliant, Pliant has the right pursuant to the Restricted Stock Agreement to repurchase 28 shares of Pliant's Series B Preferred Stock held by Executive (the "REPURCHASED SHARES"); and WHEREAS, in consideration of this Agreement and the releases, acknowledgements and agreements by Executive set forth herein, Pliant has agreed to make certain payments to Executive, which payments Executive is not otherwise entitled to receive. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the premises, covenants, payments and agreements contained herein, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, Pliant and Executive agree as follows: 1. RESIGNATION. Executive hereby resigns each of her officer and/or manager positions at Pliant and its Subsidiaries effective as of the Effective Date. Executive hereby resigns her employment with Pliant as of the Employment Resignation Date, and the employment relationship between Executive and Pliant is hereby terminated as of the Employment Resignation Date. During the period commencing on the Effective Date and ending on the Employment Resignation Date (the "TRANSITION PERIOD"), Executive shall assist in transitioning her duties to one or more other employees of Pliant; PROVIDED, HOWEVER, that during the Transition Period Executive may perform such transition services from home or such other location as Executive chooses and shall not be required to report to work at any Pliant location. 2. ACKNOWLEDGEMENTS BY EXECUTIVE. Executive acknowledges and agrees that: (i) each of the Plan and the Restricted Stock Agreement remains in full force and effect in accordance with the terms thereof, and Executive will abide by the terms thereof; (ii) other than the payments and benefits expressly required pursuant to SECTIONS 3, 4 AND 5 below, Pliant has paid Executive all compensation and other amounts due and owing to Executive related to any employment, officer, director or manager relationship or otherwise, including, without limitation, all salary, commissions, bonuses, sick pay and vacation pay, and no other amounts are owed to Executive by Pliant or any of the Subsidiaries for any reason whatsoever; (iii) other than the four (4) shares of Pliant Series B Preferred Stock retained by Executive (the "RETAINED INTEREST"), Executive has no equity or similar interest whatsoever in Pliant or any of the Subsidiaries; (iv) the Retained Interest is, as of the Effective Date, subject to the Plan and the Restricted Stock Agreement; (v) Executive has no right to any future position (including, without limitation, employee, officer, director or manager) with Pliant or any of the Subsidiaries; (vi) except as expressly provided in SECTION 4 below or as provided by applicable law, upon the Employment Resignation Date Executive is no longer eligible to participate in or receive benefits under any applicable benefit plans, including, without limitation, health insurance plans, dental insurance plans, life insurance plans, short and long term disability plans, 401(k) plans and any other benefit plans or programs available to employees of Pliant (directly or indirectly); and (vii) as of the Employment Resignation Date, Executive is no longer an employee of Pliant and may under no circumstances represent herself to be in any way connected with or a representative of Pliant or any of the Subsidiaries. Executive further acknowledges and agrees that the payments and accommodations required pursuant to SECTIONS 3, 4 AND 5 below are amounts or benefits to which she would not otherwise be entitled and such payments and benefits are being provided by Pliant pursuant to the terms of this Agreement in consideration of the agreements, acknowledgements, covenants and releases contained herein. 3. LUMP SUM PAYMENT. Provided Executive has not cancelled this Agreement pursuant to SECTION 18 below, Pliant shall pay Executive, on April 1, 2005, an amount equal to $404,436.60 (calculated as (i) $225,000 which is one year of Executive's base salary, (ii) $112,500 which is the bonus at target to which Executive would be entitled with respect to calendar year 2005 if Executive remained employed by Pliant through December 31, 2005, plus (iii) $12,177.76 which is Executive's accrued vacation as of the Employment Resignation Date, plus (iv) $222.84 which is pending expense reimbursement owed to Executive, plus (v) $50,000, and plus (vi) $4,536 which is the amount to be paid by Pliant for the Repurchased Shares pursuant to SECTION 7 below) (the "LUMP SUM PAYMENT"). 4. MEDICAL, DENTAL AND BASIC LIFE BENEFITS. Provided Executive has not cancelled this Agreement pursuant to SECTION 18 below, Executive shall be entitled to continue participation in the Pliant medical, dental and basic life plans in which Executive participates immediately prior to the Effective Date during the Transition Period and for a period of up to twelve months (12) months commencing on the Employment Resignation Date and ending March 31, 2006. At all times during such period, Executive shall continue to be responsible for, and shall pay to Pliant on a monthly basis, the then current active employee contribution rate amounts under such plans. Commencing April 1, 2006, Executive shall be eligible for extended 2 continuation coverage under such medical plan for a period of eighteen (18) months. At all times during such extended continuation period, Executive shall be responsible for, and shall pay to Pliant on a monthly basis, the then current COBRA contribution rate amounts. The medical, dental and basic life benefits described in this SECTION 4 are referred to in this Agreement as the "CONTINUED MEDICAL, DENTAL AND BASIC LIFE BENEFITS"). Notwithstanding anything in this Agreement to the contrary, the Continued Medical, Dental and Basic Life Benefits, and Executive's right to participation in the plans related thereto, shall terminate immediately in the event Executive obtains alternative employment which offers comparable coverage, obtains alternative comparable medical, dental and/or basic life coverage prior to the expiration of such rights or as otherwise required under applicable law. 5. OUTPLACEMENT SERVICE BENEFITS; LEGAL FEES. Provided Executive has not cancelled this Agreement pursuant to SECTION 18 below, Executive shall be entitled to receive outplacement services for a period of twelve (12) months commencing on the Effective Date; PROVIDED, HOWEVER, that Pliant's obligations pursuant to this SECTION 5 shall in no event exceed $20,000 (the "OUTPLACEMENT BENEFITS"). In addition, provided Executive has not cancelled this Agreement pursuant to SECTION 18 below, Executive shall be entitled to be reimbursed by Pliant for reasonable legal fees incurred and paid by Executive in connection with the negotiation and execution of this Agreement in an aggregate amount not to exceed $7,500, provided that detailed documentation substantiating such reasonable legal fees is provided to Pliant (the "LEGAL FEE BENEFIT"). 6. RELEASES. (a) RELEASE BY EXECUTIVE. In consideration of the payments by and agreements of Pliant contained herein, Executive agrees to forever RELEASE and DISCHARGE Pliant, the Subsidiaries, J.P. Morgan Partners, LLC and each of their respective direct and indirect parents, subsidiaries and affiliates, as well as all of their respective shareholders, members, directors, officers, managers, employees, agents and attorneys (hereinafter collectively referred to as the "RELEASED PARTIES") and the heirs, executors, administrators, successors and assigns of the Released Parties from any and all charges, complaints, claims, promises, suits, debts, sums of money, accounts, covenants, contracts, controversies, damages, judgments, rights, obligations, agreements and causes of action, whether known or unknown, whether contingent or liquidated, whether by apportionment or otherwise, of every kind, nature or description arising by reason of any matter, cause or thing whatsoever at any time from the beginning of the World to the Effective Date. This release includes, but is not limited to: any payments required pursuant to the Management Incentive Plan; any claims as a stockholder of the Company; any claims relating in any way to Pliant's Series B Preferred Stock (including, without limitation, any claim for entitlement to any shares thereof other than the Retained Interest retained by Executive hereunder); any claims relating in any way to any incentive plan or any agreement relating thereto, or any option or other right arising thereunder (which Executive acknowledges and agrees terminate in their entirety upon termination of 3 Executive's employment by Pliant); any claims for continued employment, employment pay, incentive pay, performance bonuses, commissions, vacation pay, sick pay, severance pay and benefits (except accrued retirement benefits); any rights arising out of alleged violations or breaches of any express or implied agreements; breach of the implied covenant of good faith and fair dealing; any legal restrictions on the Released Parties' rights to terminate employees; any tort; negligent or intentional misrepresentation; wrongful discharge; intentional or negligent interference with contractual relations; intentional or negligent infliction of emotional distress; whistleblowing; or past violation of any statute including: Title VII of the Civil Rights Act, the Age Discrimination in Employment Act as amended by the Older Worker Benefit Protection Act; ERISA, COBRA, and any other federal, state or local rule, regulation or law. Executive promises not to initiate a lawsuit or bring a claim against the Released Parties, in any court or otherwise, relating to any action released under this SECTION 6(a), under any common law claim, whether in law or equity, or federal, state or local statute, ordinance or rule of law. Executive also waives any remedy or recovery in any action that may be brought on her behalf by any government agency or other person. Notwithstanding the foregoing, Executive reserves all rights relating to the Lump Sum Payment, the Continued Medical, Dental and Basic Life Benefits, the Outplacement Benefits, the Legal Fee Benefit and any rights through the Employment Resignation Date as an officer of Pliant under Pliant's statutory and contractual officer and director indemnification obligations. (b) RELEASE BY PLIANT. In consideration of the agreements, covenants and releases of Executive contained herein, Pliant agrees to forever RELEASE and DISCHARGE Executive and her heirs and executors, from any and all charges, complaints, claims, promises, suits, debts, sums of money, accounts, covenants, contracts, controversies, damages, judgments, rights, obligations, agreements and causes of action, whether known or unknown, whether contingent or liquidated, whether by apportionment or otherwise, of every kind, nature or description arising by reason of any matter, cause or thing whatsoever at any time from the beginning of the World to the Effective Date; PROVIDED, HOWEVER, that notwithstanding the foregoing, the release set forth in this SECTION 6(b) shall not apply to (i) any charges, complaints, claims, promises, suits, debts, sums of money, accounts, covenants, contracts, controversies, damages, judgments, rights, obligations, agreements or causes of action to the extent the same arise from or relate to fraud, embezzlement, theft or willful misconduct on the part of Executive or (ii) Executive's obligations under this Agreement, the Plan, the Restricted Stock Agreement or pursuant to the covenants of any incentive bonus plan or program in which Executive has been a participant during her employment. Pliant promises not to initiate a lawsuit or bring a claim against Executive or her heirs or executors, in any court or otherwise, relating to any action released under 4 this SECTION 6(b), under any common law claim, whether in law or equity, or federal, state or local statute, ordinance or rule of law. 7. REPURCHASE OF SHARES OF SERIES B PREFERRED STOCK. In accordance with the provisions of Section 8 of the Restricted Stock Agreement, Pliant hereby notifies Executive that it is exercising its right to purchase the Repurchased Shares. For purposes of determining the number of shares which Pliant is entitled to repurchase pursuant to the Restricted Stock Agreement, Executive's employment shall be deemed to have terminated as of the Effective Date. Section 8 of the Restricted Stock Agreement provides that the price to be paid for the Repurchased Shares is $162.00 per share, resulting in an aggregate purchase price for the Repurchased Shares of $4,536. Executive and Pliant acknowledge and agree that such purchase price is included within the Lump Sum Payment. Executive hereby assigns and transfers unto Pliant all of her right title and interest in and to the Repurchased Shares. Executive and Pliant acknowledge and agree that, as of the date hereof, no certificate evidencing the Repurchased Shares (or the Retained Interest) has been issued to Executive. Executive agrees, from time to time hereafter, to take such further actions and execute and deliver such further documents as Pliant may request to effect and/or evidence the transfer of the Repurchased Shares to Pliant. Following the Employment Termination Date, Pliant shall deliver to Executive a certificate representing the Retained Interest. Executive and Pliant acknowledge and agree that the provisions of this SECTION 7 satisfy in full the obligations of Pliant pursuant to the Restricted Stock Agreement related to the purchase by Pliant of the Repurchased Shares. 8. NONDISCLOSURE; DELIVERY OF MATERIALS. (a) Executive shall not at any time or in any manner, directly or indirectly, use or disclose to anyone, other than Pliant, any trade secrets or other Confidential Information (defined below) learned or obtained by her while an employee and/or officer of Pliant. (b) Executive shall deliver to Pliant at the Employment Resignation Date or at any time Pliant may request, all property belonging to Pliant or its Subsidiaries, including memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or Work Product (defined below) which she may then possess or have under her control regardless of the location or form of such material and, if requested by Pliant, will provide Pliant with written confirmation that all such materials have been delivered to Pliant. (c) "CONFIDENTIAL INFORMATION" means information that is not known to the public, that is used, developed or obtained by Pliant or any of its Subsidiaries in connection with the Business, and that the Executive learns in the course of performing services for Pliant or any of its Subsidiaries, including, but not limited to, (a) information, observations, procedures and data obtained by the Executive while employed by Pliant concerning the business or affairs of Pliant or any of its Subsidiaries, (b) products or services of Pliant or any of its Subsidiaries, (c) costs and pricing structures of Pliant or any of its Subsidiaries, (d) analyses of Pliant or any of its 5 Subsidiaries, (e) drawings, photographs and reports of Pliant or any of its Subsidiaries, (f) computer software, including operating systems, applications and program listings of Pliant or any of its Subsidiaries, (g) flow charts, manuals and documentation of Pliant or any of its Subsidiaries, (h) data bases of Pliant or any of its Subsidiaries, (i) accounting and business methods of Pliant or any of its Subsidiaries, (j) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice of Pliant or any of its Subsidiaries, (k) customers and customer lists of Pliant or any of its Subsidiaries, (l) other copyrightable works of Pliant or any of its Subsidiaries, (m) all production methods, processes, technology and trade secrets of Pliant or any of its Subsidiaries, and (n) all similar and related information of Pliant or any of its Subsidiaries in whatever form. Confidential Information will not include any information that is now or later becomes part of the public domain. (d) "WORK PRODUCT" shall mean all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, tradenames, logos and all similar or related information (whether patentable or unpatentable) which relates to Pliant's or any of its Subsidiaries' business, research and development or existing or future products or services and which are conceived, developed or made by the Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person or entity) while employed by Pliant together with all patent applications, letters patent, trademark, tradename and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing. (e) "BUSINESS" means the business of producing and distributing polymer-based, value-added films and flexible packaging products for food, personal care, medical, agricultural, industrial and other applications. 9. EXECUTIVE COVENANTS. Executive, as a condition to this Agreement and the payments to be made by Pliant hereunder, agrees that for a period of time beginning on the Effective Date and ending on the date which is one year after the Employment Resignation Date, Executive shall not: (a) directly or indirectly, either individually or as a principal, partner, agent, employee, employer, consultant, stockholder, joint venturer, or investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, engage in, assist or have any active interest in a business located anywhere in (w) the World where Pliant or any of its affiliates is doing business during the term of this covenant, (x) the United States, (y) the State of Illinois or (z) within a 500 mile radius of the Chicago, Illinois metropolitan area that (i) develops, manufactures, markets and/or sells value-added film, flexible packaging products and/or recloseable technologies including zippers and sliders or 6 otherwise competes with or is similar in concept, design, format, or otherwise to the business conducted by Pliant and its affiliates at any time during the term of this covenant; or (ii) purchases from Pliant (notwithstanding the above, this paragraph shall not be construed to prohibit the Executive from owning less than three percent (3%) of the securities of a corporation which is publicly traded on a securities exchange or over-the-counter); (b) directly or indirectly, either individually, or as a principal, partner, agent, employee, employer, consultant, stockholder, joint venturer, or investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, (i) divert or attempt to divert (by solicitation, diversion or otherwise) from Pliant or its affiliates any business with any customer, prospective customer or account of Pliant or its affiliates with which Executive had any contact or association, which was under the supervision of Executive, or the identity of which was learned by the Executive as a result of Executive's employment with Pliant; (ii) accept the business of any customer, prospective customer or account of Pliant or its affiliates with which Executive had any contact or association, which was under the supervision of Executive, or the identity of which was learned by Executive as a result of Executive's employment with Pliant, whether solicited or not solicited by Executive if such business would be diverted from Pliant or otherwise adversely effect Pliant's business with such entity; (iii) solicit, induce or attempt to induce any salesperson, distributor, supplier, vendor, manufacturer, representative, agent, jobber or other person transacting business with Pliant and/or its affiliates to terminate their relationship or association with Pliant and/or its affiliates, or to represent, distribute or sell services or products in competition with services or products of Pliant or its affiliates; (iv) induce, solicit, cause or attempt to induce or cause any employee of Pliant or its affiliates to leave the employ of Pliant or its affiliates; or (v) hire or otherwise accept the services of any employee or former employee of Pliant, whether solicited or not solicited by Executive. (c) Notwithstanding the foregoing, in the event that Executive desires, during the restrictive period in this SECTION 9, to engage in activity that Executive believes may be in breach of this SECTION 9, Executive may discuss such activity with the Chief Executive Officer of Pliant and Pliant (A) will provide Executive with a decision on whether such activity constitutes a breach of this SECTION 9 and (B) may, upon the written consent of the Chief Executive Officer of Pliant and Pliant's Board of Directors, consent to Executive's participation in such activity. 10. INJUNCTIVE RELIEF. Executive acknowledges that any breach of this Agreement would cause irreparable injury to Pliant and/or the Released Parties and that their remedy at law would be inadequate and, accordingly, consents to and agrees that temporary and permanent 7 injunctive relief may be granted in any proceeding which may be brought to enforce this Agreement, without the necessity of proof of actual damage or posting of any bond. 11. DISPARAGEMENT/CONFIDENTIALITY. The parties agree that neither will make any disparaging remarks or statements about the other to any third parties. The parties agree to keep the existence and terms of this Agreement totally confidential except (i) in Executive's case, with regard to members of her immediate family, her lawyer(s), her accountant(s), her financial/tax advisor(s) and as compelled by court process, and (ii) in Pliant's case, with regard to Pliant's current, future and prospective principals, affiliates, direct or indirect subsidiaries, officers, directors, shareholders, employees, lawyers, accountants, investment bankers, lenders, and other agents (in each case, including, without limitation, the Released Parties) and as compelled by court process. The parties further agree to inform each of these individuals and entities of the existence of this confidentiality provision and that the respective parties shall be responsible in the event any one or more of these individuals or entities provides this information to any other person or entity. 12. CERTAIN REMEDIES. In the event Executive violates the terms of SECTIONS 8, 9 OR 11 of this Agreement or otherwise breaches this Agreement, the Plan or the Restricted Stock Agreement, in each case as finally determined by a court of competent jurisdiction or arbitrator pursuant to a binding arbitration proceeding, Executive (i) shall immediately forfeit all right to future benefits under this Agreement (including, without limitation the Continued Medical, Dental and Basic Life Benefits, Outplacement Benefits and Legal Fee Benefit) and any Lump Sum Payment and payments in respect of the Continued Medical, Dental and Basic Life Benefits, Outplacement Benefits and Legal Fee Benefit shall be immediately recoverable by Pliant from Executive; and (ii) must pay reasonable attorneys' fees and all other costs incurred by Pliant as a result of Executive's breach. Nothing in this SECTION 12 or elsewhere in this Agreement shall limit in any way the rights or remedies of any Released Party against Executive at any time with respect to this Agreement, Executive's obligations under the Employment Agreement (including, without limitation, the Plan and the Restricted Stock Agreement), or otherwise. 13. SEVERABILITY. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 14. LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, AND NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF ILLINOIS, AND NO DEFENSE, 8 COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON. SUBJECT TO SECTION 15, THE PARTIES AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT MAY BE COMMENCED IN THE STATE COURTS, OR IN THE UNITED STATES DISTRICT COURTS IN THE STATE OF ILLINOIS. THE PARTIES CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 14 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY ACTION UNDER THIS AGREEMENT IN ANY OTHER JURISDICTION. 15. ARBITRATION. THE PARTIES HEREBY WAIVE AND SHALL NOT SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, CLAIM, COUNTERCLAIM, DEFENSE OR OTHER LITIGATION OR DISPUTE UNDER OR IN RESPECT OF THIS AGREEMENT. THE PARTIES AGREE THAT ANY SUCH DISPUTE RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, INCLUDING THE RULES FOR EMERGENCY MEASURES WHICH ARE HEREBY EXPRESSLY ADOPTED. SUCH ARBITRATION SHALL TAKE PLACE IN CHICAGO, ILLINOIS AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAWS OF THE STATE OF ILLINOIS. DECISIONS PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES. THE PREVAILING PARTY IN ARBITRATION SHALL BE ENTITLED TO RECOVER REASONABLE COSTS AND ATTORNEYS' FEES FROM THE OTHER PARTY. UPON THE CONCLUSION OF ARBITRATION, THE PARTIES MAY APPLY TO ANY APPROPRIATE COURT OF THE TYPE DESCRIBED IN SECTION 14 TO ENFORCE THE DECISION PURSUANT TO SUCH ARBITRATION. 16. MISCELLANEOUS. (a) Except for Executive's obligations pursuant to the Plan and the Restricted Stock Agreement, this Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein and may not be modified orally, but only by a writing subscribed by the party charged therewith. Except for Executive's obligations pursuant to the Plan and the Restricted Stock Agreement, this Agreement supersedes all prior agreements and understandings (whether oral or written) between the parties with respect to such subject matter. (b) This Agreement constitutes the product of the negotiation of the parties hereto and the enforcement hereof shall be interpreted in a neutral manner, 9 and not more strongly for or against any party based upon the draftsmanship hereof. (c) This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (d) Executive will furnish Pliant with such other and further documents, certificates and information as Pliant shall reasonably request in connection with this Agreement and the consummation of the transactions contemplated hereby. (e) This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by Executive. 17. THIRD PARTY BENEFICIARIES. The parties agree that the Released Parties shall be and hereby are third party beneficiaries to this Agreement with the same rights to enforce the terms of this Agreement as the parties hereto. Nothing contained herein shall be construed to impose any obligation on the Released Parties (other than Pliant as expressly set forth herein) with respect to or pursuant to this Agreement or any document or agreement referenced herein. 18. RELINQUISHMENT OF ADEA CLAIM. Executive agrees to relinquish any claims arising under the Age Discrimination in Employment Act (the "ADEA") and acknowledges receiving monies and other consideration in addition to that which Executive was already entitled to in order to release any claim Executive may have had under the ADEA. Under the ADEA, and the Older Workers Benefit Protection Act of 1999, Executive is allowed a period of forty five (45) days to consider this Agreement as it relates to any age discrimination claim. However, Executive specifically agrees to waive this forty five (45) day period in order to commence payment under this Agreement. Executive acknowledges that under the law, this Agreement does not become effective until the end of the seventh (7th) day following the date on which Executive signs this Agreement and during that seven (7) day period, Executive may revoke this Agreement. By signing below, Executive does not waive the seven (7) day period. In the event Executive revokes this Agreement within such period, Executive shall return to Pliant any and all sums paid to Executive by Pliant hereunder. Executive may consult with an attorney or other advisor before signing this Agreement, and by signing below, Executive acknowledges having had an opportunity to do so. 10 IN WITNESS WHEREOF, the parties hereto have made and entered into this Agreement as of the date first hereinabove set forth. I HAVE CAREFULLY READ THIS AGREEMENT; I FULLY UNDERSTAND WHAT IT MEANS, INCLUDING THE RELEASE SET FORTH IN SECTION 6(a), AND, MY ATTORNEY, IF APPLICABLE, HAS REVIEWED THE AGREEMENT WITH ME AND EXPLAINED ITS CONTENTS TO ME. REGARDLESS OF MY REPRESENTATION BY AN ATTORNEY OR DECISION NOT TO ENGAGE SUCH REPRESENTATION, I FULLY UNDERSTAND THE AGREEMENT'S CONTENTS AND THE EFFECTS THEREOF, AND I HAVE EXECUTED THE SAME OF MY OWN FREE WILL, WITHOUT ANY COERCION BY PLIANT OR ANY RELEASED PARTY. PLIANT: Pliant Corporation By: ----------------------------------------------- Name: --------------------------------------------- Title: -------------------------------------------- EMPLOYEE: -------------------------------------------------- Lori Roberts 11 EX-10.65 6 a2154755zex-10_65.txt EXHIBIT 10.65 Exhibit 10.65 PLIANT CORPORATION 2004 MANAGEMENT INCENTIVE COMPENSATION PLAN GENERAL 1.1 PURPOSE. The purpose of the Pliant Corporation 2004 Management Incentive Compensation Plan (the "Plan") is to advance the interests of the shareholders of Pliant Corporation ("Pliant") by providing performance-based incentives to eligible management associates of Pliant. 1.2 EFFECTIVE DATE. The Plan shall be effective for the Incentive Period beginning January 1, 2004. 1.3 PLAN NOT FUNDED. Incentive Plan Awards shall be made solely from the general assets of Pliant or its wholly-owned subsidiaries, as the Board may determine in its sole discretion. To the extent any person acquires a right to receive payments under the Plan, the right is no greater than the right of any other unsecured general creditor. DEFINITIONS 2.1 "BOARD" means the Board of Directors of Pliant. 2.2 "COMPANY" means Pliant, its predecessors and affiliates. 2.3 "CHANGE OF CONTROL" means a transaction pursuant to which a majority of the capital stock or assets of Pliant are sold. 2.4 "EMPLOYMENT AGREEMENT" means any applicable employment agreement entered into between Participant and Pliant or any affiliate of Pliant. 2.5 "INCENTIVE PERCENTAGE" means the percentage amount determined by adding the Quantitative Goals Incentive Percentage for a Participant determined pursuant to EXHIBIT A and the Qualitative Goals Incentive Percentage for a Participant determined pursuant to EXHIBIT B, provided, however, the Board may establish different Incentive Percentages for individual Participants or different classes Of Participants, and/or the achievement levels of the Performance Goals. 2.6 "INCENTIVE PERIOD" means the twelve month period beginning on January 1, 2004 and ending on December 31, 2004. 2.7 "INCENTIVE PLAN AWARD" means the incentive compensation award granted under the Plan which is contingent and based upon the attainment of the Performance Goals with respect to the Incentive Period. 2.8. "LONG TERM INCENTIVE PLAN" means the 2004 MIP Long Term Incentive Plan entered into contemporaneously herewith between the Company and each Participant. 2.9 "NONCOMPETITION AGREEMENT" means any applicable noncompetition agreement or similar covenant entered into between Participant and Pliant. 2.10 "PARTICIPANT" means a management employee of the Company or its affiliates participating in the Plan as provided in Section 3.1 hereof. 2.11 "PERFORMANCE GOALS" means the performance goals established by the Board for the Incentive Period. The Performance Goals shall be based upon the following: (i) 80% of the Performance Goals shall be the overall EBITDA and/or operating free cash flow of the Company during the Incentive Period ("Quantitative Goals") and (ii) 20% of the Performance Goals shall be individual qualitative objectives determined by the Board in the form of four (4) personal objectives for each Participant valued at 5% each ("Qualitative Goals"). Additionally, the Board may establish such other subjective or objective goals, including individual Performance Goals, which it deems appropriate. The determination of EBITDA and operating free cash flow shall be based upon components and criteria established from time to time by the Board in its sole and absolute discretion, and the Board's determination regarding these items shall be final and conclusive. PARTICIPATION 3.1. ELIGIBILITY. Associates eligible to participate in the Plan shall consist of officers and other key management personnel of the Company and certain of its subsidiaries as the Board determines. At any time, including during the Incentive Period while the Plan is in effect, the Board may add additional individuals or classes of individuals for or delete individuals or classes of individuals from participation in the Plan as it deems appropriate. INCENTIVE PLAN AWARDS 4.1. DETERMINATION OF INCENTIVE PLAN AWARDS. The Board shall, promptly after the date on which the necessary financial, individual or other information for the Incentive Period becomes available with a desired determination date of January 15, 2005, certify whether the Performance Goals have been attained for the Incentive Period. If the Performance Goals have been attained, the Board shall certify the amount of the Incentive Plan Award payable to each Participant. Any such determination by the Board shall be final and conclusive on all parties, but shall be based on such objective information or financial data as is relevant to the Performance Goals. Performance Goals shall, to the extent applicable, be based upon generally accepted accounting principles. The Board may rely conclusively on any such information provided by the Company's certified public accountants. 4.2. ELIGIBILITY AND AMOUNT OF INCENTIVE PLAN AWARD. (a) To be eligible for payment of any Incentive Plan Award, the Participant must satisfy each of the following conditions: (i) be actively employed by the Company or a Pliant affiliate during the Incentive Period to which the award pertains, as well as on the date of payment of the award; (ii) have performed the Participant's duties to the satisfaction of the Board; (iii) have not engaged in any act deemed by the Board to be inimical to the best interests of the Company or any affiliate; (iv) otherwise complied with the applicable employment policies at all times prior to the date the Incentive Plan Award is actually paid; and (v) not - 2 - breached any provision of this Plan, any Noncompetition Agreement or any Employment Agreement. No Incentive Plan Award shall be paid to any Participant who does not satisfy each of the above conditions. In the event of a Participant's death, the Incentive Plan Award shall be prorated based upon the number of full payroll periods worked during such Incentive Period when such Participant's death occurs. (b) The Incentive Plan Award shall be determined by multiplying the Participant's aggregate base salary during the Incentive Period by the Incentive Percentage determined pursuant to EXHIBIT A and EXHIBIT B. The Incentive Plan Awards shall be subject to a resin pricing adjustment and a currency exchange adjustment determined by the Board and shall be self-funding at 100% of Quantitative Goals and above. 4.3 PAYMENT OF AWARD. The Incentive Plan Award for the Incentive Period shall be paid to a participant after determination of the Incentive Plan Awards pursuant to SECTION 4.1 hereof, with a target pay date of January 15, 2005 and shall be based upon the level of achievement of the Quantitative Goals for the Incentive Period pursuant to EXHIBIT A and achievement of the Qualitative Goals for the Incentive Period pursuant to EXHIBIT B. In addition, an amount equal to one-half (1/2) of any Incentive Plan Award for the Incentive Period for each Participant will be added to the long term incentive plan award for such Participant pursuant to the Long Term Incentive Plan. 4.4 CHANGE OF CONTROL. It is the intent of the Plan that in the event of a successful Change of Control during the Incentive Period, (i) all Incentive Plan Awards will be determined based upon the achievement of Quantitative Goals and Qualitative Goals for the portion of the Incentive Period beginning on January 1, 2004 and ending on the date immediately preceding the closing date of any Change of Control transaction, (ii) such partial Incentive Plan Awards will be paid on the closing date of any such Change of Control transaction and (iii) immediately following the payment of such partial Incentive Plan Awards, this Plan will terminate and be of no further force and effect. ADMINISTRATION 5.1 ADMINISTRATION. The Plan shall be administered by the Board. Subject to the provisions of the Plan, the Board shall have full discretionary authority to administer and interpret the Plan, to exercise all powers either specifically granted to it under the Plan or as are necessary or advisable in the administration of the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for the administration of the Plan, all of which shall be binding on all persons, including the Company, its affiliates and the Participants (or any person claiming any rights under the Plan from or through any Participant). A majority of the Board shall constitute a quorum, and the Board shall act pursuant to a majority vote or by unanimous written consent. No member of the Board or the Board shall be liable for any action taken or determination made in good faith with respect to the Plan or any Incentive Plan Award paid hereunder. 5.2 DELEGATION. The Board may delegate its responsibilities for administering the Plan to one or more persons as the Board deems necessary. - 3 - PARTICIPANT COVENANTS 6.1 Each Participant, as a condition to participation in the Plan and in consideration of Participant's continued employment by the Company and/or its affiliates, agrees that for a period of time beginning on the date Participant executes a copy of the Plan and continuing for a period ending on the date which is the earlier of (i) one (1) year after the termination of Participant's employment with the Company, (ii) the closing date of any Change of Control transaction, or (iii) the termination of Participant's employment by the Company for any reason other than a breach of this Plan or any Noncompetition Agreement, such Participant shall not: (a) directly or indirectly, either individually or as a principal, partner, agent, employee, employer, consultant, stockholder, joint venturer, or investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, engage in, assist or have any active interest in a business located anywhere in (w) the world where the Company or any of its affiliates is doing business during the term of this covenant, (x) the United States, (y) the State of Illinois or (z) within a 500 mile radius of the Chicago, Illinois metropolitan area that (i) develops, manufactures, markets and/or sells value-added film, flexible packaging products and/or recloseable technologies including zippers and sliders or otherwise competes with or is similar in concept, design, format, or otherwise to the business conducted by the Company and its affiliates at any time during the term of this covenant; or (ii) purchases from the Company (notwithstanding the above, this paragraph shall not be construed to prohibit Participant from owning less than three percent (3%) of the securities of a corporation which is publicly traded on a securities exchange or over-the-counter); or (b) directly or indirectly, either individually, or as a principal, partner, agent, employee, employer, consultant, stockholder, joint venturer, or investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, (i) divert or attempt to divert (by solicitation, diversion or otherwise) from the Company or its affiliates any business with any customer, prospective customer or account of the Company or its affiliates with which Participant had any contact or association, which was under the supervision of Participant, or the identity of which was learned by Participant as a result of Participant's employment with the Company; (ii) accept the business of any customer, prospective customer or account of the Company or its affiliates with which Participant had any contact or association, which was under the supervision of Participant, or the identity of which was learned by Participant as a result of Participant's employment with the Company, whether solicited or not solicited by Participant if such business would be diverted from the Company or otherwise adversely effect the Company's business with such entity; (iii) solicit, induce or attempt to induce any salesperson, distributor, supplier, vendor, manufacturer, representative, agent, jobber or other person transacting business with the Company and/or its affiliates to terminate their relationship or association with the Company and/or its affiliates, or to represent, distribute or sell services or products in competition with services or products of the Company or its affiliates; (iv) induce, solicit, cause or attempt to induce or cause any employee of the Company or its affiliates to leave the employ of the Company or its affiliates; or (v) hire or otherwise accept the services of any employee or former employee of the Company, whether solicited or not solicited by Participant. (c) Notwithstanding the foregoing, in the event that a Participant desires, during the restrictive period in this SECTION 6.1, to engage in activity that Participant believes may be in - 4 - breach of this SECTION 6.1, Participant may discuss such activity with the Human Resources manager of the Company and the Company (i) will provide the Participant with a decision on whether such activity constitutes a breach of this SECTION 6.1 and (ii) may, upon the written consent of the Chief Executive Officer of the Company and the Board, consent to Participant's participation in such activity. 6.2 NON-DISCLOSURE. Participant shall not at any time or in any manner, directly or indirectly, use (for Participant's benefit or the benefit of any other party) or disclose to any party other than the Company any trade secrets or other Confidential Information (as defined below) learned or obtained by him while an employee, stockholder, officer, director or agent of the Company. As used herein, the term "CONFIDENTIAL INFORMATION" shall mean information, material and trade secrets proprietary to the Company or to any entity related or affiliated with the Company or designated as confidential by the Company, whether or not owned or developed by the Company, which Participant may obtain knowledge of or access to, through or as a result of the services provided to the Company or to any related or affiliated entity (including information conceived, originated, discovered or developed in whole or in part by Participant). Without limiting the generality of the foregoing, Confidential Information shall include, but is not limited to, the following types of information and other information of a similar nature (whether or not reduced to writing or still in development): data, documentation, diagrams, flow charts, formulas, research, economic and financial analysis, developments, processes, procedures, "know how," marketing techniques and materials, marketing and development plans, customer names and other information related to customers, price lists, pricing policies, and the Company derived market information and financial information. 6.3 AFFILIATE TRANSACTIONS. Neither Participant, any member of Participant's immediate family nor any other person or entity affiliated (as such term is defined and used in Rule 501(b) of the Securities Act of 1933, as amended) with Participant shall, during the restricted period set forth in SECTION 6.1 of this Plan, engage, directly or indirectly, in any business transaction with the Company or any person or entity affiliated with the Company without the prior written consent of the Board. MISCELLANEOUS 7.1 NO GUARANTEE. While a discretionary Incentive Plan Award may have been paid in the past, whether such payments will be made in the future will depend upon various factors, such as the financial condition and performance of the Company and its affiliates. It is the current intent of the Plan to pay a minimum Incentive Plan Award to each Participant in accordance with EXHIBIT A even in the event that achievement of Quantitative Goals is below 100% and there is no achievement of Qualitative Goals. The Company may withhold an Incentive Plan Award, or portions thereof, for any reason including gross misconduct (e.g., theft, dishonesty/compromised integrity, fraud, harassment, etc.), breach of any Employment Agreement or Noncompetition Agreement or any actions deemed by the Board to be inimical to the best interests of the Company. 7.2 TAX WITHHOLDING. The Company shall have the right to deduct from all payments made under the Plan any applicable local or national taxes required by law to be withheld with respect to such payments. - 5 - 7.3 GOVERNING LAW. Because the corporate headquarters of the Company are located in the state of Illinois and the Participant will have frequent contact with individuals at the corporate headquarters of the Company, the parties hereto agree that the Plan and all rights to an Incentive Plan Award hereunder shall be construed in accordance with and governed by the laws of the State of Illinois. 7.4. ASSIGNMENT OR PLEDGE. No rights under the Plan, contingent or otherwise, shall be assignable or subject to any encumbrance, pledge or charge of any nature. 7.5 EMPLOYMENT. Neither the adoption of the Plan nor its operation shall in any way (i) affect the rights and power of the Company or applicable Pliant affiliate to dismiss or discharge any Participants, or (ii) alter the at-will nature of employment of any Plan Participant, subject, however to local law and any rights under the Employment Agreement. 7.6 DEATH. In the event of a Participant's death prior to the payment of any Incentive Plan Award to which the Participant is otherwise entitled, payment shall be made to the Participant's estate. 7.7 JOB CHANGE. Eligible Participants who become eligible to participate in the Plan by reason of a job change will be eligible for a prorated incentive payment based on the actual days worked during the Incentive Period, if they meet all other requirements of the Plan. 7.8 RIGHTS TO PAYMENTS. No absolute right to any Incentive Plan Award shall be considered as having accrued to any Participant prior to the close of the Incentive Period with respect to which the award is made. No Participant shall have any enforceable right to receive any Incentive Plan Award made with respect to an Incentive Period or to retain any payment made with respect thereto if for any reason the requirements of Section 4.2(a) are not satisfied. 7.9 PRIOR PLANS. The Plan supercedes and replaces all previous and existing plans of the Company regarding executive incentive compensation. This will confirm that any individual who participates under this Plan will not participate under any other Company incentive compensation or bonus plan unless expressly provided for in writing. 7.10 CONFLICTS. To the extent there are any conflicts between this Plan and any applicable Employment Agreement, the provisions of the Employment Agreement shall govern except for the provisions of SECTION 6 of the Plan which shall take precedent over any conflicting term in any Employment Agreement. 7.11 SEVERABILITY. The Company and Participant believe the covenants against competition and the consideration therefore contained in this Plan are reasonable and fair in all respects, and are necessary to protect the interests of the Company. However, in case any one or more of the provisions or parts of a provision contained in this Plan shall, for any reason, be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Plan or any other jurisdiction, but this Plan shall be reformed and construed in any such jurisdiction as if such invalid or illegal or unenforceable provision or part of a provision had never been contained herein and such provision or part shall be reformed so that it would be valid, legal and - 6 - enforceable to the maximum extent permitted in such jurisdiction. Without limiting the foregoing, the parties intend that the covenants and agreements contained in parts (w), (x), (y) or (z) of SECTION 6.1 (a) shall be deemed to be a series of separate covenants and agreements, one for each of the world where the Company and its affiliates are doing business, the United States, the State of Illinois and within a 500 mile radius of the Chicago, Illinois metropolitan area. If, in any legal proceeding, a court or arbitrator shall refuse to enforce all the separate covenants and agreements deemed to be included in parts (w), (x), (y) and (z) of SECTION 6.1(a), it is the intention of the parties hereto that the covenants and agreements which, if eliminated, would permit the remaining separate covenants and agreements to be enforced in such proceeding shall, for the purpose of such proceeding, be deemed eliminated from the provisions of parts (w), (x), (y) and (z) of SECTION 6.1(a). Participant hereby accepts the terms and conditions on the Incentive Plan Award granted by the Company and agrees to be bound by the provisions of the Plan. PARTICIPANT: Signature: ------------------------------------ Printed Name: --------------------------------- PLIANT: PLIANT CORPORATION By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- - 7 - EXHIBIT A Incentive Percentage for Quantitative Goals Participant's target Incentive Percentage is______% (the "Target Percentage") The achievement of Quantitative Goals shall constitute 80% of the Target Percentage which shall equal ______% (the "Quantitative Goal Target Percentage")

* The Quantitative Goals Incentive Percentage shall increase incrementally for each percentage of achievement between 100% of Quantitative Goals and 115% of Quantitative Goals (at a rate of 6.67% per percent increase). - 8 - EXHIBIT B Incentive Percentage for Qualitative Goals Participant's target Incentive Percentage is ______% (the "Target Percentage") The achievement of all Qualitative Goals shall constitute 20% of the Target Percentage, with each Qualitative Goal achieved earning 5% of the Target Percentage.

- 9 - EX-10.66 7 a2154755zex-10_66.txt EXHIBIT 10.66 Exhibit 10.66 PLIANT CORPORATION 2004 MIP LONG TERM INCENTIVE PLAN GENERAL 1.1 PURPOSE. The purpose of the Pliant Corporation 2004 MIP Long Term Incentive Plan (the "Plan") is to advance the interests of the shareholders of Pliant Corporation ("Pliant") by providing performance-based incentives to eligible management associates of Pliant who maintain their relationship with Pliant over a period of years. 1.2 EFFECTIVE DATE. The Plan shall be effective for the Incentive Period beginning January 1, 2004. 1.3 PLAN NOT FUNDED. Long Term Incentive Plan Awards shall be made solely from the general assets of Pliant or its wholly-owned subsidiaries, as the Board may determine in its sole discretion. To the extent any person acquires a right to receive payments under the Plan, the right is no greater than the right of any other unsecured general creditor. DEFINITIONS 2.1 "BOARD" means the Board of Directors of Pliant. 2.2 "COMPANY" means Pliant, its predecessors and affiliates. 2.3 "CHANGE OF CONTROL" means a transaction pursuant to which a majority of the capital stock or assets of Pliant are sold. 2.4 "EMPLOYMENT AGREEMENT" means any applicable employment agreement entered into between Participant and Pliant or any affiliate of Pliant. 2.5 "INCENTIVE PERIOD" means the four year period beginning on January 1, 2004 and ending on December 31, 2007. 2.6 "LONG TERM INCENTIVE PLAN AWARD" means the incentive compensation award granted under the Plan which is contingent and based upon the payment of awards granted to Participants pursuant any applicable annual Management Incentive Plan during the Incentive period. 2.7 "MANAGEMENT INCENTIVE PLANS" means any applicable Company Management Incentive Plan as defined by the Board for which Participant participated in during the Incentive Period. 2.8 "NONCOMPETITION AGREEMENT" means any applicable noncompetition agreement entered into between Participant and Pliant. 2.9 "PARTICIPANT" means a management employee of the Company or its affiliates participating in the Plan as provided in Section 3.1 hereof. PARTICIPATION 3.1. ELIGIBILITY. Associates eligible to participate in the Plan shall consist of all officers and other key management personnel of the Company and certain of its subsidiaries that participate in and receive awards pursuant to applicable Company Management Incentive Plan for which Participant participated in during the Incentive Period. At any time, including during the Incentive Period while the Plan is in effect, the Board may add additional individuals or classes of individuals for or delete individuals or classes of individuals from participation in the Plan as it deems appropriate. LONG TERM INCENTIVE PLAN AWARDS 4.1. ELIGIBILITY AND AMOUNT OF LONG TERM INCENTIVE PLAN AWARD. (a) To be eligible for payment of any Long Term Incentive Plan Award, the Participant must satisfy each of the following conditions: (i) be actively employed by the Company or a Pliant affiliate during the Incentive Period to which the award pertains, as well as on the date of payment of the award; (ii) have performed the Participant's duties to the satisfaction of the Board; (iii) have not engaged in any act deemed by the Board to be inimical to the best interests of the Company or any affiliate; (iv) otherwise complied with the applicable employment policies at all times prior to the date the Long Term Incentive Plan Award is actually paid; and (v) not breached any provision of this Plan, any Noncompetition Agreement or any Employment Agreement. No Long Term Incentive Plan Award shall be paid to any Participant who does not satisfy each of the above conditions. (b) The amount of the Long Term Incentive Plan Award shall be determined by adding an amount equal to one-half (1/2) of any award earned by any Participant under each applicable Company Management Incentive Plan as defined by the Board for which such Participant participated in during the Incentive Period. (c) In the event that a Participant experiences a job change within the Company which makes such Participant no longer eligible to participate in the Plan, such Participant's Long Term Incentive Plan Award earned to the date of such job change shall be paid to such Participant pursuant to SECTION 4.2. so long as such Participant has satisfied the conditions of SECTION 4.1 (a). 4.2 PAYMENT OF AWARD. The Long Term Incentive Plan Award for the Incentive Period shall be paid to a participant on March 15, 2008, provided, however, it is the intent of this Plan that in the event of a successful Change of Control transaction during the Incentive Period, on the closing date of such Change of Control transaction this Plan shall terminate and the Long Term Incentive Award amount earned as of such closing date shall be immediately due and payable. ADMINISTRATION 5.1 ADMINISTRATION. The Plan shall be administered by the Board. Subject to the provisions of the Plan, the Board shall have full discretionary authority to administer and interpret the Plan, to exercise all powers either specifically granted to it under the Plan or as are necessary or advisable in the administration of the Plan, to prescribe, amend and rescind rules - 2 - and regulations relating to the Plan, and to make all other determinations necessary or advisable for the administration of the Plan, all of which shall be binding on all persons, including the Company, its affiliates and the Participants (or any person claiming any rights under the Plan from or through any Participant). A majority of the Board shall constitute a quorum, and the Board shall act pursuant to a majority vote or by unanimous written consent. No member of the Board or the Board shall be liable for any action taken or determination made in good faith with respect to the Plan or any Long Term Incentive Plan Award paid hereunder. 5.2 DELEGATION. The Board may delegate its responsibilities for administering the Plan to one or more persons as the Board deems necessary. PARTICIPANT COVENANTS 6.1 Each Participant, as a condition to participation in the Plan and in consideration of Participant's continued employment by the Company and/or its affiliates, agrees that for a period of time beginning on the date Participant executes a copy of the Plan and continuing for a period ending on the date which is the earlier of (i) one (1) year after termination of Participant's employment with the Company or its affiliate, (ii) the closing date of any Change of Control transaction, or (iii) the termination of Participant's employment by the Company for any reason other than a breach of this Plan or any Noncompetition Agreement, such Participant shall not: (a) directly or indirectly, either individually or as a principal, partner, agent, employee, employer, consultant, stockholder, joint venturer, or investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, engage in, assist or have any active interest in a business located anywhere in (w) the World where the Company or any of its affiliates is doing business doing the term of this covenant, (x) the United States, (y) the State of Illinois or (z) within a 500 mile radius of the Chicago, Illinois metropolitan area that (i) develops, manufactures, markets and/or sells value-added film, flexible packaging products and/or recloseable technologies including zippers and sliders or otherwise competes with or is similar in concept, design, format, or otherwise to the business conducted by the Company and its affiliates at any time during the term of this covenant; or (ii) purchases from the Company (notwithstanding the above, this paragraph shall not be construed to prohibit Participant from owning less than three percent (3%) of the securities of a corporation which is publicly traded on a securities exchange or over-the-counter); or (b) directly or indirectly, either individually, or as a principal, partner, agent, employee, employer, consultant, stockholder, joint venturer, or investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, (i) divert or attempt to divert (by solicitation, diversion or otherwise) from the Company or its affiliates any business with any customer, prospective customer or account of the Company or its affiliates with which Participant had any contact or association, which was under the supervision of Participant, or the identity of which was learned by Participant as a result of Participant's employment with the Company; (ii) accept the business of any customer, prospective customer or account of the Company or its affiliates with which Participant had any contact or association, which was under the supervision of Participant, or the identity of which was learned by Participant as a result of Participant's employment with the Company, whether solicited or not solicited by Participant if such business would be diverted from the Company or otherwise adversely effect the Company's business with such entity; (iii) solicit, induce or attempt to induce any salesperson, distributor, supplier, vendor, manufacturer, representative, agent, jobber or - 3 - other person transacting business with the Company and/or its affiliates to terminate their relationship or association with the Company and/or its affiliates, or to represent, distribute or sell services or products in competition with services or products of the Company or its affiliates; (iv) induce, solicit, cause or attempt to induce or cause any employee of the Company or its affiliates to leave the employ of the Company or its affiliates; or (v) hire or otherwise accept the services of any employee or former employee of the Company, whether solicited or not solicited by Participant. (c) Notwithstanding the foregoing, in the event that a Participant desires, during the restrictive period in this SECTION 6.1, to engage in activity that Participant believes may be in breach of this SECTION 6.1, Participant may discuss such activity with the Human Resources manager of the Company and the Company (i) will provide the Participant with a decision on whether such activity constitutes a breach of this SECTION 6.1 and (ii) may, upon the written consent of the Chief Executive Officer of the Company and the Board, consent to Participant's participation in such activity. 6.2 NON-DISCLOSURE. Participant shall not at any time or in any manner, directly or indirectly, use (for Participant's benefit or the benefit of any other party) or disclose to any party other than the Company any trade secrets or other Confidential Information (as defined below) learned or obtained by him while an employee, stockholder, officer, director or agent of the Company. As used herein, the term "CONFIDENTIAL INFORMATION" shall mean information, material and trade secrets proprietary to the Company or to any entity related or affiliated with the Company or designated as confidential by the Company, whether or not owned or developed by the Company, which Participant may obtain knowledge of or access to, through or as a result of the services provided to the Company or to any related or affiliated entity (including information conceived, originated, discovered or developed in whole or in part by Participant). Without limiting the generality of the foregoing, Confidential Information shall include, but is not limited to, the following types of information and other information of a similar nature (whether or not reduced to writing or still in development): data, documentation, diagrams, flow charts, formulas, research, economic and financial analysis, developments, processes, procedures, "know how," marketing techniques and materials, marketing and development plans, customer names and other information related to customers, price lists, pricing policies, and the Company derived market information and financial information. 6.3 AFFILIATE TRANSACTIONS. Neither Participant, any member of Participant's immediate family nor any other person or entity affiliated (as such term is defined and used in Rule 501(b) of the Securities Act of 1933, as amended) with Participant shall, during the restricted period set forth in SECTION 6.1 of this Plan, engage, directly or indirectly, in any business transaction with the Company or any person or entity affiliated with the Company without the prior written consent of the Board. MISCELLANEOUS 7.1 NO GUARANTEE. While a discretionary Long Term Incentive Plan Award may have been paid in the past, whether such payments will be made in the future will depend upon various factors, such as the financial condition and performance of the Company and its affiliates. It is the current intent of the Management Incentive Plans to pay a minimum incentive plan award to each Participant of such Management Incentive Plans even in the event of failure - 4 - to achieve performance goals set thereunder, with one-half of such minimum incentive plan award under such Management Incentive Plans being added to the Long Term Incentive Plan Award. The Company may withhold an Long Term Incentive Plan Award, or portions thereof, for any reason including gross misconduct (e.g., theft, dishonesty/compromised integrity, fraud, harassment, etc.), breach of any Employment Agreement or Noncompetition Agreement or any actions deemed by the Board to be inimical to the best interests of the Company. 7.2 TAX WITHHOLDING. The Company shall have the right to deduct from all payments made under the Plan any applicable local or national taxes required by law to be withheld with respect to such payments. 7.3 GOVERNING LAW. Because the corporate headquarters of the Company are located in the state of Illinois and the Participant will have frequent contact with individuals at the corporate headquarters of the Company, the parties hereto agree that the Plan and all rights to an Long Term Incentive Plan Award hereunder shall be construed in accordance with and governed by the laws of the State of Illinois. 7.4. ASSIGNMENT OR PLEDGE. No rights under the Plan, contingent or otherwise, shall be assignable or subject to any encumbrance, pledge or charge of any nature. 7.5 EMPLOYMENT. Neither the adoption of the Plan nor its operation shall in any way (i) affect the rights and power of the Company or applicable Pliant affiliate to dismiss or discharge any Participants, or (ii) alter the at-will nature of employment of any Plan Participant, subject, however to local law and any rights under the Employment Agreement. 7.6 DEATH. In the event of a Participant's death prior to the payment of any Long Term Incentive Plan Award to which the Participant is otherwise entitled, payment shall be made to the Participant's estate. 7.7 JOB CHANGE. Eligible Participants who become eligible to participate in the Plan by reason of a job change will be eligible for a Long Term Incentive Plan Award based upon such "Participant's pro rated Management Incentive Plan awards if they meet all other requirements of the Plan. 7.8 RIGHTS TO PAYMENTS. No absolute right to any Long Term Incentive Plan Award shall be considered as having accrued to any Participant prior to the close of the Incentive Period with respect to which the award is made. No Participant shall have any enforceable right to receive any Long Term Incentive Plan Award made with respect to an Incentive Period or to retain any payment made with respect thereto if for any reason the requirements of SECTION 4.l(a) are not satisfied. 7.9 PRIOR PLANS. The Plan supercedes and replaces all previous and existing plans of the Company regarding executive incentive compensation. This will confirm that any individual who participates under this Plan will not participate under any other Company incentive compensation or bonus plan unless expressly provided for in writing. 7.10 CONFLICTS. To the extent there are any conflicts between this Plan and any applicable Employment Agreement, the provisions of the Employment Agreement shall govern - 5 - except for the provisions of SECTION 6 of the Plan which shall take precedent over any conflicting term in any Employment Agreement. 7.11 SEVERABILITY. The Company and Participant believe the covenants against competition and the consideration paid therefor contained in this Plan are reasonable and fair in all respects, and are necessary to protect the interests of the Company. However, in case any one or more of the provisions or parts of a provision contained in this Plan shall, for any reason, be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Plan or any other jurisdiction, but this Plan shall be reformed and construed in any such jurisdiction as if such invalid or illegal or unenforceable provision or part of a provision had never been contained herein and such provision or part shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted in such jurisdiction. Without limiting the foregoing, the parties intend that the covenants and agreements contained in parts (w), (x), (y) or (z) of SECTION 6.1 (a) shall be deemed to be a series of separate covenants and agreements, one for each of the world where the Company and its affiliates are doing business, the United States, the State of Illinois and within a 500 mile radius of the Chicago, Illinois metropolitan area. If, in any legal proceeding, a court or arbitrator shall refuse to enforce all the separate covenants and agreements deemed to be included in parts (w), (x), (y) and (z) of SECTION 6.1(a), it is the intention of the parties hereto that the covenants and agreements which, if eliminated, would permit the remaining separate covenants and agreements to be enforced in such proceeding shall, for the purpose of such proceeding, be deemed eliminated from the provisions of parts (w), (x), (y) and (z) of SECTION 6.1. Participant hereby accepts the terms and conditions on the Long Term Incentive Plan Award granted by the Company and agrees to be bound by the provisions of the Plan. PARTICIPANT: Signature: ------------------------------- Printed Name: PLIANT: PLIANT CORPORATION By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- - 6 - EX-10.68 8 a2154755zex-10_68.txt EXHIBIT 10.68 Exhibit 10.68 FINAL DRAFT PLIANT CORPORATION 2004 RESTRICTED STOCK INCENTIVE PLAN FORM OF RESTRICTED STOCK AGREEMENT THIS RESTRICTED STOCK AGREEMENT (this "AGREEMENT") is dated as of [ ], 2004 between Pliant Corporation, a Utah corporation (the "CORPORATION") and [ ] (the "EXECUTIVE"). WITNESSETH WHEREAS, pursuant to the Pliant Corporation 2004 Restricted Stock Incentive Plan (as amended, supplemented or otherwise modified from time to time, the "PLAN"), the Corporation has granted to the Executive effective as of the date hereof (the "AWARD DATE"), a right to participate in the Plan, upon the terms and conditions set forth herein and in the Plan. NOW THEREFORE, in consideration of services rendered and to be rendered by the Executive, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows: 1. DEFINED TERMS. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan and/or the Corporation's Fourth Amended and Restated Articles of Incorporation (as amended, supplemented or otherwise modified from time to time, the "CHARTER"). 2. ISSUANCE AND SALE OF RESTRICTED STOCK. Subject to the terms of this Agreement and in reliance upon the representations and warranties, covenants and agreements contained herein, the Corporation hereby issues and sells to the Executive, and the Executive hereby purchases from the Corporation, an aggregate of [ ] shares of Series B Redeemable Preferred Stock, par value $.01 per share of the Corporation (the "RESTRICTED STOCK") on the date hereof at a per share purchase price equal to $160 (the "PURCHASE PRICE"). The parties agree that the fair value of one share of Restricted Stock on the date hereof is [$160]. 3. CLOSING. The closing of the transactions contemplated hereby (the "CLOSING") will take place simultaneously with the execution and delivery of this Agreement. The Closing shall take place at the offices of [ ]. 4. DELIVERIES AT THE CLOSING. At the Closing: (a) the Corporation shall deliver to the Executive a stock certificate (the "ORIGINAL CERTIFICATE") representing the Restricted Stock registered in the name of the Executive in the stock register of the Corporation; and (b) the Executive shall deliver a check for the aggregate Purchase Price for all shares of Restricted Stock to the Corporation. 5. REPRESENTATIONS AND WARRANTIES. (a) EXECUTIVE REPRESENTATIONS AND WARRANTIES. In connection with the acquisition of the Restricted Stock hereunder, the Executive hereby represents and warrants to the Corporation as of the date of this Agreement that: (i) the Executive has the full authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance by him of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action; (ii) this Agreement has been duly and validly executed and delivered by the Executive and this Agreement constitutes a legal and binding obligation of the Executive, enforceable against the Executive in accordance with its terms and the execution, delivery and performance of this Agreement by the Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject; (iii) the Executive understands that the Restricted Stock has been issued pursuant to the Plan and is bound by the terms and conditions contained in this Agreement as well as the Plan and the Executive will not transfer the Restricted Stock acquired by him hereunder, except in compliance with this Agreement and the Plan; (iv) the Executive is acquiring the Restricted Stock for his own account, for investment only and not with a view to, or an intention of, the distribution thereof in violation of the Securities Act of 1933, as amended or any successor federal law in effect from time to time (the "SECURITIES ACT"); (v) the Executive has no need for liquidity in his investment in the Restricted Stock and is able to bear the economic risk of his investment in the Restricted Stock for an indefinite period of time and understands that the Restricted Stock has not been registered or qualified under the Securities Act or any applicable state securities laws, by reason of the issuance of the Restricted Stock in a transaction exempt from registration and qualification requirements of the Securities Act or such state securities laws and, therefore, cannot be sold unless subsequently registered or qualified under the Securities Act or such state securities laws or an exemption from registration or qualification is available; (vi) the Executive has been represented by counsel and/or advisors in connection with the execution and delivery of this Agreement and has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of the Restricted Stock and the fair value of the Restricted Stock and has had full access to or been provided with all such other information concerning the Corporation as he has requested; 2 (vii) the Executive has reviewed, or has had an opportunity to review, a copy of the Plan (including all schedules and exhibits referenced therein); (viii) the Executive is an officer of the Corporation, and has generally such knowledge and experience in financial and business matters and with respect to investments in securities of privately held companies such that the Executive is capable of evaluating the risks and merits of his investment in the Restricted Stock; (ix) the Executive further understands that this Agreement is made with the Executive in reliance upon his representations to the Corporation contained in this SECTION 5. (b) CORPORATION REPRESENTATIONS AND WARRANTIES. In connection with the issuance and sale by the Corporation to the Executive of the Restricted Stock, the Corporation represents and warrants that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, it has full corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance by it of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action; (ii) the Corporation has all requisite power and authority to execute and deliver this Agreement and any and all instruments necessary or appropriate in order to effectuate fully the terms and conditions of this Agreement, and the transactions contemplated thereby. This Agreement has been duly authorized by all necessary action on the part of the Corporation, has been duly executed and delivered by the Corporation and constitutes the valid and legally binding obligation of the Corporation, enforceable in accordance with its terms and conditions, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (iii) the authorization, issuance, sale and delivery of the Restricted Stock, when issued in accordance with this Agreement, will be duly authorized by all requisite action of the Corporation's Board of Directors. The Restricted Stock, when issued in accordance with this Agreement, will be validly issued and outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, free and clear of any liens and restrictions created by or through the Corporation whatsoever other than those contained in the Plan and this Agreement; 3 6. VESTING OF RESTRICTED SHARES. (a) On each of the next 48 monthly anniversaries of the date hereof (each a "VESTING DATE"), 1/48 of the Restricted Stock shall vest, provided that the Executive is employed by the Corporation as its [Insert Title](1) pursuant to the Employment Agreement between the Executive and the Corporation (as amended, supplemented or otherwise modified from time to time, the "EMPLOYMENT AGREEMENT"), as of each such Vesting Date. (b) Upon the consummation of a (i) Liquidation Event, (ii) a Qualified Public Offering, (iii) the redemption by the Corporation of all of the issued and outstanding shares of Series A Preferred Stock pursuant to Section 3.3(b)(iii) of the Charter (the "FINAL SERIES A REDEMPTION"), (iv) the redemption by the Corporation of 80% or more of the aggregate number of shares of Series A Preferred Stock outstanding at any time pursuant to Section 3.3(b)(iv) or (v) of the Charter (the "OPTIONAL SERIES A REDEMPTION"), and (v) to the extent the Corporation consummates an Exchange, repayment of all of the outstanding principal and interest of the Exchange Notes (the "EXCHANGE NOTE REPAYMENT" and collectively with the Final Series A Redemption and the Optional Series A Redemption, a "SERIES A VESTING EVENT") provided that, in each case, the Executive is employed by the Corporation as its President and Chief Executive Officer pursuant to the Employment Agreement following the date hereof to the date of the consummation of such Liquidation Event, Qualified Public Offering and/or Series A Vesting Event, all Restricted Stock held by the Executive, which shall then be Unvested Stock, shall automatically vest as of the date of the consummation of the Liquidation Event, Qualified Public Offering and/or the Series A Vesting Event. (c) Shares of Restricted Stock which have become vested hereunder are referred to herein as "VESTED STOCK" and all other shares of Restricted Stock are referred to herein as "UNVESTED STOCK." Shares of Restricted Stock that are Unvested Stock do not have any rights conferred upon the Restricted Stock under the Charter, including without limitation, the right to receive any payment or other consideration and conversion or redemption rights thereunder, until such time as they became Vested Stock in accordance with this Agreement and the Executive hereby waives all of the rights in respect thereof; provided, however, that so long as the Executive is employed by the Corporation as its President and Chief Executive Officer pursuant to the Employment Agreement, the Executive shall be entitled to exercise the voting rights with respect to the Vested Stock and the Unvested Stock. The Executive hereby agrees that to the extent that he shall have received any payment or other consideration relating to, or in respect of, the Unvested Stock, the Executive shall be deemed to receive such payment or other consideration as agent for the Corporation and shall immediately upon receipt of such payment or other consideration deliver such payment or other consideration to the Corporation. (d) To the extent that any dividends would be payable with respect to any Restricted Stock which is Unvested Stock pursuant to Section 3.3(c)(iii) if such Unvested Stock were Vested Stock at the time of such dividend, such dividends which would have been payable with respect to such Unvested Stock were it Vested Stock shall be held in trust by the Corporation, and shall be paid with respect to such shares of Unvested Stock at such time, but - ---------- (1) To be revised if no Employment is entered between the Company and the Executive and appropriate definitions to be inserted relating thereto. 4 only in the event that, such shares of Unvested Stock become Vested Stock. At such time as such shares of Unvested Stock become subject to repurchase by the Corporation pursuant to Section 8 hereof, such dividends shall be forfeited and no longer payable under any circumstances. 7. TERMINATION OF EMPLOYMENT IN CONNECTION WITH A LIQUIDATION EVENT. (a) If the Executive's employment with the Corporation is terminated pursuant to a Termination Without Cause or a Resignation for Good Reason (as such terms are defined in the Employment Agreement) and a Liquidation Event or Qualified Public Offering occurs prior to the first anniversary of the Termination Date (as such term is defined in the Employment Agreement), then all Restricted Stock held by the Executive which shall then be Unvested Stock shall automatically vest as of the date of the consummation of such Liquidation Event or Qualified Public Offering. (b) If the Executive's employment with the Corporation is terminated pursuant to a Termination Without Cause or a Resignation for Good Reason (as such terms are defined in the Employment Agreement) and a Series A Vesting Event occurs within 90 days following the Termination Date (as such term is defined in the Employment Agreement), then all Restricted Stock held by the Executive which shall then be Unvested Stock shall automatically vest as of the date of the consummation of such Series A Vesting Event. (c) If the Executive's employment with the Corporation is terminated as a result of the Executive's Death or Disability (as such terms are defined in the Employment Agreement) and a Liquidation Event or a Qualified Public Offering is consummated within 90 days following such Termination Date (as such term is defined in the Employment Agreement), then all Restricted Stock held by the Executive which shall then be Unvested Stock shall automatically vest as of the date of the consummation of such Liquidation Event or Qualified Public Offering. 8. EFFECT OF TERMINATION OF EMPLOYMENT; REPURCHASE OF UNVESTED STOCK. (a) REPURCHASE OF UNVESTED STOCK. The Executive's shares of Unvested Stock, to the extent such shares have not become Vested Stock upon the Termination Date (as defined in the Employment Agreement), may, at any time, and from time to time on or after the Termination Date, at the Corporation's option, be repurchased by the Corporation at a price per share equal to the Purchase Price. The Corporation, at its option, may assign or transfer such repurchase right to any affiliate or assignee of the Corporation. On and after the Termination Date (as defined in the Employment Agreement), the Executive shall have no rights in, and hereby forfeits any and all rights the Executive may have with respect to, the Unvested Stock (except pursuant to Section 7 if such Unvested Stock shall become Vested Stock in accordance therewith) if any, and hereby assigns, transfers and grants a lien and security interest to the Corporation in the Unvested Stock and any rights he may have with respect thereto. In order to preserve the Executive's right to accelerated vesting of the Unvested Stock in accordance with Section 7, if the Executive's employment as [Insert Title] pursuant to the Employment Agreement is terminated (i) pursuant to a Termination Without Cause or a Resignation for Good Reason (as such terms are defined in the Employment Agreement), the Corporation shall not 5 repurchase the Executive's shares of Unvested Stock prior to the first anniversary of the Termination Date (as defined in the Employment Agreement), or (ii) pursuant to a termination as a result of a death or Disability (as such term is defined in the Employment Agreement), the Corporation shall not repurchase the Executive's shares of Unvested Stock prior to the 90 days following the Termination Date (as defined in the Employment Agreement), provided that, in each case, such Unvested Stock shall never become Vested Stock except in accordance with Section 7. (b) The Corporation's right pursuant to this Agreement to repurchase Restricted Stock from the Executive shall be limited to the repurchase of Unvested Stock. Termination of the Executive's Employment with the Corporation shall in no way affect any of the Executive's rights of ownership of the Vested Stock. Immediately following the Termination Date (as defined in the Employment Agreement) and upon delivery of the Original Certificate to the Corporation by the Executive, the Corporation shall, in exchange for the Original Stock Certificate, deliver to the Executive, (i) a stock certificate (the "VESTED STOCK CERTIFICATE") representing the number of shares of Vested Stock held by the Executive as of the Termination Date (as defined in the Employment Agreement) and (ii) a stock certificate (the "UNVESTED STOCK CERTIFICATE") representing the number of shares of Unvested Stock held by the Executive as of the Termination Date (as defined in the Employment Agreement). In the event that such shares of Unvested Stock become Vested Stock pursuant to Section 7 above, the Corporation shall, in exchange for the Unvested Stock Certificate, deliver to the Executive either a stock certificate representing such shares of Vested Stock or the Mandatory Redemption Price for such shares, as the case may be. In addition to any other legends placed upon the certificates representing Restricted Stock, certificates representing Unvested Stock shall have the following legend: "THE SHARES OF STOCK EVIDENCED HEREBY ARE UNVESTED STOCK AS DEFINED IN THE RESTRICTED STOCK AGREEMENT DATED AS OF [ ] __, 2004 BETWEEN THE CORPORATION AND THE EXECUTIVE NAMED THEREIN (THE "RESTRICTED STOCK AGREEMENT") AND, EXCEPT TO THE EXTENT PROVIDED IN SUCH RESTRICTED STOCK AGREEMENT, THE HOLDER OF SUCH SHARES IS NOT ENTITLED TO ANY INTEREST OR RIGHTS PROVIDED THEREIN UNTIL SUCH TIME AS THEY BECOME VESTED STOCK IN ACCORDANCE WITH THE RESTRICTED STOCK AGREEMENT" (c) In the event that the any capital stock is to be repurchased pursuant to this Section 8 or in order to effectuate the Drag Along Rights contained in the Plan, the Executive and his successors, assigns or representatives shall take (at the Corporation's expense) all steps necessary and desirable to obtain all required third-party, governmental and regulatory consents and approvals and take all other actions necessary and desirable to facilitate the consummation of such repurchases or such Drag Along Rights, as the case may be, in a timely manner. The Executive shall promptly return to the Corporation share certificates representing shares of the capital stock repurchased pursuant to this Section 8. 9. CONVERSION UPON A QUALIFIED PUBLIC OFFERING. In the event an automatic conversion of the Restricted Stock occurs upon a Qualified Public Offering pursuant to Article III, Section 3.3(c)(iv) of the Charter, the Executive shall take the same necessary and desirable actions in connection with the consummation of the Qualified Public Offering as the other 6 stockholders are required to take in connection therewith, including without limitation, the execution and delivery of any underwriting, custody, lock-up or similar agreements. 10. STOCK CERTIFICATES. (a) CERTIFICATES TO BE HELD BY CORPORATION; LEGEND. Any certificates representing Restricted Stock shall bear the following legend: "THE OWNERSHIP OF THIS CERTIFICATE AND THE SHARES OF STOCK EVIDENCED HEREBY AND ANY INTEREST THEREIN IS SUBJECT TO SUBSTANTIAL RESTRICTIONS ON TRANSFER UNDER AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND PLIANT CORPORATION. A COPY OF SUCH AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF PLIANT CORPORATION." (b) STOCK POWER; POWER OF ATTORNEY. Concurrent with the execution and delivery of this Agreement, the Executive shall deliver to the Corporation an executed stock power in the form attached hereto as EXHIBIT A, in blank. The Executive, by acceptance of the Restricted Stock Award under the Plan, shall be deemed to appoint, and does so appoint by execution of this Agreement, the Corporation and each of its authorized representatives as the Executive's attorney(s)-in-fact to: (i) effect any transfer of, or transaction with respect to, capital stock of the Corporation pursuant to or referenced in Section hereof (including any Drag Along Rights); (ii) to effect a conversion of the Restricted Stock upon a Qualified Public Offering pursuant to Article III, Section 3.3(c)(iv) of the Charter; and (iii) to execute such documents as the Corporation deems necessary or advisable in connection with any such transfer or transaction or conversion. 11. TAX ELECTION. THE EXECUTIVE ACKNOWLEDGES THAT IT IS THE EXECUTIVE'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO DECIDE IF AN ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE SHOULD BE MADE AND TO FILE TIMELY SUCH ELECTION, EVEN IF THE EXECUTIVE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS BEHALF. The Executive understands that under applicable law such election must be filed with the Internal Revenue Service (the "IRS") within thirty (30) days after any acquisition of Restricted Stock to be effective. If the Executive files an effective election, the excess of the fair value of the Restricted Stock (which the IRS may assert is different from the fair value determined by the parties) covered by such election over the amount paid by the Executive for the Restricted Stock shall be treated as ordinary income received by the Executive, and the Corporation shall withhold from the Executive's compensation all amounts required under applicable law. If the Executive does not file an effective election, future appreciation on the Restricted Stock will generally be taxable as ordinary income when such Restricted Stock 7 vests pursuant to this Agreement. The foregoing is merely a brief summary of complex tax regulations, and therefore, the Executive is strongly advised to consult with his own tax advisors. 12. NOTICES. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office located at 1475 Woodfield Road, Suite 700, Schaumburg, Illinois 60173 to the attention of the Chief Financial Officer and to the Executive at the address given beneath the Executive's signature hereto, or at such other address as either party may hereafter designate in writing to the other. 13. PLAN. The Restricted Stock and all rights of the Executive with respect thereto are subject to, and the Executive agrees to be bound by, all of the terms and conditions of the provisions of the Plan, incorporated herein by reference, to the extent such provisions are applicable to Restricted Stock granted to Eligible Persons (as defined in the Plan). The Executive acknowledges receipt of a copy of the Plan, which is made a part hereof by this reference, and agrees to be bound by the terms thereof. Unless otherwise expressly provided in other Sections of this Agreement, provisions of the Plan that confer discretionary authority on the Administrator do not (and shall not be deemed to) create any rights in the Executive unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Administrator so conferred by appropriate action of the Administrator under the Plan after the date hereof. Notwithstanding the foregoing, nothing contained herein shall limit the discretionary authority of the Administrator pursuant to Section 3.2(d)-(g), (i)-(k) and Section 6 and 7 of the Plan, except to the extent the exercise of such authority materially adversely affects the rights of the Executive hereunder. 14. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby and the termination of this Agreement indefinitely. 15. ENTIRE AGREEMENT; AMENDMENT. This Restricted Stock Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The provisions of this Agreement may be amended, modified and waived only with the prior written consent of the Corporation and the Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof. Notwithstanding anything to the contrary contained in the Plan or the Charter, any amendment, modification or waiver to the terms of the Restricted Stock contained in the Charter and Plan that would materially adversely affect the Executive's rights therein or herein or which materially adversely affects the rights or priorities of the Restricted Stock, shall not be effective against the Executive without the prior written consent of the Executive. Notwithstanding the foregoing, nothing contained herein shall limit the Corporation's ability to make amendments, modifications or waivers to the terms of the Plan or Charter to the extent the requirements set forth in the Plan and the Charter regarding such amendments, modifications and waivers have been met. 16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, 8 PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. 17. REMEDIES. Each of the parties to this Agreement shall be entitled to enforce its rights under this Agreement specifically to recover damages and costs (including reasonable attorneys' fees and expenses) for any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or other injunctive relief (without posting any bond or deposit) in order to enforce or prevent any violations of this Agreement. 18. COUNTERPARTS. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 19. SECTION HEADINGS. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof. 20. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without regard to conflict of law principles thereunder. * * * * * 9 IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Executive has hereunto set his hand as of the date and year first above written. PLIANT CORPORATION By: -------------------------------------- Name: Title: EXECUTIVE ----------------------------------------- SIGNATURE ----------------------------------------- PRINT NAME ----------------------------------------- ADDRESS EXHIBIT A STOCK POWER FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Award Agreement between Pliant Corporation, a Utah corporation (the "CORPORATION"), and _______________________ (the "EXECUTIVE") dated as of _____________________, 2004, the Executive, hereby sells, assigns and transfers to the Corporation, an aggregate ____________ shares of Series B Redeemable Preferred Stock of the Corporation, standing in the Executive's name on the books of the Corporation and represented by stock certificate number(s) _________________________________ to which this instrument is attached, and hereby irrevocably constitutes and appoints _______________________________________________________________________ as his or her attorney in fact and agent to transfer such shares on the books of the Corporation, with full power of substitution in the premises. Dated ___________, ________ ------------------------------------ SIGNATURE ------------------------------------ PRINT NAME (INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE. THE PURPOSE OF THE ASSIGNMENT IS TO ENABLE THE CORPORATION TO EXERCISE CERTAIN RIGHTS SET FORTH IN THE RESTRICTED STOCK AWARD AGREEMENT AND CHARTER WITHOUT REQUIRING ADDITIONAL SIGNATURES ON THE PART OF THE INDIVIDUAL.) EXHIBIT B SPOUSAL ACKNOWLEDGMENT The undersigned spouse of the Executive has read and hereby approves the foregoing Restricted Stock Agreement. In consideration of the Corporation's granting the Executive the right to acquire the Restricted Stock in accordance with the terms of such Agreement, the undersigned hereby agrees to be irrevocably bound by all the terms of such Agreement and the Plan. ------------------------------------ Spouse of Executive EXHIBIT C ELECTION TO INCLUDE STOCK IN GROSS INCOME PURSUANT TO SECTION 83(B) OF THE INTERNAL REVENUE CODE The undersigned purchased [______________] shares of Series B Redeemable Preferred Stock, no par value per share (the "SERIES B PREFERRED STOCK"), of Pliant Corporation (the "CORPORATION") pursuant to a Restricted Stock Agreement (the "RESTRICTED STOCK AGREEMENT") dated as of [________, _______,] between the Corporation and the undersigned. Under certain circumstances, the Corporation has the right of forfeiture of the unvested Series B Preferred Stock from the undersigned, upon the termination of his employment with the Corporation. Hence, the Series B Preferred Stock is subject to a substantial risk of forfeiture and is nontransferable (within the meaning of Treasury Regulation Section 1.83-3(d)). The undersigned desires to make an election under Section 83(b) of the Internal Revenue Code ("CODE") to have the Series B Preferred Stock taxed at the time the undersigned purchased the Series B Preferred Stock. Therefore, pursuant to Code Section 83(b) and Treasury Regulation Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election, with respect to the Series B Preferred Stock, to report as taxable income for the undersigned's taxable year ended [ ] the excess (if any) of the Series A Preferred Stock's fair market value on [ ] over the purchase price thereof. The following information is supplied in accordance with Treasury Regulation Section 1.83-2(e): The name, address and social security number of the undersigned: A description of the property with respect to which the election is being made: [___________] shares of Series B Preferred Stock, no par value per share. The date on which the property was transferred: [ ] The taxable year for which such election is made: The undersigned's taxable year ended [ ]. The restrictions to which the property is subject: All or any portion of the shares of Series B Preferred Stock which have not "vested" are subject to repurchase by the Corporation in the event the undersigned ceases to be or is no longer employed by the Company and for any reason whatsoever and in such event the purchase price for each share of Series B Preferred Stock which has not "vested" subject to repurchase will be [$ ] per share. The Series B Preferred Stock will "vest" on a monthly basis during the 4 years after initial issuance during the time that the undersigned remains employed by the Corporation and shall vest upon a liquidation event, a qualified public offering, the redemption of the Corporation's Series A Preferred Stock or repayment of the Corporation's Exchange Notes, as applicable, if the undersigned is so employed on the effective date thereof and, in certain circumstances, may vest within one year after the termination of such employment. The fair value on [ ] of the property with respect to which the election is being made, determined without regard to any lapse restrictions: $[_______]. The amount paid for such property: $[_______]. A copy of this election has been furnished to the Secretary of the Corporation pursuant to Treasury Regulations Section 1.83-2(e)(7). Dated: [________________, _________] ------------------------------------ Executive This election must be filed with the Internal Revenue Service Center with which taxpayer files his or her Federal income tax returns and must be made within thirty (30) days after the date hereof. This filing should be made by registered or certified mail, return receipt requested. The Executive must retain two (2) copies of the completed form for filing with his Federal and state tax returns for the current tax year and an additional copy of his records. EX-10.69 9 a2154755zex-10_69.txt EXHIBIT 10.69 Exhibit 10.69 FOURTH AMENDMENT TO THE PLIANT CORPORATION DEFINED BENEFIT PENSION PLAN This Fourth Amendment to the Pliant Corporation Defined Benefit Pension Plan ("Plan") is adopted this 11th day of March, 2004. WHEREAS, Pliant Corporation (formerly known as Huntsman Packaging Corporation and before that known as Huntsman Corporation) ("Pliant") adopted the Plan June 29, 1993 for the benefit of its eligible employees; and WHEREAS, Pliant reserved unto itself, through its Board of Directors, the right to amend the Plan pursuant to Section 15.1 of the Plan; and WHEREAS, Pliant restated the Plan effective January 1, 2001 and amended it by a First Amendment adopted May 20, 2002, a Second Amendment adopted June 28, 2002, and a Third Amendment adopted December 16, 2002, each amendment effective as stated therein; and WHEREAS, Pliant now desires to freeze the Plan, effective July 1, 2004 with respect to all participants in the Plan who are not subject to the collective bargaining agreement between the United Electrical Radio and Machine Workers Union of America and Local 274 and Pliant Corporation, South Deerfield, Massachusetts. NOW THEREFORE, the Plan is hereby amended as follows: 1. SECTION 2.1 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING SECTION 2.1: "2.1 ACCRUED BENEFIT means an amount determined as of any specific date, which is equal to the Participant's normal retirement benefit as of such specified date computed pursuant to Section 9.1, multiplied by a fraction (not greater than one (1)), the numerator of which is the Participant's period of Credited Service as of the specified date and the denominator of which is the aggregate period of Credited Service the Participant would have if he continued employment to his Normal Retirement Date. Notwithstanding the foregoing provisions of this Section 2.1, the Accrued Benefit of each Participant who is not subject to the Deerfield CBA shall be frozen as of June 30, 2004 and the Accrued Benefit so determined as of June 30, 2004, based on Credited Service, Average Final Compensation and Primary Social Security Benefit as of June 30, 2004, shall be fixed as of that date and not thereafter further adjusted for any subsequent changes in Credited Service, Average Final Compensation and Primary Social Security Benefit, except as otherwise required by Section 17 (relating to Top-Heavy Rules)." 2. SECTION 2.7 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING SECTION 2.7: "2.7 AVERAGE FINAL COMPENSATION means one-third of the Participant's aggregate Basic Compensation for the three consecutive calendar years during the ten complete calendar years preceding the earlier of the date the Participant's Average Final Compensation is to be determined that produce the greatest Basic Compensation; provided that no compensation earned after June 30, 2004 by any Participant who is not subject to the Deerfield CBA shall be included in any ten year period to calculate Average Final Compensation. If a Participant's entire period of Service is less than three consecutive full calendar years, then such Participant's Average Final Compensation shall equal his aggregate Basic Compensation averaged over the number of full calendar years of service; provided that no compensation earned after June 30, 2004 by any Participant who is not subject to the Deerfield CBA shall be included in the Average Final Compensation calculation. If a Participant's entire period of service does not include a full calendar year, then such Participant's Average Final Compensation shall equal his aggregate Basic Compensation averaged on an annualized basis over the Participant's entire period of service (not to exceed 3 years); provided that no compensation earned after June 30, 2004 by any Participant who is not subject to the Deerfield CBA shall be taken into account in calculating Average Final Compensation." 3. THE FIRST PARAGRAPH OF SECTION 2.8 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING FIRST PARAGRAPH OF SECTION 2.8: "2.8 BASIC COMPENSATION means, with respect to a Participant who is a Regular Employee, the Participant's regular salary or wages, overtime and any bonuses actually paid during any calendar year, provided however, that the compensation taken into account with respect to benefits accruing under this Plan for a calendar year shall not exceed the maximum annual compensation that may be taken into account under Code Section 401(a)(17) and regulations issued with respect thereto; further provided that no compensation, earnings, wages, salary or bonuses earned or paid after June 30, 2004 to any Participant who is not subject to the Deerfield CBA shall be taken into account under the Plan. With respect to a Participant who is a Supplemental Employee, Basic Compensation means the amount determined under the preceding sentence for such Participant, divided by the Participant's Hours of Service during such calendar year (not to exceed the product of 167 multiplied by the number of months in which the Participant was an Eligible Employee), and multiplied by 2,000. Basic Compensation shall be interpreted to include all items and exclude all items necessary to be a safe harbor definition of compensation within the meaning of Treasury Regulation 1.14(s)-l(c)(3), subject to the following: Basic Compensation for Regular Employees and Supplemental Employees shall be determined without regard to compensation deferred pursuant to any plan satisfying the requirements of Sections 125 or 401(k) of the Code adopted by the Employer and shall include elective amounts that are not includible in the gross income of the Participant by reason of Section 132(f)(4)of the Code." THE REMAINING TWO PARAGRAPHS OF SECTION 2.8 SHALL REMAIN EFFECTIVE. 4. A NEW SECTION 2.42 IS HEREBY INSERTED INTO THE PLAN: - 2 - "2.42 DEERFIELD CBA means that collective bargaining agreement between Pliant Corporation, South Deerfield, Massachusetts and United Electrical Radio and Machine Workers of America and Local 274 entered into on September 25, 2002, effective through October 11, 2006." 5. A NEW SECTION 5.8 IS HEREBY INSERTED INTO THE PLAN: "5.8 SERVICE AFTER JUNE 30, 2004. Notwithstanding any provision in the Plan to the contrary, Participants in the Plan who are not subject to the Deerfield CBA shall continue to earn Service under the Plan after June 30, 2004 only for purposes of vesting but not for purposes of eligibility or for accruing a benefit under the Plan." 6. SECTION 6.2 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: "6.2 CREDITED SERVICE. (a) Regular Employees. A Regular Employee's Credited Service commences on the date the Regular Employee becomes a Participant in the Plan and includes Service from such date backwards to the date the Employee became an Eligible Employee under the Plan (but in no event shall credit be given for any period of Service prior to the Effective Date other than past service expressly granted in accordance with the terms of the Plan.) Except as provided in this Section 6.2, a Regular Employee's Credited Service includes the period from the date the Regular Employee becomes a Participant to the date he severs from Service (determined under the provisions of Section 5.2 without the application of other Sections, including Section 5.3 or 5.6) if the Participant is subject to the Deerfield CBA. If the Participant is not subject to the Deerfield CBA, a Regular Employee's Credited Service includes the period from the date the Regular Employee becomes a Participant to the earlier of (i) the date he severs from Service (determined under the provisions of Section 5.2 without the application of other Sections, including Section 5.3 or 5.6) or (ii) June 30, 2004. In addition, a Regular Employee's Credited Service includes such other periods as may be required by law, and to the extent provided by Section 12 of the Plan, the period during which he is a Disabled Participant. (b) Supplemental Employees. A Supplemental Employee shall receive a year of Credited Service for each calendar year in which he completes at least 2,000 Hours of Service as a Participant; provided however, that if the Participant is not subject to the Deerfield CBA, he will not receive any Credited Service after June 30, 2004. In addition, a Supplemental Employee shall receive a fractional year of Credited Service for each calendar year in which he completes less than 2,000 Hours of Service as a Participant; provided however, that if the Participant is not subject to the Deerfield CBA, he will not receive any Credited Service after June 30, 2004. The numerator of such fractional year of Credited Service shall be the Participant's Hours of Service as a Participant in such calendar year (not to exceed the product of 167 times the number of months in which the Participant is an - 3 - Eligible Employee) and the denominator shall be 2,000. In addition, Credited Service of a Supplemental Employee includes, to the extent provided by Section 12 of the Plan, the period during which he is a Disabled Participant." 7. SECTION 6.3 IS HEREBY AMENDED BY INSERTING THE FOLLOWING SENTENCE AT THE END OF THAT SECTION: "If the Participant resumes employment with the Employer after June 30, 2004, and the Participant is not subject to the Deerfield CBA, such re-employment shall not count toward Credited Service." 8. A NEW SECTION 6.7 IS HEREBY ADDED TO THE PLAN: "6.7 NO CREDITED SERVICE AFTER JUNE 30, 2004. Notwithstanding any provision in the Plan to the contrary, no Participant shall earn any Credited Service under the Plan after June 30, 2004, unless such Participant is subject to the Deerfield CBA." 9. SECTION 9.1 IS HEREBY AMENDED BY ADDING THE FOLLOWING SUBSECTION (c) TO THE END OF THAT SECTION AND AMENDING THE FIRST SENTENCE OF SECTION 9.1 TO READ AS FOLLOWS: "9.1 NORMAL PENSION. The Pension Benefit of a Participant retiring on or after attaining Normal Retirement Age shall equal the sum of (a) and (b), as limited by (c): (c) Notwithstanding the foregoing, any Participant who is not subject to the Deerfield CBA shall not earn any Pension Benefit for any Service after June 30, 2004, and shall not have any compensation earned after June 30, 2004 included in his Average Final Compensation." 10. SECTION 9.2 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: "9.2 EARLY PENSION. In the case of a Participant who is subject to the Deerfield CBA and who elects to have his Early Pension commence prior to his Normal Retirement Date, the annual amount of such Participant's Early Pension shall equal the Accrued Benefit determined as of the date his employment terminates, multiplied by the applicable actuarial factor, based upon the Participant's age at the date his payments commence, as set forth in Section 1(a) of Appendix A. In the case of a Participant who is not subject to the Deerfield CBA and who elects to have his Early Pension commence prior to his Normal Retirement Date, the annual amount of such Participant's Early Pension shall equal the Accrued Benefit determined as of the earlier of (a) the date his employment terminates, or (b) June 30, 2004, multiplied by the applicable actuarial factor, based upon the Participant's age at the date his payments commence, as set forth in Section 1(a) of Appendix A." - 4 - 11. SECTION 9.3 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: "9.3 DEFERRED VESTED PENSION. The annual amount of a Deferred Vested Pension of any Participant who is subject to the Deerfield CBA shall be the Participant's Accrued Benefit on the date of severance from employment. The annual amount of a Deferred Vested Pension of any Participant who is not subject to the Deerfield CBA shall be the Participant's Accrued Benefit on the earlier of (a) the date of severance from employment, or (b) June 30, 2004. If a Participant elects to have his Deferred Vested Pension commence prior to his Normal Retirement Date, his benefit shall be the Actuarial Equivalent of the Deferred Vested Pension otherwise payable on his Normal Retirement Date using the actuarial factors as set forth in Section 1(b) of Appendix A." 12. SECTION 12.1 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: "12.1 SERVICE AND CREDITED SERVICE. (a) Except as provided in paragraph (b), a Disabled Participant who is subject to the Deerfield CBA shall be granted Service and Credited Service until the termination of his Disability or until he attains age 65, whichever occurs first. Except as provided in paragraph (b), a Disabled Participant who is not subject to the Deerfield CBA shall be granted Service and Credited Service until the termination of his Disability or until he attains age 65, whichever occurs first, but in no case shall he be granted Credited Service at any time after June 30, 2004. (b) If a Disabled Participant who is subject to the Deerfield CBA receives a lump sum settlement under the Employer's Long Term Disability Income Insurance Plan, his Service and Credited Service under this Plan shall terminate as of the date of the settlement and his rights under this Plan shall be determined on the basis of Service and Credited Service at that time. If a Disabled Participant who is not subject to the Deerfield CBA receives a lump sum settlement under the Employer's Long Term Disability Income Insurance Plan, his Service shall terminate as of the date of the settlement, his Credited Service under this Plan shall terminate as of earlier of (i) the date of the settlement, or (ii) June 30, 2004, and his rights under this Plan shall be determined on the basis of Service and Credited Service at that time. (c) If a Disabled Participant who is subject to the Deerfield CBA recovers from his Disability, but fails to return to work with an Employer within 30 days following such recovery (or such additional period, not in excess of one year, as authorized by the Committee), he shall be deemed to have terminated Service and Credited Service as of the time of his recovery, and his rights to benefits under this Plan shall be determined accordingly. If a Disabled Participant who is not subject to the Deerfield CBA recovers from his Disability, but fails to return to work with an Employer within 30 days following such recovery (or such additional period, not in excess of one year, as authorized by the Committee), he shall be deemed to have terminated Service as of the time of his recovery, shall be - 5 - deemed to have terminated Credited Service as of the earlier of (i) the time of his recovery, or (ii) June 30, 2004, and his rights to benefits under this Plan shall be determined accordingly." 13. SECTION 12.2 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: "12.2 PENSION BENEFITS. In computing the Participant's pension benefits, the Participant who is subject to the Deerfield CBA shall be deemed to earn for the period (expressed in whole months) of his Disability at a monthly rate equal to one-twelfth of his Average Final Compensation calculated as of the date he became a Disabled Participant. The Participant who is not subject to the Deerfield CBA shall be deemed to earn for the period (expressed in whole months) of his Disability at a monthly rate equal to one-twelfth of his Average Final Compensation calculated as of the date he became a Disabled Participant; provided that no time after June 30, 2004 shall be included in any such calculation, whether or not the Participant was Disabled at that time." 14. SECTION 14.1 (a) IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: "14.1 LIMITATIONS ON BENEFITS. (a) General Rule. (1) Notwithstanding anything in this Plan to the contrary, in accordance with the requirements of Section 415 of the Code, the Annual Benefit of a Participant shall not, at any time during the Limitation Year, exceed the lesser of: (i) the Maximum Permissible Dollar Amount, or (ii) 100 percent of the Participant's average Total Compensation for the three consecutive calendar years while a Participant in the Plan in which his Total Compensation was the highest; provided that if, the Participant is not subject to the Deerfield CBA, no Compensation earned after June 30, 2004 shall be taken into account." 15. SECTIONS 14.1(b)(5) AND 14.1(b)(7) ARE HEREBY DELETED IN THEIR ENTIRETY AND REPLACED WITH THE FOLLOWING: "(5) Projected Annual Benefit means the Annual Benefit a Participant would receive if the Participant continued employment, receive his current Total Compensation in each Limitation Year, until the later of the Normal Retirement Age or the Participant's current age, and if all relevant factors used to determine benefits under the Plan for the current Limitation Year remained constant for all future Limitation Years; provided that, for a Participant who is not subject to the Deerfield CBA, no Projected Annual Benefit shall include any Compensation earned or Limitation Year after June 30, 2004. (7) Total Compensation means all amounts paid or made available to a Participant in a calendar year which are treated as compensation under Treasury Regulation Section 1.415-2(d)(l)(i) and which are not excluded under Treasury - 6 - Regulation Section 1.415-2(d)(2); provided that, for any Participant who is not subject to the Deerfield CBA, Total Compensation shall not include any amount paid or made available to such Participant after June 30, 2004. Notwithstanding the foregoing, the term "Total Compensation" shall include (i) any elective deferral to a plan of the Employer as defined in Code Section 402(g)(3), and (ii) any amount which is contributed or deferred by the Employer at the election of the Participant and which is not includible in the gross income of the Participant by reason of Code Section 125 or 457, and (iii) elective amounts that are not includible in the gross income of the Participant by reason of Section 132(f)(4) of the Code." 16. SECTION 16.3 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: "16.3 INCREASE IN SOCIAL SECURITY BENEFIT LEVELS. In the case of a pensioner or beneficiary who was receiving benefits under this Plan, or in the case of a Participant who terminates employment with nonforfeitable rights to benefits, such benefits shall not be decreased by reason of any increase of the benefit levels payable under Title II of the Social Security Act or any increase in the wage base under such Title II, if such increase takes place after September 2, 1974 or (if later) the earliest of (i) the date of first receipt of such benefits, (ii) the date of such termination, or (iii) if the pensioner or beneficiary is not subject to the Deerfield CBA, June 30, 2004, as the case may be. 17. SECTION 19.4 IS HEREBY AMENDED BY ADDING THE FOLLOWING SENTENCE AT THE END OF THE FIRST PARAGRAPH OF THAT SECTION: "However, nothing in this Section 19.4 shall entitle any Participant who is not subject to the Deerfield CBA to any Credited Service for any time period after June 30, 2004." 18. A NEW SECTION 7 IS ADDED TO APPENDIX D AS FOLLOWS: "7. PROVISIONS OF PLAN FROZEN AS OF JUNE 30, 2004. No provisions of the Plan that freeze any accrued benefits as of June 30, 2004 shall apply to Participants who are subject to the Deerfield CBA and whose benefits are governed by this Appendix D." 19. APPENDIX E IS HEREBY AMENDED BY DELETING SECTION 4 IN ITS ENTIRETY AND REPLACING IT WITH THE FOLLOWING: "4. FUTURE SALARY INCREASES COUNTED: In addition to the benefit accrued under the terms of this Plan for service after the Effective Date, a Non-Union CT Film Employee shall be entitled to the positive difference, if any, between (i) his or her accrued benefit under the terms of the Rexene Retirement Plan at the Effective Date determined by taking into account compensation earned following the Effective Date but before June 30, 2004; and (ii) his or her accrued benefit under the terms of the Rexene Retirement Plan at the Effective Date taking into account - 7 - only compensation earned as of the Effective Date (which is the benefit maintained under the Huntsman Defined Benefit Pension Plan)." 20. APPENDIX F IS HEREBY AMENDED BY DELETING SECTION 4 IN ITS ENTIRETY AND REPLACING IT WITH THE FOLLOWING: "4. POST-MERGER BENEFIT: Beginning January 1, 1999, eligible employees of Huntsman Edison Films Corporation shall accrue a benefit under the Plan based upon the terms of the Plan (the Post-Merger Benefit). For purposes of determining the Post-Merger Benefit, only compensation earned and service performed after the Effective Date, and before June 30, 2004, shall be taken into account. However, service prior to the Effective Date for Huntsman Edison Films Corporation shall be taken into account under the Plan for purposes of vesting and eligibility (including eligibility for early or normal retirement) in the Post-Merger Benefit." 21. APPENDIX H IS HEREBY AMENDED BY ADDING THE FOLLOWING SENTENCE AT THE END OF SECTION 3: "In no event will any Participant whose benefit is governed by this Appendix H earn any credited service for accrued benefit purposes after June 30, 2004." All other provisions of the Plan as amended shall remain effective. This Fourth Amendment is hereby executed on this 11th day of March, 2004 and effective as described herein. PLIANT CORPORATION By: ---------------------------- Title: ------------------------- - 8 - EX-10.70 10 a2154755zex-10_70.txt EXHIBIT 10.70 Exhibit 10.70 BUY-OUT AGREEMENT This Buy-Out Agreement (the "Agreement") is dated as of January 5, 2005 between Supreme Plastics Group PLC, a public company organized under the laws of England and Wales ("Supreme"), Pliant Investment, Inc., Utah corporation ("Pliant"), and Pliant Corporation ("Pliant Corporation"), a Utah corporation. RECITALS A. Supreme and Pliant Corporation, the parent company of Pliant, entered into that certain Limited Liability Company Agreement (the "Joint Venture Agreement") of Alliant Company LLC, a Delaware limited liability company ("Alliant") on July 26, 2001. B. Pliant has succeeded to the interests of Pliant Corporation in Alliant and the Joint Venture Agreement. C. The parties desire that Pliant purchase Supreme's entire interest in Alliant in accordance with the terms and conditions set forth herein. NOW, THEREFORE, Supreme and Pliant hereby agree as follows: AGREEMENT 1. DEFINITIONS. All capitalized terms used in this Agreement and not specifically delined herein shall have the same meaning as may be ascribed thereto in the Joint Venture Agreement. 2. BUY-OUT. Supreme and Pliant hereby agree that Pliant will purchase Supreme's entire interest in Alliant (the "Purchase") for a purchase price of $400,000 (the "Purchase Price"). 3. CLOSING. The closing (the "Closing") of the Purchase will take place on the date hereof, and will be effectuated by (i) delivery by Pliant to Supreme of the Purchase Price, payable by wire transfer of immediately available funds to a bank account designated by Supreme, and (ii) delivery by Supreme to Pliant of an assignment of Supreme's entire interest in Alliant, in the form attached hereto. 4. EFFECT OF BUY-OUT. Effective at Closing, the following agreements (the "Terminated Agreements") shall terminate: Slider-Zipper License Agreement, dated November 15, 2001, between Supreme Plastics Holdings Limited and Pliant Corporation; Slider-Zipper FPS License Agreement, dated November 15, 2001, between Supreme Plastics Holdings Limted and Pliant Corporation: Agreement of Mutual Dissolution of Joint Venture, dated as of October 27, 2004, between Supreme, Pliant and Pliant Corporation; Supply Agreement-Reliant 100 Series, dated November 15, 2001, between Supreme Plastics Holdings Limited and Pliant Corporation; Supply Agreement-Reliant 200 Series, dated November 15, 2001, between Supreme Plastics Holdings Limited and Pliant Corporation, and any Ancillary Agreement to which Supreme is a party. 5. REPRESENTATIONS OF PARTIES. The parties each represent and warrant that they are fully authorized to enter into this Agreement, that they have not assigned any of their interests in Alliant or the Joint Venture Agreement, and that their respective agents indicated below are duly authorized to sign this Agreement on their behalf. 6. MUTUAL RELEASE. As of the Closing, in consideration for the obligations set forth herein, the adequacy and sufficiency of which is acknowledged, Supreme, on the one hand, for itself and its successors, assigns, subsidiaries, divisions and affiliates, and all directors, members, officers, employees, agents, insurers, guarantors, attorneys and other representatives ("Affiliated Parties"), and Pliant, on the other hand, for itself and its Affiliated Parties, absolutely and forever release and discharge each other and the other's respective Affiliated Parties, from all actual and potential claims, complaints, demands, causes of action, damages, costs, expenses, fees, and other liabilities of every sort and description, direct or indirect, fixed or contingent, known or unknown, suspected or unsuspected, and whether or not liquidated, including, without limitation, claims based upon preexisting acts occurring at any time up to the date of Closing, which may result in future damages or injury (collectively, the "Claims"), arising out of, caused by, or otherwise related in any way to the Joint Venture Agreement or any Terminated Agreement and any Claims which could be raised by either party related to the Joint Venture Agreement or any Terminated Agreement. It is the intention of the parties that this release be read as broadly as possible such that the parties each shall have no further obligations or liability of any sort or nature, directly or indirectly, to each other relating to or arising from the Joint Venture Agreement or any Terminated Agreement. 7. INDEMNIFICATION. As of the Closing, Pliant, Pliant Corporation and Alliant to indemnify and hold harmless Supreme and its Affiliated Parties for any claims, complaints, demands, causes of action, damages, costs, expenses and other liabilities asserted or claimed, arising out of, caused by, or otherwise related in any way to the Joint Venture Agreement or any Terminated Agreement. 8. MISCELLANEOUS. (a) VOLUNTARY AGREEMENT. The parties have read this Agreement and the terms contained in it, and on advice of counsel they have freely and voluntarily entered into this Agreement. (b) SUCCESSORS. This Agreement shall be binding on and inure to the benefit of the parties and their successors. (c) COUNTERPARTS. This Agreement may be signed in two or more counterparts. (d) ENTIRE AGREEMENT. The parties agree that this Agreement is the entire agreement between them related to the subject matter hereof and that any and all prior agreements are superseded by this Agreement. The parties further agree that this Agreement can only be amended or revised by a written document signed by both parties. 2 (e) NEUTRAL INTERPRETATION. This Agreement constiutes the product of the negotiation of the parties hereto and the enforcement hereof shall be interpreted in a neutral manner, and not more strongly for or against any party based upon the source of the draftsmanship hereof. (f) GOVERNING LAW. The Agreement shall be governed by, construed and enforced in accordance with laws of the state of Delaware. (g) WINDER OPTION. In the event that the business of Alliant is not sold to ITW and Pliant Corporation or Alliant ceases to operate the business of Alliant, Supreme will have the option to purchase the Meltec Winder owned by Alliant for a purchase price of $25,000. IN WITNESS WHEREOF, Supreme, Pliant and Pliant Corporation have executed this Agreement as of the date first above written. SUPREME: PLIANT CORPORATION: SUPREME PLASTICS CROUP PLC PLIANT CORPORATION: By: /s/ J. Bruce Underwood By: /s/ N.S. Grenal ----------------------------------- --------------------------- Its: V.P. MFG. Its: MANAGING DIRECTOR ------------------------------- -------------------------- PLIANT: PLIANT INVESTMENT, INC.: By: /s/ J. Bruce Underwood - ----------------------------------- Its: V.P. MFG. ------------------------------- 3 EX-10.71 11 a2154755zex-10_71.txt EXHIBIT 10.71 Exhibit 10.71 ASSIGNMENT OF LIMITED LIABILITY COMPANY INTERESTS THIS ASSIGNMENT OF LIMITED LIABILITY COMPANY INTERESTS (this "Assignment"), is dated as of January 5, 2005, and made by and between SUPREME PLASTICS GROUP PLC ("Seller"), and PLIANT INVESTMENT, INC. ("Buyer"). WHEREAS, Seller and Buyer have entered into an agreement for purchase and sale of all of Seller's interest in Alliant Company. LLC ("Alliant") dated January 5, 2005 the "Agreement") upon completion of the $400,000 wire transfer from Buyer to Seller. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows: 1. Seller hereby sells, conveys, transfers, assigns and delivers TO Buyer, and Buyer accepts from Seller, all of right, title and interest Seller's memebership interest (representing 50% interest) in Aliant [the "Seller Percentage Interest"). its 2. Seller warrants to Buyer that on the date hereof, Seller is the true and lawful owner of the Seller Percentage Interest, holds good and marketable title in and to Seller Percentage Interest, free and clear of all liens, encumbrances and rights of third parties, and has full power and authority to sell and convey the same. 3. At the request of Buyer, Seller shall provide such further instruments, documents and certificates as may be reasonably necessary to assure a transfer of title to the Seller Percentage Interest to Buyer. 4. This Assignment shall be governed by, construed and enforced in accordance with the laws of the slate of Delaware. IN WITNESS WHEREOF, Seller and Buyer have has caused this Assignment to be executed and delivered on the date first above written. SUPREME, PLASTICS GROUP PLC PLIANT INVESTMENT, INC. By: /s/ N.S. Grenal By: /s/ J. Bruce Underwood --------------------------------- ------------------------------ Name: N.S. Grenal Name: J. Bruce Underwood ------------------------------- ---------------------------- Title: MANAGING DIRECTOR Title: V.P MFG. ------------------------------ --------------------------- EX-21.1 12 a2154755zex-21_1.htm EXHIBIT 21.1
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EXHIBIT 21.1

PLIANT CORPORATION
LIST OF SUBSIDIARIES AND
STATES OF INCORPORATION OR ORGANIZATION

COMPANY NAME		JURISDICTION OF INCORPORATION/ORGANIZATION
Alliant Company LLC(1)		Delaware
Pliant Corporation International(2)		Utah
Pliant Film Products of Mexico, Inc.(2)		Utah
Pliant Corporation of Canada Ltd.(2)		Canada
Pliant Corporation Pty. Ltd.(2)		Australia
Pliant Film Products GmbH(2)		Germany
Pliant Packaging of Canada, LLC(2)		Utah limited liability company
Pliant Investment, Inc.(2)		Utah
Pliant Corporation Asia & Pacific Rim Pte Ltd(2)		Singapore
ASPEN Industrial, S.A. de C.V.(3)		Mexico
Jacinto Mexico, S.A. de C.V.(4)		Mexico
Pliant de Mexico, S.A. de C.V.(5)		Mexico
Uniplast Holdings Inc.(2)		Delaware
Uniplast U.S., Inc.(6)		Delaware
Turex, Inc.(7)		Rhode Island
Pierson Industries, Inc.(7)		Massachusetts
Uniplast Midwest, Inc.(7)		Indiana
Uniplast Industries Co.(6)		Nova Scotia, Canada
Uniplast Films, Inc.(8)		Ontario, Canada

(1): Owned by Pliant Investment, Inc.
(2): Owned by Pliant Corporation
(3): Owned by Pliant Corporation (greater than 99%) and Pliant Corporation International (less than 1%)
(4): Owned by ASPEN Industrial, S.A. de C.V. (greater than 99%) and Pliant Corporation (less than 1%)
(5): Owned by ASPEN Industrial, S.A. de C.V. (greater than 99%) and Pliant Corporation (less than 1%)
(6): Owned by Uniplast Holdings Inc.
(7): Owned by Uniplast U.S., Inc.
(8): Owned by Uniplast Industries Co.

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EXHIBIT 21.1

PLIANT CORPORATION LIST OF SUBSIDIARIES AND STATES OF INCORPORATION OR ORGANIZATION
EX-31.1 13 a2154755zex-31_1.htm EXHIBIT 31.1
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EXHIBIT 31.1

CERTIFICATIONS

I, Harold C. Bevis, certify that:

1. I have reviewed this annual report on Form 10-K of Pliant Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 30, 2005

/s/ HAROLD C. BEVIS

Harold C. Bevis
Chief Executive Officer

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EXHIBIT 31.1

CERTIFICATIONS
EX-31.2 14 a2154755zex-31_2.htm EXHIBIT 31.2
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EXHIBIT 31.2

CERTIFICATIONS

I, Harold C. Bevis, certify that:

1. I have reviewed this annual report on Form 10-K of Pliant Corporation;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 30, 2005

/s/ HAROLD C. BEVIS

Harold C. Bevis
Chief Financial Officer

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EXHIBIT 31.2

CERTIFICATIONS
EX-32.1 15 a2154755zex-32_1.htm EXHIBIT 32.1
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EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

In connection with the annual report of Pliant Corporation (the "Company") on Form 10-K for the period ended December 31, 2004, as filed with the Securities and Exchange Commission (the "Report"), I, Harold C. Bevis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 30, 2005

/s/ HAROLD C. BEVIS

Harold C. Bevis
Chief Executive Officer

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EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
EX-32.2 16 a2154755zex-32_2.htm EXHIBIT 32.2
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EXHIBIT 32.2

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

In connection with the annual report of Pliant Corporation (the "Company") on Form 10-K for the period ended December 31, 2004, as filed with the Securities and Exchange Commission (the "Report"), I, Harold C. Bevis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 30, 2005

/s/ HAROLD C. BEVIS

Harold C. Bevis
Chief Financial Officer

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EXHIBIT 32.2

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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