Exhibit 4.3


 


	
   

  	
  STOCKHOLDERS’ AGREEMENT dated as of July 18,
  2006 (this “Agreement”), among Pliant
  Corporation, a Delaware corporation (the “Company”); the
  Investor Stockholders (as defined herein); the Bond Stockholders (as defined
  herein); and the Other Stockholders (as defined herein).

  



 


WHEREAS, on January 3, 2006,
Pliant (Utah) and certain of its subsidiaries, Uniplast Holdings, Inc., Pliant
Corporation International, Pliant Solutions Corporation, Pliant Film Products
of Mexico, Inc., Pliant Packaging of Canada, LLC, Pliant Investment, Inc.,
Alliant Company LLC, Uniplast U.S., Inc., Uniplast Industries Co., and Pliant
Corporation of Canada Ltd. (collectively, the “Debtors”), filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the
Bankruptcy Court.


 


WHEREAS, on June 19, 2006, the
Debtors’ Fourth Amended Joint Plan of Reorganization (the “Plan”) was filed
with the Bankruptcy Court, which Plan, among other things, provides for the
execution and delivery of this Agreement by the Company, the Investor
Stockholders, the Bond Stockholders and the Other Stockholders.


 


WHEREAS, the Plan further provides that this Agreement shall be binding on all
parties receiving Common Stock of the Company pursuant to the Plan, regardless
of whether such parties execute this Agreement.


 


WHEREAS, the Debtors, the
creditors and other interest-holders of Pliant (Utah) have approved, and the
Bankruptcy Court has confirmed, the Plan.


 


WHEREAS, the Bankruptcy Court
has entered an order pursuant to Section 1129 of the Bankruptcy Code,
confirming the Plan and authorizing and directing the Company to execute and
deliver this Agreement.


 


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 herein.


 


ARTICLE
I



DEFINITIONS; RULES OF CONSTRUCTION


 


1.1                               Definitions


 


As used in
this Agreement, the following terms shall have the meanings set forth below.


 


“2003
Indenture” means the indenture, dated as of May 30, 2003, as amended,
modified, restated or supplemented from time to time, by and among Pliant
(Utah), the guarantors party thereto and Wilmington Trust Company, a Delaware
banking corporation, as trustee.


 

















 


“2003-Indenture
Permitted Holder” means any “Permitted Holder” as such term is defined in
the 2003 Indenture.


 


“2004
Indenture” means the amended and restated indenture, dated as of
February 17, 2004, as amended and restated as of May 6, 2005 and as may be
further amended, modified, restated or supplemented from time to time, by and
among Pliant (Utah), the guarantors party thereto and Wilmington Trust Company,
a Delaware banking corporation, as trustee.


 


“2004-Indenture
Permitted Holder” means any “Permitted Holder” as such term is defined in
the 2004 Indenture.


 


“Additional
Series AA Directors” has the meaning ascribed to it in the Certificate.


 


“Affiliate”
means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, Controls, or is Controlled by,
or is under common Control with, such Person.


 


“Agreement”
has the meaning ascribed to it in the caption.


 


“Approved
Sale” has the meaning ascribed to it in Section 2.3(a).


 


“Approved
Sale Notice” has the meaning ascribed to it in Section 2.3(b).


 


“Bankruptcy
Code” means the United States Bankruptcy Code, 11 U.S.C. §§ et seq.


 


“Bankruptcy
Court” means the United States Bankruptcy Court for the District of
Delaware.


 


“Board”
means the board of directors of the Company.


 


“Bond
Stockholders” means, collectively: (a) all Persons who receive Common Stock
in respect of Class 7 Claims under the Plan, including the Persons listed on Exhibit
A attached hereto and made a part hereof (as the same may be amended by the
Company to reflect any such Persons not listed thereon on the date hereof); and
(b) any Person who is or becomes a holder of Stockholder Shares by Transfer of
Stockholder Shares from a Bond Stockholder and who becomes a party to this
Agreement as a Bond Stockholder pursuant to Section 2.1(c), in each case, only
for so long as such Person holds Stockholder Shares.


 


“Business
Day” means any day except a Saturday, a Sunday or any other day on which
commercial banks are not required by law to be open in New York, New York.


 


“By-laws”
means the By-laws of the Company, as amended, modified, supplemented or
restated and in effect from time to time.


 


“Certificate”
means the certificate of incorporation of the Company, as amended, modified,
supplemented or restated and in effect from time to time, including any
certificates of


 


2

















 


designation, correction or amendment filed with the
Secretary of State of the State of Delaware pursuant to the terms thereof.


 


“Commission”
means the Securities and Exchange Commission and any other Governmental
Authority at the time administering the Securities Act.


 


“Common
Stock” means, collectively, all of the common stock of the Company of any
class and any other class of capital stock of the Company hereafter authorized
that is not limited to a fixed sum or percentage of par or stated value with
respect to the rights of the holders thereof to participate in dividends and in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.


 


“Common
Stock Directors” has the meaning ascribed to it in the Certificate.


 


“Company”
has the meaning ascribed to it in the caption.


 


“Control”
means, (including, with correlative meaning, the terms “Controlling,” “Controlled
by” and “under common Control with”) with respect to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management, policies or investment decisions of such Person,
whether through the ownership of voting Securities, by contract or otherwise.


 


“Debtors”
has the meaning ascribed to it in the recitals.


 


“Demand
Registration” has the meaning ascribed to such term in Section 5.1(a).


 


“Directors”
has the meaning ascribed to it in Section 4.1(c).


 


“Eligible
Stockholder” means (i) any Investor Stockholder and (ii) as determined from
time to time, any other Stockholder who (x) is an “accredited investor” as such
term is defined in Rule 501 of the Securities Act and (y) holds in excess of
1.0% of the then outstanding Stockholder Shares.


 


“Equity
Incentive Plan” means the Pliant Corporation 2006 Restricted Stock
Incentive Plan attached as Exhibit B hereto, as the same may be amended
from time to time in accordance with the terms thereof and, to the extent applicable,
Article VI hereof.


 


“Exchange Act” means the
Securities Exchange Act of 1934, as amended, or any successor Federal statute
then in force, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect from time to time.


 


“Excluded
Securities” has the meaning ascribed to it in Section 3.2.


 


 “Form
S-1,” “Form S-3,” “Form S-4” or “Form S-8” means Form
S-1, Form S-3, Form S-4 or Form S-8, as appropriate, promulgated under the
Securities Act (or any successor forms thereto).


 


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“Governmental
Authority” means any domestic or foreign government or political
subdivision thereof, whether on a Federal, state or local level and whether
executive, legislative or judicial in nature, including any agency, authority,
board, bureau, commission, court, department or other instrumentality thereof.


 


“Inclusion Request” has the
meaning ascribed to such term in Section 5.1(a).


 


“Indentures” means the 2003
Indenture and the 2004 Indenture.


 


“Information” has the
meaning ascribed to such term in Section 5.5(i).


 


“Initial Public Offering”
means the first underwritten Public Offering of Common Stock pursuant to a
Registration Statement.


 


“Initial
Subscribing Stockholder” has the meaning ascribed to it in Section 3.1(d).


 


“Initiating
Request” has the meaning ascribed to such term in Section 5.1(a).


 


“Inspectors” has the meaning
ascribed to such term in Section 5.5(i).


 


“Investor
Stockholders” means, collectively: (a) (i) Flexible Films, LLC, a Delaware
limited liability company, (ii) Flexible Films II, LLC, a Delaware limited
liability company, (iii) Southwest Industrial Films, LLC, a Delaware limited
liability company, (iv) Southwest Industrial Films II, LLC, a Delaware limited
liability company, (v) New York Life Capital Partners, L.P., (vi) The
Northwestern Mutual Life Insurance Company, and (vii) Wachovia Capital
Partners, LLC; and (b) any Person who is or becomes a holder of Stockholder
Shares by Transfer of Stockholder Shares from an Investor Stockholder and who
becomes a party to this Agreement as an Investor Stockholder pursuant to
Section 2.1(c), in each case, only for so long as such Person holds Stockholder
Shares.


 


“Joinder Agreement” has the meaning ascribed to it in Section 2.1(b).


 


“Material Transaction” means any material
transaction in which the Company or any of its Subsidiaries proposes to engage
or is engaged, including a purchase or sale of assets or securities, financing,
merger, tender offer or any other transaction that would require disclosure
pursuant to the Exchange Act, and with respect to which the Board reasonably
has determined in good faith that compliance with this Agreement would require
the Company to disclose material, non-public, competitive or sensitive
information prior to such time as it would otherwise be required to be
disclosed and thereby materially interfere with the ability of the Company or
such Subsidiary to consummate such transaction.


 


“NASD”
means the National Association of Securities Dealers, Inc.


 


“NASDAQ”
means The National Association of Securities Dealers Automated Quotations
System.


 


“New
Investor” has the meaning ascribed to it in Section 3.1(c).


 


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“New
Senior Subordinated Notes” means the 13% Senior Subordinated Notes due 2010
issued by the Company under that certain Indenture dated as of July 18, 2006
between the Company and The Bank of New York Trust Company, N.A. as trustee.


 


“Offered
Securities” has the meaning ascribed to it in Section 3.1(a).


 


“Other
Eligible Stockholder” has the meaning ascribed to it in Section 3.1(d).


 


“Other Shares”
means, at any time, those shares of Common Stock which do not constitute
Registrable Shares or Primary Shares.


 


“Other
Stockholders” means any party hereto other than the Company, the Bond
Stockholders and the Investor Stockholders.


 


“Percentage
Ownership” means with respect to any Stockholder, the fraction, expressed
as a percentage, the numerator of which is the total number of shares of Common
Stock held by such Stockholder and the denominator of which is the total number
of shares of Common Stock issued and outstanding at the time of determination.


 


“Permitted-Holder
Directors” has the meaning ascribed to it in Section 4.1(a)(i).


 


“Permitted
Holder” has the meaning ascribed to such term in the applicable Indenture.


 


“Permitted-Holder
Stockholders” has the meaning ascribed to it in Section 4.1(a)(i).


 


“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.


 


“Plan”
has the meaning ascribed to it in the recitals.


 


“Pliant (Utah)” means Pliant
Corporation, a Utah corporation.


 


“Primary Shares” means, at
any time, the authorized but unissued shares of Common Stock or shares of
Common Stock held in the treasury of the Company.


 


“Prospectus”
means the prospectus included in any Registration Statement, including any
amendment or prospectus subject to completion, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Shares and, in each case, by
all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.


 


“Public
Offering” means the closing of a public offering of Common Stock pursuant
to a Registration Statement declared effective under the Securities Act, except
that a


 


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Public Offering shall not include an offering of
Securities to be issued as consideration in connection with a business
acquisition or an offering of Securities issuable pursuant to an employee
benefit plan.


 


“Records” has the meaning
ascribed to it in Section 5.5(i).


 


“Refused
Securities” has the meaning ascribed to it in Section 3.1(c).


 


“Registrable
Holders” means, on the date of determination, those Investor Stockholders
and Bond Stockholders who hold in the aggregate more than fifty percent (50%)
of the Registrable Shares held by all of the Investor Stockholders and the Bond
Stockholders in the aggregate on such date of determination.


 


“Registrable Shares” means
at any time, and with respect to any Stockholder, the shares of Common Stock
(including any shares of Common Stock issued upon conversion of any other
Securities) held by, or issuable to, such Stockholder. As to any particular
Registrable Shares, such Registrable Shares shall cease to be Registrable
Shares: (a) when an offering of such Registrable Shares has been registered
under the Securities Act, the Registration Statement in connection therewith
has been declared effective and such Registrable Shares have been disposed of
pursuant to and in the manner described in such effective Registration
Statement; (b) following an Initial Public Offering, when such Registrable Shares
are sold or distributed to the public, or are eligible to be sold or
distributed, through a broker, dealer or market maker pursuant to Rule 144(k);
(c) when such Registrable Shares have ceased to be outstanding; or (d)
following an Initial Public Offering, if such Registrable Shares are freely
tradeable pursuant to Section 1145 of the Bankruptcy Code; provided,
that in the cases of clauses (b) and (d), such shares shall be deemed
Registrable Shares for purposes of an Initial Public Offering.


 


“Registration Date” means
the date upon which the Registration Statement filed by the Company to effect
its Initial Public Offering shall have been declared effective by the
Commission.


 


“Registration
Request Notice” has the meaning ascribed to it in Section 5.1(a).


 


“Registration
Statement” means any registration statement of the Company filed with the
Commission that covers an offering of any Registrable Shares, and all
amendments and supplements to any such registration statement, including
post-effective amendments, in each case, including the prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.


 


“Representative”
means with respect to a particular Person, any director, officer, employee,
agent, consultant, advisor or other representative of such Person, including
legal counsel, accountants and financial advisors.


 


“Requisite
Bond Stockholders” means, on the date of determination, those Bond
Stockholders who hold in the aggregate more than fifty percent (50%) of the
Common Stock held by all of the Bond Stockholders on such date of
determination.


 


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“Requisite
Investor Stockholders” means, on the date of determination, those Investor
Stockholders who hold in the aggregate more than fifty percent (50%) of the
Common Stock held by all of the Investor Stockholders on such date of
determination.


 


 “Rule 144” means Rule 144 (including
Rule 144(k) and all other subdivisions thereof) promulgated by the Commission
under the Securities Act, as such rule may be amended from time to time, or any
similar or successor rule then in force.


 


“Sale
of the Company” means the consummation of (a) the sale or 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), provided that such Person
is not, and such group of Persons does not include any Person who is, an
Affiliate of any Investor Stockholder; (b) the sale or transfer (in one or a
series of related transactions) of a majority of the outstanding Common Stock
of the Company to one Person or a group of Persons acting in concert, provided
that such Person is not, and such group of Persons does not include any Person
who is, an Affiliate of any Investor Stockholder; or (c) the merger or
consolidation of the Company with or into another Person, provided that such
Person is not an Affiliate of any Investor Stockholder; provided, that, in the
case of clause (c) above, a Sale of the Company shall not occur under
circumstances in which the holders of a majority of the voting power of the
outstanding Common Stock of the Company immediately prior to such transaction
own, directly or indirectly, a majority in voting power of the outstanding
Common Stock or other voting Securities having, in the aggregate, the right to elect a majority of the board of
directors of the Company or the surviving or resulting corporation or
acquirer, as the case may be, immediately following such transaction. A sale
(or multiple related sales) of one or more Subsidiaries of the Company (whether
by way of merger, consolidation, reorganization or sale of all or substantially
all assets or Securities) which constitutes all or substantially all of the
consolidated assets of the Company shall be deemed a “Sale of the Company.”


 


“Securities”
means “securities” as defined in Section 2(1) of the Securities Act and
includes, with respect to any Person, such Person’s capital stock or other
equity interests or any options, warrants or other securities that are directly
or indirectly convertible into, or exercisable or exchangeable for, such
Person’s capital stock or other equity or equity-linked interests, including
phantom stock and stock appreciation rights.


 


“Securities
Act” means the Securities Act of 1933, as amended, or any successor Federal
statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect from time to time.


 


“Series
AA Directors” has the meaning ascribed to it in the Certificate.


 


“Series
AA Preferred Stock” means the Series AA Redeemable Preferred Stock of the
Company, par value $.01 per share.


 


“Series
M Preferred Stock” means the Series M Preferred Stock of the Company, par
value $.01 per share.


 


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“Special
Incentive Plan” means the Pliant Corporation Deferred Cash Incentive Plan
attached as Exhibit C hereto, as the same may be amended from time to
time in accordance with the terms thereof and, to the extent applicable,
Article VI hereof.


 


“Stockholder
Shares” means (a) the Common Stock or (b) any Securities issued or issuable
directly or indirectly with respect to the Securities referred to in clause (a)
above by way of conversion, exercise or exchange, stock dividend or stock split
or in connection with a combination of shares, recapitalization,
reclassification, merger, consolidation or other reorganization. As to any
particular shares constituting Stockholder Shares, such shares shall cease to
be Stockholder Shares when they have been effectively registered under the
Securities Act and disposed of in accordance with the Registration Statement
covering them. For the avoidance of doubt, shares of Series AA Preferred Stock
shall not be considered Stockholder Shares.


 


“Stockholders”
means the Investor Stockholders, Bond Stockholders and/or Other Stockholders or
any of them individually.


 


“Stockholders’
Counsel” has the meaning ascribed to it in Section 5.5(b).


 


“Subscription
Offer Acceptance Notice” has the meaning ascribed to it in Section 3.1(b).


 


“Subscription
Offer Notice” has the meaning ascribed to it in Section 3.1(a).


 


“Subscription
Offer Period” has the meaning ascribed to it in Section 3.1(a).


 


“Subsidiary”
means, at any time, with respect to any Person (the “Subject Person”),
any other Person of which either (a) fifty percent (50%) or more of the
Securities or other interests entitled to vote in the election of directors or
comparable governance bodies performing similar functions or (b) an interest of
50% or more in the profits or capital of such Person, are at the time owned or
controlled directly or indirectly by the Subject Person or through one or more
Subsidiaries of the Subject Person.


 


“Suspension
Period” has the meaning ascribed to it in Section 5.10.


 


“Transfer”
of Securities shall be construed broadly and shall include any sale,
assignment, transfer, participation, gift, bequest, distribution, or other
disposition thereof, or any pledge or hypothecation thereof, placement of a
lien thereon or grant of a security interest therein or other encumbrance
thereon, in each case whether voluntary or involuntary or by operation of law
or otherwise.


 


“Transferee”
means a Person acquiring or intending to acquire Stockholder Shares through a
Transfer.


 


“Transferor”
means a Stockholder Transferring or intending to Transfer Stockholder Shares.


 


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1.2                               Rules
of Construction


 


The use in
this Agreement of the term “including” means “including, without
limitation.”  The words “herein,”
“hereof,” “hereunder” and other words of similar import refer to this Agreement
as a whole, including the schedules and exhibits, as the same may from time to
time be amended, modified, supplemented or restated, and not to any particular
section, subsection, paragraph, subparagraph or clause contained in this
Agreement. All references to sections, schedules and exhibits mean the sections
of this Agreement and the schedules and exhibits attached to this Agreement,
except where otherwise stated. The title of and the section and paragraph
headings in this Agreement are for convenience of reference only and shall not
govern or affect the interpretation of any of the terms or provisions of this Agreement.
The use herein of the masculine, feminine or neuter forms shall also denote the
other forms, as in each case the context may require. Where specific language
is used to clarify by example a general statement contained herein, such
specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Unless expressly provided otherwise, the measure of a period of one
month or year for purposes of this Agreement shall be that date of the
following month or year corresponding to the starting date; provided,
that if no corresponding date exists, the measure shall be that date of the
following month or year corresponding to the next day following the starting
date. For example, one month following February 18 is March 18, and one month
following March 31 is May 1.


 


ARTICLE
II



ISSUANCES AND TRANSFERS OF SECURITIES


 


2.1                               Issuances
and Transfers of Securities


 


(a)                                  The
provisions in this Article II shall apply to all Stockholder Shares now owned
or hereafter acquired by a Stockholder, including Stockholder Shares acquired
by reason of original issuance, dividend, distribution, exchange, conversion
and acquisition of outstanding Stockholder Shares from another Person, and such
provisions shall apply to any Stockholder Shares obtained by a Stockholder upon
the exercise, exchange or conversion of any option, warrant or other derivative
Security (including upon the conversion of the Series AA Preferred Stock).


 


(b)                                 Any
Person who is not already a party to this Agreement and who subscribes for
Stockholder Shares shall, as a condition to such acquisition, execute and
deliver to the Company a joinder agreement in substantially the form attached
hereto as Exhibit D (a “Joinder Agreement”), pursuant to which
such Person will thereupon become a party to, and be bound by and obligated to
comply with the terms and provisions of, this Agreement.


 


(c)                                  No
Stockholder shall Transfer any Stockholder Shares to a Person not already a
party to this Agreement as a Stockholder unless (i) such Person executes and
delivers to the Company a Joinder Agreement, pursuant to which such Person will
thereupon become a party to, and be bound by and obligated to comply with the
terms and provisions of, this


 


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Agreement, as a Stockholder
hereunder and (ii) such Transfer is made in compliance with this Article II.
Any Transfer of Stockholder Shares in violation of this Section 2.1(c) shall be
deemed to be a breach of this Agreement by the Transferor.


 


(d)                                 On
or before the fifth anniversary of the date hereof, no Stockholder who is both
a 2003-Indenture Permitted Holder and 2004-Indenture Permitted Holder shall
Transfer (other than pursuant to a Transfer effected pursuant to the “Merger
Exception” as defined in Article Four, Part B, Section 5(a) of the Certificate)
any Stockholder Shares to any Person unless (i) no “Change of Control” (as
defined in the applicable Indenture) occurs under the applicable Indenture (if
such Indenture is then in effect) as a result of such Transfer and the
Transferee agrees to be bound by the restrictions set forth in this Section
2.1(d) with respect to any subsequent proposed Transfer of such Stockholder
Shares by such Transferee, or (ii) such Transfer is made only after all shares
of the Series AA Preferred Stock have been redeemed and New Senior Subordinated
Notes have been repaid in full in cash.


 


(e)                                  On
or before the fifth anniversary of the date hereof, the Company shall not issue
or sell any Securities to any Person in the event that such issuance or sale
would cause a “Change of Control” as defined in either Indenture (if such
Indenture is then in effect) without the prior written consent of the Requisite
Investor Stockholders and the Requisite Bond Stockholders.


 


2.2                               Intentionally
Omitted


 


2.3                               Required
Sale in Connection with a Sale of the Company


 


(a)                                  Subject
to the provisions set forth in Section 2.1(d) and this Section 2.3, if the
Requisite Investor Stockholders and the Board approve a Sale of the Company (an
“Approved Sale”), each Stockholder shall consent to, vote in favor of
and raise no objections against the Approved Sale, and if the Approved Sale is
structured as a sale of the issued and outstanding capital stock of the Company
(whether by merger, recapitalization, consolidation or Transfer of Stockholder
Shares, other Securities or otherwise), then each Stockholder shall waive any
dissenters rights, appraisal rights or similar rights in connection with such
Sale of the Company and each Stockholder shall agree to sell his, her or its
Stockholder Shares on the terms and conditions approved by the Requisite
Investor Stockholders and the Board. Each Stockholder shall take all necessary
and desirable actions in connection with the consummation of the Approved Sale,
including, but not limited to, the execution of such agreements and instruments
and other actions necessary to provide the representations, warranties,
indemnities, covenants, conditions, escrow agreement and other provisions and
agreements relating to such Approved Sale. In the event that any Stockholder
fails for any reason to take any of the foregoing actions after reasonable
notice thereof, he, she or it hereby grants an irrevocable power of attorney
and proxy to the Company or its designees to take all necessary actions and
execute and deliver all documents deemed necessary or desirable by such Person
to effectuate the terms of this Section 2.3. The restrictions on Transfers of
Stockholder Shares and the other terms set forth in Sections 2.1 (other than
Section 2.1(d), if applicable) shall not apply in connection with an Approved
Sale.


 


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(b)                                 The
Company shall deliver written notice to each Stockholder setting forth in
reasonable detail the terms (including price, time and form of payment) of any
Approved Sale (the “Approved Sale Notice”). Within ten (10) days
following receipt of the Approved Sale Notice, each Stockholder shall deliver
to the Company written notice (in form and substance reasonably satisfactory to
the Company) setting forth such holders’ agreement to consent to and raise no
objections against, or impediments to, the Approved Sale (including waiving all
dissenter’s and similar rights) and (ii) if the Approved Sale is structured as
a sale of stock, to sell his, her or its Stockholder Shares on the terms and
conditions set forth in the Approved Sale Notice.


 


(c)                                  The
obligations of the Stockholders to participate in any Approved Sale pursuant to
this Section 2.3 are subject to the satisfaction of the following conditions:


 


(i)                                     upon
the consummation of the Approved Sale, each Stockholder shall receive the same
proportion of the aggregate consideration from such Approved Sale that such
holder would have received if such aggregate consideration had been distributed
by the Company in complete liquidation pursuant to the rights and preferences
set forth in the Certificate as in effect immediately prior to such Approved
Sale (giving effect to applicable orders of priority and the provisions of the
various agreements relating to vested stock or vested options of the Company);


 


(ii)                                  if
any Stockholders are given an option as to the form and amount of consideration
to be received with respect to Securities in a class, all holders of Securities
of such class will be given the same option;


 


(iii)                               no
Stockholder shall be obligated to pay more than his, her or its pro rata amount
of reasonable expenses incurred in connection with a consummated Approved Sale
to the extent such expenses are incurred for the benefit of all Stockholders
and are not otherwise paid by the Company or the acquiring party (expenses
incurred by or on behalf of a Stockholder for its or his sole benefit not being
considered expenses incurred for the benefit of all Stockholders);


 


(iv)                              with
respect to the obligations of the Bond Stockholders only to so participate in
such an Approved Sale, and except in a transaction effected pursuant to the
“Merger Exception” as defined in Article Four, Part B, Section 5(a)(i) of the
Certificate, the terms of the Approved Sale shall provide that (A) the holders
of the Series AA Preferred Stock shall receive an amount in cash equal to at
least the aggregate liquidation preference of all outstanding shares of Series
AA Preferred Stock and, (B) prior to or simultaneously with the closing of such
Approved Sale, either (I) the New Senior Subordinated Notes are paid in full in
cash or (II) the Company gives written notice of redemption of all New Senior
Subordinated Notes to the trustee and the holders thereof pursuant to the
related indenture and deposits the redemption price therefor with a bank or
trust company acting as paying agent or otherwise segregates and holds in trust
the redemption price as permitted by the indenture; and


 


(v)                                 any
indemnification obligations for breaches of representations, warranties and
covenants made by the Company and its Subsidiaries shall be pro-rata


 


11

















 


among
the Stockholders based on the aggregate consideration payable with respect to
the equity Securities of the Company.


 


(d)                                 The
obligations of the Stockholders set forth in this Section 2.3 shall apply
solely with respect to the Stockholder Shares and shall not apply with respect
to any shares of Series AA Preferred Stock owned by any Stockholder.


 


ARTICLE
III



RIGHTS TO SUBSCRIBE FOR SECURITIES


 


3.1                               General


 


(a)                                  Prior
to the occurrence of a Public Offering, in the event that the Company proposes
to issue any equity Securities (the “Offered Securities”), other than
Excluded Securities, the Company shall deliver to each Eligible Stockholder
written notice (which notice shall state the number or amount of the Offered
Securities proposed to be issued, the purchase price therefor and any other
terms or conditions of the proposed issuance, including any linked or grouped
Securities which comprise Offered Securities) of such issuance (the “Subscription
Offer Notice”) at least fifteen (15) days prior to the date of the proposed
issuance (the “Subscription Offer Period”).


 


(b)                                 Each
Eligible Stockholder shall have the option, exercisable at any time during the
Subscription Offer Period by delivering written notice to the Company (a “Subscription
Offer Acceptance Notice”), (i) to subscribe for the number or amount of
such Offered Securities up to its Percentage Ownership (excluding for the
purposes of this calculation Stockholder Shares held by Stockholders who are
not Eligible Stockholders) of the total number or amount of Offered Securities
proposed to be issued and (ii) to offer to subscribe for up to its Percentage
Ownership (excluding for the purposes of this calculation Stockholder Shares
held by Stockholders who are not Eligible Stockholders) of the Offered
Securities not subscribed for by other Eligible Stockholders (as further
described below). Any Offered Securities not subscribed for by an Eligible Stockholder
shall be deemed to be re-offered to and accepted by the Eligible Stockholders
exercising their options specified in clause (ii) of the immediately preceding
sentence with respect to the lesser of (x) the amount specified in their
respective Subscription Offer Acceptance Notices and (y) an amount equal to
their respective Percentage Ownership (excluding for the purposes of this
calculation Stockholder Shares held by Stockholders who have not exercised
their option specified in clause (ii) of the immediately preceding sentence)
with respect to such deemed re-offer. Such deemed re-offer and acceptance
procedures described in the immediately preceding sentence shall be deemed to
be repeated until either (i) all of the Offered Securities are accepted by the
Eligible Stockholders or (ii) no Eligible Stockholders desire to subscribe for
more Offered Securities. The Company shall notify each Eligible Stockholder
within five (5) Business Days following the expiration of the Subscription
Offer Period of the number or amount of Offered Securities which such Eligible
Stockholder has subscribed to purchase.


 


(c)                                  If
Subscription Offer Acceptance Notices are not given by the Eligible
Stockholders for all the Offered Securities, the Company may issue the part of
such Offered


 


12

















 


Securities as to which
Subscription Offer Acceptance Notices have not been given by the Eligible
Stockholders (the “Refused Securities”) to any Person (a “New
Investor”) in accordance with the terms and conditions set forth in the
Subscription Offer Notice. Any Refused Securities not purchased by one or more
New Investors in accordance with this Section 3.1 within ninety (90) days after
the date of the Subscription Offer Notice may not be sold or otherwise disposed
of until they are again offered to the Eligible Stockholders under the
procedures specified in this Section 3.1.


 


(d)                                 Notwithstanding
anything to the contrary contained herein, the Company may, in order to
expedite the issuance of the Offered Securities hereunder, issue all or a
portion of the Offered Securities to one or more Persons (each, an “Initial
Subscribing Stockholder”), without complying with the provisions of this
Section 3.1; provided, that prior to such issuance, either: (i) each
Initial Subscribing Stockholder agrees to offer to sell to each Eligible
Stockholder who is not an Initial Subscribing Stockholder (each such
Stockholder, an “Other Eligible Stockholder”) such Other Eligible
Stockholder’s respective Percentage Ownership (excluding for the purposes of
this calculation Stockholder Shares held by Stockholders who are not Eligible
Stockholders) of such Offered Securities on the same terms and conditions as
issued to the Initial Subscribing Stockholders and in a manner which provides
such Other Eligible Stockholder with rights substantially similar to the rights
outlined in Sections 3.1(b) and 3.1(c); provided, however, that
the purchase price payable by the Other Eligible Stockholders to the Initial
Subscribing Stockholders may include (A) an amount equal to any accrued and
unpaid dividends thereon or (B) a reasonable rate of interest, in each case
calculated from the date such Initial Subscribing Stockholder purchase such
Offered Securities through the date of sale to the Other Eligible Stockholders;
or (ii) the Company shall offer to sell an additional amount of Offered
Securities to each Other Eligible Stockholder only in an amount and manner
which provides such Other Eligible Stockholder with rights substantially similar
to the rights outlined in Sections 3.1(b) and 3.1(c). The Initial Subscribing
Stockholders or the Company, as applicable, shall offer to sell such Offered
Securities to each Other Eligible Stockholder within sixty (60) days after the
closing of the purchase of the Offered Securities by the Initial Subscribing
Stockholders.


 


3.2                               Excluded
Securities


 


The rights of
the Eligible Stockholders under Section 3.1 shall not apply to the following
Securities issued by the Company at any time (the “Excluded Securities”):


 


(a)                                  Securities
issued as a stock dividend or distribution or upon any stock split,
recapitalization or other subdivision or combination of Securities;


 


(b)                                 Securities
issued upon the exercise, conversion or exchange of any warrants, options or
any other derivative or convertible Securities of the Company (including the
Series AA Preferred Stock and the Series M Preferred Stock);


 


(c)                                  Securities
issued in connection with (i) the acquisition (whether by stock sale, merger,
recapitalization, asset sale or otherwise) of another Person (or portion
thereof), or (ii) a joint venture or strategic alliance with another Person, in
each case, that is approved by the Board;


 


13

















 


(d)                                 Securities
issued in a Public Offering;


 


(e)                                  Securities
issued pursuant to the terms of the Equity Incentive Plan;


 


(f)                                    Securities
issued as a bona fide “equity kicker” to a lender or placement agent in
connection with a financing; and


 


(g)                                 Securities
issued for non-cash consideration or upon the conversion of debt that by its
terms is convertible into equity Securities.


 


3.3                               Application


 


This Article
III shall not apply in connection with an Approved Sale.


 


ARTICLE
IV



BOARD


 


4.1                               Election
of Directors; Voting


 


(a)                                  Subject
to the provisions of Section 4.1(b) hereof, except with the prior written
consent of the Requisite Investor Stockholders and the Requisite Bond
Stockholders, each Stockholder hereby covenants and agrees to vote all of his,
her or its Stockholder Shares against any proposed amendment to or restatement
of the Certificate that would cause the number of Common Stock Directors to be
any greater than, or less than, five (5). At each annual meeting of the
Stockholders, and at each special meeting of the holders of any class of Stockholder
Shares called for the purpose of electing Common Stock Directors, and at any
time at which holders of Stockholder Shares shall have the right to vote for or
consent in writing to the election of Common Stock Directors, then, and in each
such event, each Stockholder shall vote all of the Stockholder Shares owned by
them for, or consent in writing with respect to such shares in favor of, the
election of Common Stock Directors to the Board constituted as follows:


 


(i)                                     four
(4) representatives (the “Permitted-Holder Directors”) designated by the
holders of a majority of the shares of Common Stock held by the Stockholders
who are both 2003-Indenture Permitted Holders and 2004-Indenture Permitted
Holders (the “Permitted-Holder Stockholders”), which designees shall, in
accordance with the Plan, initially be John D. Bowlin, Edward A. Lapekas,
Stephen McKenna and Timothy J. Walsh;


 


(ii)                                  one
(1) representative who shall be, if the Company has employed a permanent chief
executive officer at such time, the chief executive officer of the Company from
time to time.


 


(b)                                 The
Stockholders shall vote their shares (i) to remove any Permitted-Holder
Director whose removal is required by the holders of a majority of the shares
of Common Stock held by the Permitted-Holder Stockholders and (ii) to promptly
fill any vacancy created by the removal, resignation or death of a Common Stock
Director, in each case for the election of a new Common Stock Director
designated, if approval is required, in accordance with the


 


14

















 


provisions of this Section 4.1.
The Company and the Stockholders shall use their best efforts to fill any
vacancies of the Permitted-Holder Directors as soon as practicable following
any such designation.


 


(c)                                  The
Company shall pay all reasonable out-of-pocket fees, charges and expenses
(including travel and related expenses) incurred by each of the members of the
Board, including, for the avoidance of doubt, the Series AA Directors and any
Additional Series AA Directors in connection with (i) attending the meetings of
the Board and all committees thereof and (ii) conducting any other Company
business requested by the Company. So long as any Director serves on the Board
and for three (3) years thereafter, the Company shall maintain directors and
officers indemnity insurance coverage reasonably satisfactory to the Requisite
Investor Stockholders and the Requisite Bond Stockholders, and the Company’s
Certificate and By-laws shall provide for indemnification and exculpation of
Directors to the fullest extent permitted under applicable law.


 


4.2                               Subsidiaries


 


At the
election of the Series AA Directors (such election to be made in writing at
least five (5) Business Days prior to the effectiveness thereof), the board of
directors or board of managers, as applicable, of each Subsidiary of the
Company shall include one of the Series AA Directors on such board.


 


ARTICLE
V



REGISTRATION RIGHTS


 


5.1                               Required
Registration


 


(a)                                  If,
at any time following the third-year anniversary of the date hereof, the
Company shall be requested in writing (an “Initiating Request”) by the
Registrable Holders to effect the registration under the Securities Act of an
offering of Registrable Shares (a “Demand Registration”), then the
Company shall, subject to Sections 5.1(b), (c) and (d) below, promptly use its reasonable
best efforts to effect a registration under the Securities Act of an offering
of all the Registrable Shares that the Company has been requested pursuant to
such Initiating Request and in any Inclusion Request (as hereinafter defined)
for sale in accordance with this Section 5.1(a) and with the method of
distribution specified in the Initiating Request. The Company shall promptly
give written notice to all Stockholders (a “Registration Request Notice”)
of the Company’s requirement to register such offering. The Stockholders shall
have 30 days after delivery of a Registration Request Notice to deliver to the
Company a request in writing (an “Inclusion Request”) that the Company
include in such registration the number of Registrable Shares of all
Stockholders so specified in the Inclusion Request.


 


(b)                                 Anything
contained in Section 5.1(a) to the contrary notwithstanding, the Company may
delay the filing or effectiveness of any Registration Statement for a period of
up to 120 days after the date that the Registrable Holders make an Initiating
Request, if at the time of such Initiating Request: (i) any other registration
statement (other than on Form S-4 or Form S-8) pursuant to which equity
Securities of the Company are to be or were offered and sold has


 


15

















 


been filed and not withdrawn or has been
declared effective within the prior ninety (90) days (180 days in the case of
the Initial Public Offering); or (ii) the Board determines in good faith that
(A) it is in possession of material, non-public information concerning pending
or threatened litigation and disclosure of such information would jeopardize
such litigation or otherwise materially harm the Company or (B) a Material
Transaction that has not been publicly disclosed is reasonably likely to occur;
provided, however, that the Company may not utilize this right
more than once in any twelve-month period.


 


(c)                                  With
respect to any registration pursuant to Section 5.1(a), the Company may include
in such registration any other Registrable Shares, Primary Shares or Other
Shares; provided, however, that if the managing underwriter
advises the Company that the inclusion of all Registrable Shares, Primary
Shares and Other Shares proposed to be included in such registration would
materially adversely affect the offering and sale (including pricing) of all
such Securities, then the number of Registrable Shares, Primary Shares, and
Other Shares proposed to be included in such registration shall be included in
the following order:


 


(i)                                     first, the
Registrable Shares owned by the Stockholders, pro rata based upon the number of
Registrable Shares owned by each such Stockholder at the time of such
registration;


 


(ii)                                  second, the
Primary Shares; and


 


(iii)                               third, the Other
Shares.


 


(d)                                 Subject to
paragraphs (f) and (g), the Company shall not be required pursuant to Section
5.1(a) to effect more than one (1) registration of an offering of Registrable
Shares on Form S-1.


 


(e)                                  If any
offering pursuant to a Demand Registration involves an underwritten offering,
the Registrable Holders shall select the managing underwriter or underwriters
to administer the offering, which managing underwriters shall be a firm of nationally
recognized standing.


 


(f)                                    Any
Stockholder initiating or requesting the inclusion of Registrable Shares in a
Demand Registration may, by written notice to the Company delivered prior to
the effectiveness of the Registration Statement, withdraw its request to have
its Registrable Shares included in such Demand Registration. In the event that
either: (i) the conditions to closing specified in an underwriting agreement to
which the Company is a party with respect to a Demand Registration are not
satisfied or waived; or (ii) any Registration Statement filed pursuant to this
Section 5.1(a) is not declared effective for any reason, then in each such case
such registration shall not be deemed a Demand Registration for purposes of
this Section 5.1(a).


 


(g)                                 The
Registrable Holders that own a majority of the Registrable Shares requested to
be included in a Registration Statement pursuant to this Section 5.1(a) shall
have the right to terminate or withdraw any registration initiated pursuant to
this Section 5.1(a) by written notice to the Company delivered prior to the
effectiveness of such Registration Statement and such withdrawn registration
shall not be deemed a Demand Registration for purposes of this Section 5.1(a)
if such Registrable Holders within 30 days after the delivery of such written
notice


 


16

















 


fully reimburse the Company for all costs,
fees and expenses incurred by the Company (including legal fees) in connection
with such withdrawn registration.


 


5.2                               Piggyback Registration


 


(a)                                  If the
Company at any time proposes for any reason to register Primary Shares or Other
Shares under the Securities Act (other than on Form S-4 or Form S-8), it shall
promptly give written notice to each Stockholder of its intention to register
the Primary Shares or Other Shares and, upon the written request of any
Stockholder (given within twenty (20) days after delivery of any such notice to
each Stockholder by the Company) to include in such registration Registrable
Shares (which request shall specify the number of Registrable Shares proposed
to be included in such registration), the Company shall use its reasonable best
efforts to cause all such Registrable Shares requested to be included in such
registration to be included on the same terms and conditions as the Securities
otherwise being sold in such registration; provided, however,
that if the managing underwriter advises the Company that the inclusion of all
Registrable Shares or Other Shares proposed to be included in such registration
would interfere with the successful offering and sale (including pricing) of
Primary Shares proposed to be offered and sold by the Company, then the number
of Primary Shares, Registrable Shares and Other Shares proposed to be included
in such registration shall be included in the following order:


 


(i)                                     first, the Primary Shares;


 


(ii)                                  second,
the Registrable Shares owned by the Stockholders requesting that their Registrable
Shares be included in such registration pursuant to the terms of this Section
5.2, pro rata based upon the number of Registrable Shares owned by each such Stockholder
at the time of such registration; and


 


(iii)                               third, the Other
Shares.


 


(b)                                 The
number of requests by the Stockholders permitted by this Section 5.2 shall
be unlimited.


 


5.3                               Registrations
on Form S-3


 


(a)                                  Subject
to Sections 5.3(c) and (d), at such time as the Company shall have qualified
for the use of Form S-3, the Stockholders shall have the right to request
registrations on Form S-3, and to effect a registration under the Securities
Act of Registrable Shares in accordance with this Section 5.3.


 


(b)                                 If the
Company shall be requested in writing by any Stockholder to effect a
registration under the Securities Act of Registrable Shares in accordance with
this Section 5.3, then the Company shall promptly give written notice of such
proposed registration to all Stockholders and shall include in such proposed
registration any Registrable Shares requested to be included in such proposed
registration by all Stockholders provided that such Stockholders respond in
writing to the Company’s notice within twenty (20) days after delivery by the
Company of such notice (which response shall specify the number of Registrable
Shares proposed to be included in such registration). The Company shall
promptly use its commercially


 


17

















 


reasonable efforts to effect such registration on Form S-3 of the
Registrable Shares that the Company has been so requested to register.


 


(c)                                  The Company
shall not be obligated to effect any registration under the Securities Act
requested by the Stockholders under this Section 5.3 if either: (i) with
respect to any request made by a Stockholder pursuant to this Section 5.3, the
anticipated gross offering price of all Registrable Shares to be included in
such registration would be less than $5,000,000; or (ii) the Company shall have
effected four (4) or more Registration Statements on Form S-3 pursuant to this
Section 5.3 during the twelve-month period prior to the date of such request
for registration (unless the Company shall have waived such limitation).


 


(d)                                 The Company
may delay the filing or effectiveness of any Registration Statement for a
period not to exceed one hundred twenty (120) days after the date of a request
for registration pursuant to this Section 5.3 if (i) any other registration
statement (other than on Form S-4 or Form S-8) pursuant to which Securities of
the Company are to be or were offered and sold has been filed and not withdrawn
or has been declared effective within the prior ninety (90) days; or (ii) the
Board determines in good faith that (A) it is in possession of material,
non-public information concerning pending or threatened litigation and
disclosure of such information would jeopardize such litigation or otherwise
materially harm the Company or (B) a Material Transaction that has not been
publicly disclosed is reasonably likely to occur; provided, however,
that the Company may not utilize this right more than once in any twelve-month
period.


 


(e)                                  With
respect to any registration pursuant to this Section 5.3, the Company may
include in such registration any Registrable Shares, Primary Shares or Other
Shares; provided, however, that if the managing underwriter
advises the Company that the inclusion of all Registrable Shares, Primary
Shares and Other Shares proposed to be included in such registration would
materially adversely affect the offering or sale (including pricing) of all
such securities, then the number of Registrable Shares, Primary Shares and
Other Shares proposed to be included in such registration shall be included in
the following order:


 


(i)                                     first, the
Registrable Shares owned by the Stockholders, pro rata based upon the number of
Registrable Shares owned by each such Stockholder at the time of such
registration;


 


(ii)                                  second, the
Primary Shares; and


 


(iii)                               third, the Other
Shares.


 


(f)                                    The number
of requests by the Stockholders permitted by this Section 5.3 shall be
unlimited.


 


5.4                               Holdback Agreement


 


(a)                                  If the
Company at any time shall register an offering and sale of shares of Common
Stock under the Securities Act in an underwritten offering and such offering
and sale is the first Public Offering for the account of the Company or is
effected pursuant to Section 5.1(a), the Stockholders shall not sell, make any
short sale of, grant any option for the purchase of, or


 


18

















 


otherwise dispose of any shares of Common
Stock (other than (i) those Registrable Shares included in such registration
pursuant to Section 5.1 or 5.2 or (ii) subject to the consent of the
underwriters, a Transfer to an Affiliate) without the prior written consent of
the Company for a period as shall be determined by the managing underwriters,
which period cannot begin more than seven (7) days prior to the effectiveness
of such Registration Statement and cannot last more than 180 days after the
effective date of such Registration Statement.


 


(b)                                 If the
Company at any time shall register an offering and sale of shares of Common
Stock for the account of the Company under the Securities Act in an
underwritten offering pursuant to any registration under the Securities Act
other than the first Public Offering for the account of the Company (other than
on Form S-4 or Form S-8), the Stockholders participating in such registered
offering shall not sell, make any short sale of, grant any option for the
purchase of, or otherwise dispose of any shares of Common Stock (other than (i)
those Registrable Shares included in such registration pursuant to Sections
5.1, 5.2 or 5.3 or (ii) subject to the consent of the underwriters, a Transfer
to an Affiliate) without the prior written consent of the Company for a period
as shall be determined by the managing underwriters, which period cannot begin
more than seven (7) days prior to the effectiveness of such Registration
Statement and cannot last more than ninety (90) days after the effective date
of such Registration Statement.


 


5.5                               Preparation and Filing


 


If and whenever the Company is
under an obligation pursuant to the provisions of this Agreement to use its reasonable
best efforts to effect the registration of an offering and sale of any
Registrable Shares, the Company shall, as expeditiously as practicable:


 


(a)                                  use its reasonable
best efforts to cause a Registration Statement that registers such offering of
Registrable Shares to become and remain effective for a period of 120 days or
until all of such Registrable Shares have been disposed of (if earlier);


 


(b)                                 furnish, at
least five (5) Business Days before filing a Registration Statement that
registers such Registrable Shares, a draft Prospectus relating thereto and any
amendments or supplements relating to such Registration Statement or
Prospectus, to one counsel (the “Stockholders’ Counsel”) selected by the
Registrable Holders that own a majority of the Registrable Shares to be
included in such Registration Statement, copies of all such documents proposed
to be filed (it being understood that such five (5) Business Day period need
not apply to successive drafts of the same document proposed to be filed so
long as such successive drafts are supplied to such counsel in advance of the
proposed filing by a period of time that is customary and reasonable under the
circumstances), and shall reflect in each such document, when so filed with the
Commission, such comments as the Stockholders whose Registrable Shares are to
be covered by such Registration Statement may reasonably propose;


 


(c)                                  prepare and
file with the Commission such amendments and supplements to such Registration
Statement and the Prospectus used in connection therewith as may be necessary
to keep such Registration Statement effective for a period of at least 120 days
or until all of such Registrable Shares have been disposed of (if earlier) and
to comply with the


 


19

















 


provisions of the Securities Act with respect
to the offering and sale or other disposition of such Registrable Shares;


 


(d)                                 notify the
Stockholders’ Counsel promptly in writing of (i) any comments by the Commission
with respect to such Registration Statement or Prospectus, or any request by
the Commission for the amending or supplementing thereof or for additional
information with respect thereto; (ii) the issuance by the Commission of any
stop order suspending the effectiveness of such Registration Statement or
Prospectus or any amendment or supplement thereto or the initiation of any
proceedings for that purpose; and (iii) the receipt by the Company of any notification
with respect to the suspension of the qualification of such Registrable Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purposes;


 


(e)                                  use its reasonable
best efforts to register or qualify such Registrable Shares under such other
securities or “blue sky” laws of such jurisdictions as any seller of
Registrable Shares reasonably requests and do any and all other acts and things
that may reasonably be necessary or advisable to enable such seller of Registrable
Shares to consummate the disposition in such jurisdictions of the Registrable
Shares owned by such seller; provided, however, that the Company
will not be required to qualify generally to do business, subject itself to
general taxation or consent to general service of process in any jurisdiction
where it would not otherwise be required to do so but for this Section 5.5(e);


 


(f)                                    furnish to
each seller of such Registrable Shares such number of copies of a summary
Prospectus or other Prospectus, including a preliminary Prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such seller of Registrable Shares may reasonably request in order
to facilitate the public offering and sale or other disposition of such Registrable
Shares;


 


(g)                                 use its reasonable
best efforts to cause such offering and sale of Registrable Shares to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Shares;


 


(h)                                 promptly
notify on a timely basis each seller of such Registrable Shares at any time
when a Prospectus relating to such Registrable Shares is required to be
delivered under the Securities Act of the happening of any event as a result of
which the Prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and, at the
request of such seller, prepare and furnish to such seller a reasonable number
of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the offerees of such shares, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;


 


(i)                                     make
available for inspection by any seller of such Registrable Shares, any
underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by any such
seller or underwriter (collectively, the


 


20

















 


“Inspectors”), all
pertinent financial, business and other records, pertinent corporate documents
and properties of the Company (collectively, the “Records”), as shall
reasonably be necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, directors and employees to
supply all information (together with the Records, the “Information”)
reasonably requested by any such Inspector in connection with such Registration
Statement (and any of the Information that the Company determines in good faith
to be confidential, and of which determination the Inspectors are so notified,
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Information is necessary to avoid or correct a misstatement or omission in the
Registration Statement; (ii) the release of such Information is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction or
is otherwise required by law; (iii) such Information has been made generally
available to the public; or (iv) the seller of Registrable Shares agrees that
it will, upon learning that disclosure of such Information is sought in a court
of competent jurisdiction, give notice to the Company and allow the Company, at
the Company’s expense, to undertake appropriate action to prevent disclosure of
the Information deemed confidential);


 


(j)                                     use
its reasonable best efforts to obtain from its independent certified public
accountants a “cold comfort” letter in customary form and covering such matters
of the type customarily covered by cold comfort letters;


 


(k)                                  use
its reasonable best efforts to obtain, from its counsel, an opinion or opinions
in customary form and covering such matters of the type customarily covered by
such opinions (which shall also be addressed to the Stockholders selling
Registrable Shares in such registration);


 


(l)                                     provide
and maintain a transfer agent and registrar (which may be the same entity and
which may be the Company) for such Registrable Shares;


 


(m)                               issue
to any underwriter to which any seller of Registrable Shares may sell shares in
such offering certificates evidencing such Registrable Shares;


 


(n)                                 list
such Registrable Shares on any national securities exchange on which any shares
of the Common Stock are listed or, if the Common Stock is not listed on a
national securities exchange, take all reasonable action required to qualify
such Registrable Shares for quotation on the NASDAQ OTC Bulletin Board Service;


 


(o)                                 otherwise
comply with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable but not
later than eighteen (18) months after the effective date, earnings statements
(which need not be audited) covering a period of twelve (12) months beginning
within three (3) months after the effective date of the Registration Statement,
which earnings statements shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;


 


(p)                                 use
its reasonable best efforts to obtain the withdrawal of any order suspending
the effectiveness of a Registration Statement, or the lifting of any suspension
or exemption from qualification of any of the Registrable Shares for sale in
any jurisdiction as soon as is practicable;


 


21

















 


(q)                                 use
its reasonable best efforts to take all other steps necessary to effect the
registration of such Registrable Shares contemplated hereby; and


 


(r)                                    cause
officers or key employees of the Company, as applicable, to participate in any
“road show” or “road shows” reasonably requested by the managing underwriter.


 


5.6                               Expenses


 


All expenses incident to the Company’s performance of or compliance
with Sections 5.1, 5.2, 5.3 and 5.5, including, without limitation: (a) all
registration and filing fees, and any other fees and expenses associated with
filings required to be made with any stock exchange and the Commission
(including, if applicable, the fees and expenses of any “qualified independent
underwriter” and its counsel as may be required by the rules and regulations of
the NASD); (b) all fees and expenses of compliance with state securities or
“blue sky” laws (including fees and disbursements of counsel for the
underwriters or Stockholders in connection with “blue sky” qualifications of
the Registrable Shares and determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters may
designate); (c) all printing and related messenger and delivery expenses
(including expenses of printing certificates for the Registrable Shares in a
form eligible for deposit with The Depository Trust Company) and of printing
prospectuses, all fees and disbursements of counsel for the Company and of all
independent certified public accountants of the issuer (including the expenses
of any special audit and “cold comfort” letters required by or incident to such
performance); (d) Securities Act liability insurance if the Company so desires
or the underwriters so require; (e) all fees and expenses incurred in
connection with the listing of the Registrable Shares on any securities exchange
and all rating agency fees; (f) all reasonable fees and disbursements of the
Stockholders’ Counsel to represent such Stockholders in connection with such
registration; (g) all fees and disbursements of underwriters customarily paid
by the issuer or sellers of Securities, excluding underwriting discounts and
commissions and transfer taxes, if any, and fees and disbursements of counsel
to underwriters; and (h) fees and expenses of other Persons retained by the
Company, will be borne by the Company, regardless of whether the Registration
Statement becomes effective. In addition, the Company will, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any audit and the fees and expenses of any Person, including special
experts, retained by the Company.


 


5.7                               Indemnification


 


(a)                                  In
connection with any registration of any offering and sale of Registrable Shares
under the Securities Act pursuant to this Agreement, the Company shall
indemnify and hold harmless the seller of such Registrable Shares, each
underwriter, broker or any other Person acting on behalf of such seller, each
other Person, if any, who controls any of the foregoing Persons within the
meaning of the Securities Act and each Representative of any of the foregoing
Persons, against any losses, claims, damages or liabilities, joint or several,
to which any of the foregoing Persons may become subject, whether commenced or
threatened, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a


 


22

















 


material fact contained in the Registration
Statement under which such Registrable Shares were registered, any preliminary
Prospectus or final Prospectus contained therein, any amendment or supplement
thereto or any document incident to registration or qualification of any
offering and sale of any Registrable Shares, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading
or, with respect to any Prospectus, necessary to make the statements therein in
light of the circumstances under which they were made not misleading, or any
violation by the Company of the Securities Act or state securities or “blue
sky” laws applicable to the Company and relating to action or inaction required
of the Company in connection with such registration or qualification under such
state securities or “blue sky” laws, and the Company shall promptly reimburse
such seller, underwriter, broker, controlling Person or Representative for any
legal or other expenses incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company
shall not be liable to any such Person to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
Registration Statement, preliminary Prospectus, amendment thereto, or any
document incident to registration or qualification of any Registrable Shares in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Person, or a Person duly
acting on their behalf, specifically for use in the preparation thereof; provided,
further, however, that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any untrue statement or
allegedly untrue statement in, or omission or alleged omission made in any
preliminary Prospectus but eliminated or remedied in the final Prospectus
(filed pursuant to Rule 424 of the Securities Act), such indemnity agreement
shall not inure to the benefit of any indemnified party from whom the Person
asserting any loss, claim, damage, liability or expense purchased the
Registrable Shares which are the subject thereof, if a copy of such final
Prospectus had been timely made available to such indemnified party and such final
Prospectus was not delivered to such Person with or prior to the written
confirmation of the sale of such Registrable Shares to such Person.


 


(b)                                 In
connection with any registration of an offering and sale of Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 5.7(a)) the Company, each underwriter or broker
involved in such offering, each other seller of Registrable Shares under such
Registration Statement, each Person who controls any of the foregoing Persons
within the meaning of the Securities Act and any Representative of the
foregoing Persons with respect to any untrue statement or allegedly untrue
statement in or omission or alleged omission from such Registration Statement,
any preliminary Prospectus or final Prospectus contained therein, any amendment
or supplement thereto or any document incident to registration or qualification
of any such offering and sale of Registrable Shares, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company or such underwriter through an instrument duly
executed by such seller or a Person duly acting on such Seller’s behalf
specifically for use in connection with the preparation of such Registration
Statement, preliminary Prospectus, final Prospectus, amendment or supplement; provided,
however, that the maximum amount of liability in respect of such indemnification
shall be limited, in the case of each seller of Registrable Shares, to an


 


23

















 


amount equal to the net
proceeds actually received by such seller from the sale of Registrable Shares
effected pursuant to such registration.


 


(c)                                  Promptly
after receipt by an indemnified party of notice of the commencement of any
action involving a claim referred to in the preceding paragraphs of this
Section 5.7, such indemnified party will, if a claim in respect thereof is made
against an indemnifying party, give written notice to the latter of the
commencement of such action (provided, however, that an
indemnified party’s failure to give such notice in a timely manner shall only
relieve the indemnification obligations of an indemnifying party to the extent
such indemnifying party is materially prejudiced by such failure). In case any
such action is brought against an indemnified party, the indemnifying party
will be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election to
assume the defense thereof, the indemnifying party shall not be responsible for
any legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that if
any indemnified party shall have reasonably concluded that there may be one or
more legal or equitable defenses available to such indemnified party which are
in addition to or in conflict with those available to the indemnifying party,
or that such claim or litigation involves or could have an effect upon matters
beyond the scope of the indemnity agreement provided in this Section 5.7, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party and such indemnifying party shall reimburse
such indemnified party and any Person controlling such indemnified party for
that portion of the fees and expenses of any one lead counsel (plus
appropriate special and local counsel) retained by the indemnified party that
are reasonably related to the matters covered by the indemnity agreement
provided in this Section 5.7.


 


(d)                                 If
the indemnification provided for in this Section 5.7 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, claim, damage or liability referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amounts paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other hand in connection with the
statements or omissions that resulted in such loss, claim, damage or liability
as well as any other relevant equitable considerations; provided, however,
that the maximum amount of liability in respect of such contribution shall be
limited, in the case of each seller of Registrable Shares, to an amount equal
to the net proceeds actually received by such seller from the sale of
Registrable Shares effected pursuant to such registration. The relative fault
of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. No Person guilty of fraud
shall be entitled to indemnification or contribution hereunder.


 


24

















 


(e)                                  The indemnification and contribution provided
for under this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party and will survive
the transfer of Registrable Shares.


 


5.8                               Underwriting
Agreement


 


(a)                                  If
requested by the managing underwriters in connection with a request for a
Demand Registration under Sections 5.1 or 5.3, the Company shall enter into a
firm commitment underwriting agreement with such underwriters, such agreement
to be reasonably satisfactory in substance and form to the Company, the
Registrable Holders and the underwriters, and to contain such representations,
warranties and undertakings (including undertakings with respect to holdback
periods) by the Company and such other terms as are customary in agreements of
that type, including, without limitation, indemnification and contribution to
the effect and to the extent provided in Section 5.7.


 


(b)                                 No
Stockholder may participate in any registration hereunder that is underwritten
unless such Stockholder agrees (i) to sell such Stockholder’s Registrable
Shares proposed to be included therein on the basis provided in any
underwriting arrangements acceptable to the Company in the case of an offering
of Primary Shares, or, in the case of an offering pursuant to Section 5.1
hereof, the Company and the Registrable Holders and (ii) as expeditiously as
possible, to notify the Company of the occurrence of any event concerning such
Stockholder as a result of which the Prospectus relating to such registration
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.


 


5.9                               Information by Holder


 


Each holder of Registrable Shares
to be included in any registration shall furnish to the Company and the
managing underwriter such written information regarding such holder and the
distribution proposed by such holder as the Company or the managing underwriter
may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.


 


5.10                        Suspension


 


Anything
contained in this Agreement to the contrary notwithstanding, the Company may
(not more than once in any twelve-month period), by notice in writing to each
holder of Registrable Shares to which a Prospectus relates, require such holder
to suspend, for up to 90 days (the “Suspension Period”), the use of any
Prospectus included in a Registration Statement filed under Sections 5.2 or 5.3
if a Material Transaction exists that would require an amendment to such
Registration Statement or supplement to such Prospectus (including any such amendment
or supplement made through incorporation by reference to a report filed under
Section 13 of the Exchange Act). The period during which such Prospectus must
remain effective shall be extended by a period equal to the Suspension Period.
The Company may (but shall not be obligated to) withdraw the effectiveness of
any Registration Statement subject to this provision.


 


25

















 


5.11                        Exchange Act Compliance


 


From and after the Registration
Date or such earlier date as a registration statement filed by the Company
pursuant to the Exchange Act relating to any class of the Company’s Securities
shall have become effective, the Company shall comply with all of the reporting
requirements of the Exchange Act (whether or not it shall be required to do so)
and shall comply with all other public information reporting requirements of
the Commission that are conditions to the availability of Rule 144 for the sale
of the Common Stock. The Company shall cooperate with each Stockholder in
supplying such information as may be necessary for such Stockholder to complete
and file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.


 


ARTICLE
VI



MANAGEMENT INCENTIVE PLANS


 


6.1                               Certain Amendments


 


The Company
shall not, without the prior written consent of the Requisite Bond
Stockholders, (i) grant any shares of capital stock, or options, warrants or
rights to purchase capital stock, of the Company to any director, officer or
employee of the Company, other than shares of Series M Preferred Stock to be
granted pursuant to the Equity Incentive Plan, (ii) except as authorized by the
Special Incentive Plan, grant any stock appreciation rights or other equity participation
interests to any director, officer or employee of the Company, (iii) increase
the Share Limit (as defined in the Equity Incentive Plan) above 8,000 shares of
Series M Preferred Stock, (iv) increase the Series M Liquidation Multiple (as
defined in the Certificate) above .00001, (v) increase the Applicable
Percentage (as defined in the Special Incentive Plan) above 8.0% or (vi)
decrease the Series M Factor (as defined in the Certificate) below .92.


 


ARTICLE
VII



LEGENDS; NO REPRESENTATIONS


 


7.1                               Restrictive
Legends


 


(a)                                  Each
certificate for Stockholder Shares held by an Affiliate of the Company shall be
stamped or otherwise imprinted with a legend in substantially the following
terms:


 


“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SAID ACT OR LAWS.”


 


(b)                                 Each
certificate evidencing Stockholder Shares and each certificate issued in
exchange for or upon the Transfer of any Stockholder Shares (if such shares
remain


 


26

















 


Stockholder Shares as
defined herein after such Transfer) shall be stamped or otherwise imprinted
with a legend in substantially the following form:


 


“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS’
AGREEMENT DATED AS OF JULY 18, 2006 (AS AMENDED, MODIFIED, SUPPLEMENTED OR
RESTATED FROM TIME TO TIME, THE “AGREEMENT”), AMONG THE ISSUER OF SUCH
SECURITIES (THE “COMPANY”) AND CERTAIN OF THE COMPANY’S STOCKHOLDERS.
THE TERMS OF SUCH AGREEMENT INCLUDE, AMONG OTHER THINGS, RESTRICTIONS ON TRANSFERS.
A COPY OF THE AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE
HOLDER HEREOF UPON WRITTEN REQUEST.”


 


(c)                                  The
legend set forth in paragraph (b) shall be removed from the certificates
evidencing any shares which cease to be Stockholder Shares in accordance with
the terms of this Agreement.


 


7.2                               No
Representations


 


THE COMPANY
MAKES NO REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE
REGISTRABLE SHARES ISSUED UNDER THE PLAN. THE COMPANY RECOMMENDS THAT
STOCKHOLDERS CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE
SUCH SECURITIES WITHOUT REGISTRATION UNDER THE SECURITIES ACT.


 


ARTICLE
VIII



AMENDMENT AND WAIVER


 


8.1                               Amendment


 


The
terms and provisions of this Agreement may not be amended, modified or waived
except pursuant to a writing signed by (a) the Company; (b) the Requisite
Investor Stockholders; and (c) the Requisite Bond Stockholders; provided,
however, that any amendment, modification or waiver that discriminates
against the Other Stockholders or treats the Other Stockholders in a manner
materially adversely different from Investor Stockholders and Bond
Stockholders, after giving effect to such amendment, modification or waiver,
shall not be effective as to the Other Stockholders without the prior written
consent of the holders of a majority of the shares of Common Stock held by the
Other Stockholders; and provided, further, any amendment,
modification or waiver that discriminates against any particular Stockholder or
treats any particular Stockholder in a manner materially adversely different
from other Stockholders of the same class (i.e., Investor Stockholders, Bond
Stockholders or Other Stockholders, as the case may be), after giving effect to
such amendment, modification or waiver, shall not be effective as to such
particular Stockholder without his, her or its prior written consent.


 


27

















 


8.2                               Waiver


 


No course of
dealing between the Company and the Stockholders (or any of them) or between
any of the Stockholders or any delay in exercising any rights hereunder will
operate as a waiver of any rights of any party to this Agreement. The failure
of any party to enforce any of the provisions of this Agreement will in no way
be construed as a waiver of such provisions and will not affect the right of
such party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.


 


ARTICLE
IX



TERMINATION


 


The provisions
of this Agreement, except as otherwise expressly provided herein, shall
terminate upon the first to occur of (a) the dissolution, liquidation or
winding-up of the Company; (b) a Sale of the Company; (c) the conversion of all
of the outstanding shares of Series AA Preferred Stock into Common Stock
pursuant to the terms of the Certificate; or (d) the approval of such
termination by the Company, the Requisite Investor Stockholders and the
Requisite Bond Stockholders; provided, however, that Article II,
Article III, Article IV and Article VI shall terminate upon the consummation of
an Initial Public Offering. Anything contained herein to the contrary
notwithstanding, as to any particular Stockholder, this Agreement shall no
longer be binding or of further force or effect as to such Stockholder, except
as otherwise expressly provided herein, as of the date such Stockholder has
Transferred all of such Stockholder’s Stockholder Shares.


 


ARTICLE
X



MISCELLANEOUS


 


10.1                        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.


 


10.2                        Entire
Agreement


 


This Agreement
and the other agreements referred to herein and to be executed and delivered in
connection herewith embody the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and thereof and
supersede and preempt


 


28

















 


any and all
prior and contemporaneous understandings, agreements, arrangements or
representations by or among the parties, written or oral, which may relate to
the subject matter hereof or thereof in any way.


 


10.3                        Independence
of Agreements and Covenants


 


All agreements
and covenants hereunder shall be given independent effect so that if a certain
action or condition constitutes a default under a certain agreement or
covenant, the fact that such action or condition is permitted by another agreement
or covenant shall not affect the occurrence of such default, unless expressly
permitted under an exception to such initial agreement or covenant.


 


10.4                        Successors
and Assigns


 


Except as otherwise provided herein, this Agreement
will bind and inure to the benefit of and be enforceable by the Company and its
successors and permitted assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and permitted
assigns of each of them, so long as they hold Stockholder Shares. Except as
specifically set forth herein, the Company may not assign its rights or
obligations hereunder without the prior written consent of the Requisite
Investor Stockholders and the Requisite Bond Stockholders.


 


10.5                        Counterparts;
Facsimile Signatures; Validity


 


This Agreement
may be executed in two or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered (by
facsimile or otherwise) to the other party, it being understood that all
parties need not sign the same counterpart. Any counterpart or other signature
hereupon delivered by facsimile shall be deemed for all purposes as
constituting good and valid execution and delivery of this Agreement by such
party.


 


10.6                        Remedies


 


(a)                                  Each
Stockholder shall have all rights and remedies reserved for such Stockholder
pursuant to this Agreement and all rights and remedies which such holder has
been granted at any time under any other agreement or contract and all of the
rights which such holder has under any law or equity. Any Person having any
rights under any provision of this Agreement will be entitled to enforce such
rights specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law or
equity.


 


(b)                                 It
is acknowledged that it will be impossible to measure in money the damages that
would be suffered by any party hereto if any other Person party hereto fails to
comply with any of the obligations imposed on it upon them in this Agreement
and that in the event of any such failure, the aggrieved party will be
irreparably damaged and will not have an adequate remedy at law. Any such
aggrieved party shall, therefore, be entitled to equitable relief, including
specific performance, to enforce such obligations, and if any action should be


 


29

















 


brought in equity to
enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.


 


10.7                        Notices


 


All notices,
amendments, waivers or other communications pursuant to this Agreement shall be
in writing and shall be deemed to have been duly given if personally delivered,
telecopied, sent by nationally recognized overnight courier or mailed by
registered or certified mail with postage prepaid, return receipt requested, to
the parties hereto at the following addresses (or at such other address for a
party as shall be specified by like notice):


 


(a)                                  if
to the Company, to:


 


Pliant Corporation

1475 Woodfield Road, Suite 700

Schaumburg, Illinois  60173

Attention: President

Facsimile: (847) 969-3338

Telephone: (847) 969-3330


 


with copies to:


 


Sidley Austin LLP

One South Dearborn

Chicago, Illinois 60603


Attention: Larry J. Nyhan, Esq.

John R. Box, Esq.


Facsimile: (312) 853-7036

Telephone: (312) 853-7425; and



O’Melveny & Myers LLP

Times Square Tower

7 Times Square

New York, New York 10036

Attn: Ilan S. Nissan, Esq.

Facsimile:  (212) 326-2061

Telephone: (212) 408-2443


 


(b)                                 if
to any Stockholder to it at its address set forth on Schedule I attached
hereto. Any such notice or communication shall be deemed to have been given and
received (a) when delivered, if personally delivered; (b) when sent, if sent by
telecopy on a Business Day (or, if not sent on a Business Day, on the next
Business Day after the date sent by telecopy); (c) on the next Business Day
after dispatch, if sent by nationally recognized overnight courier guaranteeing
next Business Day delivery; and (d) on the fifth Business Day following the
date on which the piece of mail containing such communication is posted, if
sent by mail.


 


30

















 


10.8                        Governing
Law


 


EXCEPT AS SET FORTH BELOW, THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAWS OR PRINCIPLES THEREOF
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF DELAWARE. ALL MATTERS WHICH ARE THE SUBJECT OF THIS AGREEMENT RELATING
TO MATTERS OF INTERNAL GOVERNANCE OF THE COMPANY SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY LAW OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF DELAWARE TO BE APPLIED. WITH RESPECT TO ANY LAWSUIT OR
PROCEEDING ARISING OUT OF OR BROUGHT WITH RESPECT TO THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY, EACH OF THE PARTIES HERETO IRREVOCABLY (a)
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL AND DELAWARE
STATE COURTS LOCATED IN THE COUNTY OF NEW CASTLE IN THE STATE OF DELAWARE; (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 PART.


 


10.9                        Waiver
of Jury Trial


 


EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY DEALINGS BETWEEN THE PARTIES HERETO RELATING TO THE
SUBJECT MATTER HEREOF. EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND OR
SURETY OR SECURITY UPON SUCH BOND THAT MIGHT, BUT FOR THIS WAIVER, BE REQUIRED
OF THE OTHER PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT. EACH OF THE PARTIES HERETO
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED OR HAD THE OPPORTUNITY TO
REVIEW THIS WAIVER WITH ITS RESPECTIVE LEGAL COUNSEL, AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.


 


31

















 


10.10                 Further
Assurances


 


Each party
hereto shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments, and documents as any other party hereto reasonably
may request in order to carry out the provisions of this Agreement and the
consummation of the transactions contemplated hereby or thereby.


 


10.11                 Prior
Agreements


 


Upon the execution and delivery of this Agreement, the Stockholders’
Agreement and the Registration Rights Agreement, each dated as of May 31, 2000,
as amended from time to time, by and between Pliant (Utah) and its
stockholders, shall each be terminated and of no further force or effect.


 


10.12                 Regulatory
Covenants


 


The Company
shall comply, and the Stockholders will cause the Company to comply, with the
terms and provisions contained in Exhibit E attached hereto and made a
part hereof.


 


10.13                 Third Party
Reliance


 


Anything
contained herein to the contrary notwithstanding, the covenants of the Company
contained in this Agreement (a) are being given by the Company as an inducement
to the Stockholders to enter into this Agreement (and the Company acknowledges
that the Stockholders have expressly relied thereon) and (b) are solely for the
benefit of the Stockholders. Accordingly, no third party (including, without
limitation, any holder of Securities of the Company) or anyone acting on behalf
of any thereof other than the Stockholders, shall be a third party or other
beneficiary of such covenants and no such third party shall have any rights of
contribution against the Stockholders or the Company with respect to such
covenants or any matter subject to or resulting in indemnification under this
Agreement or otherwise.


 


10.14                 Confidentiality


 


Except as
otherwise required by law, each Stockholder shall, and shall cause its
Representatives to, hold in confidence all nonpublic information of the Company
provided or made available to such Stockholder and Representative until such
time as such information has become publicly available other than as a
consequence of any breach by such Stockholder or Representative of its
confidentiality obligations hereunder (provided that such information may be
disclosed to any other Stockholder, Representative, or, in the case of a
Stockholder that is a private investment fund, any partner in such fund) so
long as such Person agrees to keep such information confidential upon receipt
thereof). The obligations of each Stockholder under this Section 10.14 shall
terminate upon the earlier of (a) the second anniversary of the date on which
such Stockholder has Transferred all of such Stockholder’s Stockholder Shares
or (b) the termination of this Agreement.


 


*******


 


32

















 


IN
WITNESS WHEREOF, the undersigned have duly executed this
Stockholders’ Agreement as of the date first written above.


 


 


	
   

  	
  PLIANT CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harold C. Bevis

  	
   

  
	
   

  	
   

  	
  Harold C. Bevis

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEXIBLE FILMS, LLC

  
	
   

  	
  FLEXIBLE FILMS II, LLC

  
	
   

  	
  SOUTHWEST INDUSTRIAL FILMS, LLC

  
	
   

  	
  SOUTHWEST INDUSTRIAL FILMS II, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  J.P. Morgan Partners (BHCA), L.P.,

  its Member,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  JPMP Master Fund Manager, L.P.,

  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  JPMP Capital Corp.,

  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NEW YORK LIFE CAPITAL PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  NYLCAP Manager LLC,

  its Investment Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
								



 

















 


	
   

  	
  THE NORTHWESTERN MUTUAL LIFE

  INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


	
   

  	
  WACHOVIA CAPITAL PARTNERS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


	
   

  	
  [BOND HOLDERS]

  
	
   

  	
   

  
	
   

  	
  By:

  	
  [                        ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Its:

  



 

















 


[OTHER
STOCKHOLDERS]


 

















 


Schedule I


 


Stockholders


 


Name and Address of
Investor Stockholders


 


Flexible Films, LLC


Flexible Films II, LLC


Southwest Industrial Films, LLC


Southwest Industrial Films II, LLC


c/o J.P. Morgan Partners, LLC


1221 Avenue of the Americas


New York, New York  10020


Attention: Timothy Walsh


Facsimile:  (2120 899-3755


Telephone: (212) 899-3400


 


with a copy to:


 


O’Melveny & Myers LLP


Times Square Tower


7 Times Square


New York, New York 10036


Attn: Ilan S. Nissan, Esq.


Facsimile:  (212) 326-2061


Telephone: (212) 408-2443


 


New York Life Capital Partners, L.P.


c/o [                     ]


[Address]


[City, State Zip]


Attention:  [                     ]


Facsimile:  [                     ]


Telephone: [                    
]


 


The Northwestern Mutual Life Insurance Company


c/o [                     ]


[Address]


[City, State Zip]


Attention:  [                     ]


Facsimile:  [                     ]


Telephone: [                    
]


 


i

















 


Wachovia Capital Partners, LLC

c/o [                     ]


[Address]


[City, State Zip]


Attention:  [                     ]


Facsimile:  [                     ]


Telephone: [                     ]


 


[Bond Stockholders]

c/o [                     ]


[Address]


[City, State Zip]


Attention:  [                     ]


Facsimile:  [                     ]


Telephone: [                     ]


 


Name and Address of Other Stockholders


 


 


 


ii

















 


Exhibit
A


 


Bond
Stockholders


 

















 


Exhibit
B


 


Pliant
Corporation 2006 Restricted Stock Incentive Plan


 


PLIANT CORPORATION


 


2006 RESTRICTED
STOCK INCENTIVE PLAN


 


1.                                  PURPOSE
OF PLAN


 


The purpose of the Pliant
Corporation 2006 Restricted Stock Incentive Plan (this “Plan”) is to
promote the success of Pliant Corporation (the “Corporation”) and to
increase stockholder value by providing an additional means, through the grant
of the right to acquire shares of the Corporation’s Series M Redeemable
Preferred Stock, no par value per share (the “Restricted Stock” or the “Series M
Preferred”), to attract, motivate, retain and reward selected employees of
the Corporation.


 


2.                                        ELIGIBILITY


 


The Administrator (as
such term is defined in Section 3.1) may grant the right to acquire
Restricted Stock under this Plan (a “Restricted Stock Award”) only to
those persons that the Administrator determines to be Eligible Persons. An “Eligible
Person” is any person who is an officer (whether or not a director),
employee, consultant, advisor, agent or representative of the Corporation or
any of its Subsidiaries employed in such capacity on the date such Restricted
Stock is granted and is designated an “Eligible Person” by the Administrator.
An Eligible Person who has been granted a Restricted Stock Award (a “participant”)
may, if otherwise eligible, be granted the right to purchase additional shares
of Restricted Stock if the Administrator shall so determine.


 


3.                                        PLAN
ADMINISTRATION


 


3.1                               The Administrator.
This Plan shall be administered by, and all Restricted Stock Awards awarded
under this Plan shall be authorized by, the Administrator. The “Administrator”
means the Board of Directors of the Corporation (the “Board”) or one or
more committees appointed by the Board to administer all or certain aspects of
this Plan. Any such committee shall be comprised solely of two or more directors
who are not Eligible Persons or such number of directors who are not Eligible
Persons as may be required under applicable law and the Corporation’s
Bylaws.


 


3.2                               Powers of the Administrator.
Subject to the express provisions of this Plan and any limitations contained in
a Restricted Stock Agreement (a “Restricted Stock Agreement”) entered
into by the participant, the Administrator is authorized and empowered to do
all things necessary or desirable in connection with the authorization of
shares of Restricted Stock and the administration of this Plan (in the case of
a committee, within the authority delegated to that committee, including,
without limitation, the authority to:


 

















 


(a)                                  determine eligibility
and, from among those persons determined to be eligible, the particular
Eligible Persons who will receive a Restricted Stock Award under this Plan;


 


(b)                                 grant Restricted Stock
Awards to Eligible Persons, determine the price at which shares of Restricted
Stock will be offered or awarded and the number of shares of Restricted Stock
to be awarded to any of such Eligible Persons, determine the other specific
terms and conditions of such Restricted Stock consistent with the express
limits of this Plan, establish the installments or terms (if any) in which such
shares of Restricted Stock shall vest (which may include, without
limitation, performance and/or time-based criteria), or determine that no
vesting is required, establish any applicable performance targets, and
establish the events of termination or reversion of such Restricted Stock;


 


(c)                                  approve the forms of
Restricted Stock Agreements, which need not be identical among participants;


 


(d)                                 construe and interpret
this Plan and any agreements defining the rights and obligations of the
Corporation and participants under this Plan, further define the terms used in
this Plan, and prescribe, amend and rescind rules and regulations relating
to the administration of this Plan or the Restricted Stock granted under this
Plan;


 


(e)                                  cancel, modify, or
waive the Corporation’s rights with respect to, or modify, discontinue,
suspend, or terminate any or all outstanding shares of Restricted Stock;


 


(f)                                    accelerate or
extend the vesting of any or all outstanding shares of Restricted Stock in such
circumstances as the Administrator may deem appropriate (including,
without limitation, in connection with a termination of employment or services
or other events of a personal nature);


 


(g)                                 adjust the number of
shares of Restricted Stock subject to any Restricted Stock Award, adjust the
price of any or all outstanding shares of Restricted Stock or otherwise change
previously imposed terms and conditions, in such circumstances as the
Administrator may deem appropriate, in each case subject to Sections 4 and
8.6.2;


 


(h)                                 determine the date of
grant of a Restricted Stock Award;


 


(i)                                     determine whether,
and the extent to which, adjustments are required pursuant to Section 7
hereof and authorize the termination, conversion, substitution or succession of
shares of Restricted Stock upon the occurrence of an event of the type
described in Section 7;


 


2

















 


(j)                                     acquire or settle
(subject to Sections 7 and 8.6.2) rights under Restricted Stock in cash, stock
of equivalent value, or other consideration; and


 


(k)                                  determine the fair
market value of the shares of Restricted Stock awarded under this Plan from
time to time and/or the manner in which such value will be determined and make
all other elections or determinations under this Plan and under any Restricted
Stock Agreement.


 


3.3                               Binding Determinations.
Any action taken by, or inaction of, the Corporation or the Administrator
relating or pursuant to this Plan and within its authority hereunder or under
applicable law shall be within the absolute discretion of that entity or body
and shall be conclusive and binding upon all persons. Neither the Board nor any
Board committee, nor any member thereof or person acting at the direction
thereof, shall be liable for any act, omission, interpretation, construction or
determination made in good faith in connection with this Plan (or any shares of
Restricted Stock granted under this Plan), and all such persons shall be
entitled to indemnification and reimbursement by the Corporation in respect of
any claim, loss, damage or expense (including, without limitation, attorneys’
fees) arising or resulting therefrom to the fullest extent permitted by law,
under the Corporation’s Amended and Restated Certificate of Incorporation as
amended from time to time (the “Charter”) and/or, to the extent
available, under any directors and officers liability insurance coverage that may be
in effect from time to time.


 


3.4                               Reliance on Experts.
In making any determination or in taking or not taking any action under this
Plan, the Administrator may obtain and may rely upon the advice of
experts, including employees and professional advisors to the Corporation. No
director, officer or agent of the Corporation shall be liable for any such
action or determination taken or made or omitted in good faith.


 


3.5                               Delegation.
The Administrator may delegate ministerial, non-discretionary functions in
connection with the administration of the Plan to individuals who are officers
or employees of the Corporation or to third parties.


 


4.                                        SHARES
OF RESTRICTED STOCK SUBJECT TO THE PLAN; SHARE LIMITS


 


4.1                               Shares Available.
Subject to the provisions of Section 7.1, the aggregate number of shares
of Restricted Stock that may be awarded to Eligible Persons under this
Plan (the “Share Limit”) shall not exceed 8,000 shares of Series M
Preferred.


 


4.2                               Reissue of Awards and
Shares. Shares of Restricted Stock that are subject to awards
which are cancelled or terminated, are forfeited, fail to vest, or for any
other reason are not delivered under this Plan shall again be available for
subsequent awards under this Plan to Eligible Persons.


 


4.3                               Reservation of Shares;
Fractional Shares; Minimum Issue. The Corporation shall at all
times reserve a number of shares of Series M Preferred sufficient to cover
the Corporation’s obligations and contingent obligations, if any, to issue and
sell shares of Restricted Stock. The Corporation has initially reserved 8,000


 


3

















 


shares of Series M Preferred for
issuance under this Plan. Fractional shares may be issued or delivered
under this Plan.


 


5.                                        AWARDS


 


5.1                               Restricted Stock Agreements.
Each Restricted Stock Award shall be evidenced by a written Restricted Stock
Agreement as approved by the Administrator and executed on behalf of the Corporation
and by the recipient of the Restricted Stock Award. The Administrator may authorize
any officer of the Corporation to execute any or all Restricted Stock
Agreements on behalf of the Corporation. The Restricted Stock Agreement shall
set forth the material terms and conditions of such Restricted Stock Award as
established by the Administrator consistent with the express limitations of
this Plan.


 


5.2                               Consideration for
Restricted Stock Awards. The purchase price for any shares of
Restricted Stock to be delivered pursuant to a Restricted Stock Award, as
applicable, may be paid by means of any lawful consideration as determined
by the Administrator, including, without limitation, one or a combination of
the following methods:


 


(a)                                  services rendered by
the recipient of such Restricted Stock Award;


 


(b)                                 cash, check payable to
the order of the Corporation, or electronic funds transfer; or


 


(c)                                  payment in such
manner as may be authorized by the Administrator;


 


In no event
shall any shares of Restricted Stock newly issued by the Corporation be issued
for less than the minimum lawful consideration for such shares or for
consideration other than consideration permitted by applicable state law. The
Corporation will not be obligated to deliver any shares of Restricted Stock
unless and until it receives full payment of the purchase price therefor, and
any other conditions to purchase have been satisfied.


 


5.3                               Transfer Restrictions.


 


5.3.1                     Limitations on Exercise and
Transfer. Unless otherwise expressly provided in (or pursuant
to) this Section 5.3.1, by applicable law, (a) all Restricted Stock
Awards are non-transferable and shall not be subject in any manner to sale,
transfer, participation, alienation, assignment, pledge, encumbrance or charge
other than pursuant to, and in accordance with Part C of Article Four
of the Charter; and (b) amounts payable or shares issuable pursuant to any
Restricted Stock Awards shall be delivered only to (or for the account of) the
participant.


 


5.3.2                     Exceptions to Limits on
Transfer. The transfer restrictions in Section 5.3.1 shall
not apply to:


 


(a)                                  transfers to the
Corporation; or


 


4

















 


(b)                                 the designation of a
beneficiary to receive benefits in the event of the participant’s death or, if
the participant has died, transfers to the participant’s beneficiary, or, in
the absence of a validly designated beneficiary, transfers by will or the laws
of descent and distribution, or


 


(c)                                  transfers to trusts
or other entities controlled by the participant, and whose beneficiaries or
beneficial owners are, the participant and/or members of the participants
immediate family so long as (i) the Administrator receives evidence
satisfactory to it that such transfer is being made for tax and/or estate
planning purposes on a gratuitous or donative basis, without consideration
(other than nominal consideration or in exchange for an interest in the
qualified transferee) and (ii) the participant maintains control over the
voting and dispositive power of the Restricted Stock;


 


provided however, that in
the case of clauses (b) and (c) above, the beneficiary, successor,
trust, trustee or other entity shall agree in writing to be bound by this Plan
and the participant’s Restricted Stock Agreement.


 


6.                                        EFFECT
OF TERMINATION OF SERVICE ON AWARDS


 


The Administrator shall establish the effect
of a termination of employment or service on the rights and benefits under each
Restricted Stock Award under this Plan and in so doing may make
distinctions based upon the cause of termination or otherwise.


 


7.                                        ADJUSTMENTS


 


Upon or in contemplation
of any reclassification, recapitalization, stock split (including a stock split
in the form of a stock dividend) or reverse stock split; any merger,
combination, consolidation, or other reorganization; any exchange of Restricted
Stock, or any similar, unusual or extraordinary corporate transaction, in each
case, in respect of the Restricted Stock; then the Administrator shall, in such
manner, to such extent (if any) and at such time as it deems appropriate and
equitable in the circumstances, proportionately adjust any or all of (1) the
number and type of shares of Restricted Stock that thereafter may be made
the subject of Restricted Stock Awards, (2) the amount of shares of
Restricted Stock then subject to any or all outstanding Restricted Stock
Awards, (3) the grant of any or all outstanding Restricted Stock Awards or
(4) the Share Limit. Notwithstanding the foregoing, any adjustment made
pursuant to this Section 7 shall be subject to de novo review at the
request of the participant to the extent provided in a Restricted Stock
Agreement.


 


In any of such events,
the Administrator may take such action prior to such event to the extent
that the Administrator deems the action necessary to permit the participant to
realize the benefits intended to be conveyed with respect to the underlying
shares of Restricted Stock. In the case of any stock split or reverse stock
split, if no action is taken


 


5

















 


by the Administrator, the
proportionate adjustments contemplated by clause (a) above shall
nevertheless be made.


 


8.                                        OTHER
PROVISIONS


 


8.1                               Compliance with Laws.
This Plan, the granting and vesting of Restricted Stock Awards under this Plan,
the offer, issuance and delivery of shares of Restricted Stock, the acceptance
of promissory notes and/or the payment of money under this Plan or under
Restricted Stock Awards are subject to compliance with all applicable federal
and state laws, rules and regulations (including but not limited to state
and federal securities law, federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith.
Eligible Persons acquiring any Restricted Stock under this Plan will, if
requested by the Corporation, provide such assurances and representations to
the Corporation as the Administrator may deem necessary or desirable to
assure compliance with all applicable legal and accounting requirements.


 


8.2                               Employment Status.
No person shall have any claim or rights to be granted a Restricted Stock Award
(or additional Restricted Stock Awards, as the case may be) under this
Plan, subject to any express contractual rights (set forth in a document other
than this Plan) to the contrary.


 


8.3                               No Employment/Service
Contract. Nothing contained in this Plan (or in any other
documents under this Plan or in any Restricted Stock Award) shall confer upon
any person any right to continue in the employ or other service of the
Corporation, constitute any contract or agreement of employment or other
service or affect an employee’s status as an employee at will, or shall
interfere in any way with the right of the Corporation to change a person’s
compensation or other benefits, or to terminate his or her employment or other
service, with or without cause. Nothing in this Section 8.3, however, is
intended to adversely affect any express independent right of such person under
a separate employment or service contract other than a Restricted Stock Agreement.


 


8.4                               Plan Not Funded.
Restricted Stock Awards granted under this Plan shall be payable in shares of
Restricted Stock, and no special or separate reserve, fund or deposit shall be
made to assure payment of such Restricted Stock Awards. No participant,
beneficiary or other person shall have any right, title or interest in any fund
or in any specific asset of the Corporation by reason of any Restricted Stock
Award hereunder. Neither the provisions of this Plan (or of any related
documents), nor the creation or adoption of this Plan, nor any action taken
pursuant to the provisions of this Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the Corporation
and any participant, beneficiary or other person.


 


8.5                               Tax Withholding.
Upon any vesting or payment of any Restricted Stock Award the Corporation shall
have the right at its option to:


 


6

















 


(a)                                  require the
participant (or the participant’s personal representative or beneficiary, as
the case may be) to pay or provide for payment of at least the minimum
amount of any taxes which the Corporation may be required to withhold with
respect to such vesting or payment; or


 


(b)                                 deduct from any amount
otherwise payable in cash to the participant (or the participant’s personal
representative or beneficiary, as the case may be) the minimum amount of
any taxes which the Corporation may be required to withhold with respect
to such vesting or payment.


 


8.6                               Effective
Date, Termination and Suspension, Amendments.


 


8.6.1                     Effective Date.
This Plan is effective as July 18, 2006 (the “Effective Date”).


 


8.6.2                     Amendments to Plan and
Awards. This Plan may be amended, modified, suspended or
terminated with the written approval of the Corporation; provided,  however,
any amendment which materially adversely affects an outstanding Restricted
Stock Award shall require the consent of the holder of such Restricted Stock
Award. Changes, settlements and other actions contemplated by Section 7
shall not be deemed to constitute amendments, modifications or suspensions for
purposes of this Section 8.6.2.


 


8.7                               Governing
Law; Construction; Severability.


 


8.7.1                     Choice of Law.
This Plan, the Restricted Stock Awards, the Restricted Stock Agreements, all
documents evidencing Restricted Stock Awards and all other related documents
shall be governed by, and construed in accordance with the laws of the State of
New York.


 


8.7.2                     Severability.
If a court of competent jurisdiction holds any
provision invalid and unenforceable, the remaining provisions of this Plan
shall continue in effect.


 


8.8                               Captions.
Captions and headings are given to the sections and subsections of this Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
this Plan or any provision thereof.


 


8.9                               Required
Sale in Connection with a Sale of the Company.


 


8.9.1                     Drag-Along Rights. Subject to the provisions of this Section 8.9,
if the Board and the “Requisite Investor Stockholders” (as defined in the
Stockholders’ Agreement of the Corporation dated July 18, 2006, as amended
(the “Stockholders’ Agreement”)) approve a “Sale of the Company” (as
defined pursuant to the Stockholders’ Agreement)(such approved Sale of the
Company, an “Approved Sale”), each participant shall consent to, vote in
favor of and raise no objections against the Approved Sale, and if the Approved
Sale is structured as


 


7

















 


a sale of the issued and outstanding capital
stock of the Corporation (whether by merger, recapitalization, consolidation or
sale or otherwise), then each participant shall waive any dissenters rights,
appraisal rights or similar rights in connection with such Approved Sale and
shall, so long as such participant shall comply with Section 1 of Part C
of Article Four of the Charter, be entitled to receive the consideration
for his or her Restricted Stock in connection with such Approved Sale upon a
Mandatory Redemption as provided in, and subject to, Section 1 of Part C
of Article Four of the Charter. Each participant shall take all necessary
and desirable actions in connection with the consummation of the Approved Sale
which are substantially equivalent to the actions being taken by the parties to
the Stockholders’ Agreement, including, but not limited to, the execution of
such agreements and instruments and other actions necessary to provide the
representations, warranties, indemnities, covenants, conditions, escrow
agreements and other provisions and agreements relating to such Approved Sale
as shall be determined by the Board of Directors; provided, however, that the
participant’s obligations with respect to any representations, warranties,
indemnities, covenants, conditions, escrow provisions and agreements of (i) the
Corporation and its subsidiaries shall be limited to such participant’s
Indemnity Cap; provided, further that in no event shall the maximum liability
of a participant on account of such participant’s Restricted Stock exceed the
sum of (x) the net proceeds received by such participant in connection with
such Approved Sale on account of such Restricted Stock and (y) any amounts paid
to such participant pursuant to the Company’s Deferred Cash Incentive Plan and (ii) of
such Participant shall not be so limited or restricted. In the event that any
participant fails for any reason to take any of the foregoing actions after
reasonable notice thereof, he, she or it hereby grants an irrevocable power of
attorney and proxy to any officer or member of the Board (as defined in the
Stockholders’ Agreement) or an assignee of such person to take all necessary
actions and execute and deliver all documents deemed by such person to
effectuate the terms of this Section 8.9. As used in this Section 8.9.1,
“Indemnity Cap” shall mean, with respect to any participant, the sum of
the product of (x) the Indemnity Percentage and (y) the sum of (1) the aggregate
Series M Mandatory Redemption Price received by such Participant in
connection with such Approved Sale plus (2) the aggregate amount, if any,
paid to such participant pursuant to the Company’s Deferred Cash Incentive
Plan. “Indemnity Percentage” shall mean the percentage which the
aggregate maximum indemnification obligation of all holders of capital stock of
all Covered Classes (as defined in the Charter) represents of the Net Asset
Proceeds (as defined in the Charter) or Net Stock Proceeds (as defined in the
Charter), as the case may be; provided, however, that in the event that
holders of capital stock of the Covered Classes have different maximum
indemnification obligations for different matters (for example, if some
representations or warranties are excluded from a cap on indemnity), then the
Indemnity Percentage shall be calculated separately with respect to each type
of indemnification obligations.


 


8.9.2                     Procedure. The Corporation shall deliver written notice
to each participant setting forth in reasonable detail the terms (including
price, time and


 


8

















 


form of payment) of any Approved Sale
(the “Drag Notice”). Within twenty (20) days following receipt of the
Drag Notice, each such participant shall deliver to the Corporation written
notice setting forth such participants’ agreement to consent to and raise no
objections against, or impediments to, the Approved Sale (including, waiving
all dissenter’s and similar rights).


 


8.10                        Compliance with Code Section 409A. The Restricted
Stock Awards granted hereunder are intended to comply with the requirements set
forth in Section 409A of the Internal Revenue Code of 1986, as amended,
and any regulations and rulings thereunder (“Section 409A”), so as to avoid
the imposition of excise taxes and other penalties (“409A Penalties”) under Section 409A
with respect to the Restricted Stock. The Administrator shall not amend any
Restricted Stock Award in a manner that would subject the participant to Section 409A
Penalties. In the event that the grant of any Restricted Stock Award under this
Plan or the amendment of any Restricted Stock Award under this Plan would
subject the participant to 409A Penalties, the Administrator and the
participant shall cooperate diligently to amend the terms of the Restricted
Stock Award to avoid, insofar as possible, such 409A Penalties while minimizing
any material and adverse impact of any such amendment upon the economic, tax or
accounting implications of such Restricted Stock Award to the Company.


 


8.11                        Non-Exclusivity
of Plan. Nothing in this Plan shall limit or be deemed to limit
the authority of the Board or the Administrator to authorize any other
compensation under any other plan or authority.


 


9






 













 


Exhibit
C


 


Pliant
Corporation Deferred Cash Incentive Plan


 


PLIANT CORPORATION

DEFERRED CASH INCENTIVE PLAN


 


Pliant Corporation, a
Delaware corporation, has determined that it is in the best interest of the
Company to adopt the Pliant Corporation Deferred Cash Incentive Plan (the “Plan”) to provide financial benefits
to key management employees of the Company and its subsidiaries in the event of
a Liquidation Event or a Redemption (each as herein defined) in accordance with
the terms and conditions set forth herein.


 


The purpose of the Plan is
to provide designated key employees with financial rewards in the event of a
Liquidation Event or Redemption in order to incentivize such employees to
increase the value of the Company and to secure their continued commitment and
dedication to the Company.


 


1.                                       Definitions. The following
definitions shall apply for purposes of this Plan:


 


(a)                                  “Applicable
Percentage” means 8.0%.


 


(b)                                 “Asset Sale” has the meaning set forth in the definition of
“Liquidation Event” contained in Article Four, Part C, Section 6
of the Certificate of Incorporation.


 


(c)                                  “Bonus” means with respect to an eligible Participant upon a
Liquidation Event or Redemption, the amount payable to such eligible
Participant under Section 3 of the Plan.


 


(d)                                 “Bonus
Percentage” means the fixed
percentage of the Bonus Pool assigned to a Participant as set forth in
Exhibit A, with the Bonus Percentages to be assigned by the Board of
Directors of the Company, following consultation and discussions with the
Company’s Chief Executive Officer; provided, however, that the Bonus Percentage
of any Participant may not be reduced without the prior written consent of
such Participant. The sum of the Bonus Percentages for the Participants, in the
aggregate, may be less than, but shall not exceed, 100%.


 


(e)                                  “Bonus Pool” means:


 


(i)                                    With respect to a Liquidation Event, an
aggregate positive amount, if any, equal to the Applicable Percentage of the
lesser of:


 


(A)                              the
Hurdle Amount (or, to the extent the Initial Redemption has not occurred prior
thereto but there have been one or more prior redemptions of Series AA
Preferred Stock for which no Bonus Pool has been created, $224.8 million); and


 


(B)                                the
sum of (x) the Liquidation Proceeds of such Liquidation Event plus (y) the
Grossed-Up Other Distributions as of the date of such Liquidation Event, plus,
(z) only to the extent


 

















 


the Initial Redemption had not occurred prior thereto but there had
been prior redemptions of Series AA Preferred Stock for which no Bonus
Pool had been created, the sum of the Redemption Proceeds in connection with
all such prior redemptions.


 


(ii)                                 With
respect to a Redemption, an aggregate amount equal to the Applicable Percentage
of the Redemption Proceeds (which in the case of the Initial Redemption, shall
include the Redemption Proceeds from any prior redemptions of Series AA
Preferred Stock by the Company occurring prior to the occurrence of the Initial
Redemption for which no Bonus Pool has been created);


 


provided, however, that the amount of all Bonus Pools
created pursuant to clauses (i) and (ii) above shall in no event
exceed an aggregate amount equal to the Applicable Percentage of $224.8
million. For purposes of clarification, in the event of the occurrence of a
Liquidation Event which includes or is consummated substantially simultaneously
with a Redemption, regardless of the actual order of the transaction, such
transaction shall be deemed to be a single transaction and shall be deemed to
be a Liquidation Event (and not a Redemption), with the proceeds of the
redemption portion of such transaction to be deemed to be proceeds payable in
connection with such transaction.


 


(f)                                    “Cause” means:


 


(i)                                     with respect to Harold Bevis, “cause” as
defined in Harold Bevis’ Employment Agreement with the Company, dated as of
July 18, 2006 (as it may be amended, modified or restated from time
to time, the “Bevis Employment Agreement”); and


 


(ii)                                  with respect to any other Participant:


 


(A)                              the
Participant’s commission of a crime involving his or her fraud, theft or
dishonesty or engagement in willful or wrongful activities that are materially
detrimental to the Company;


 


(B)                                the
material and willful breach by the Participant of his or her responsibilities
as an employee of the Company or willful failure to comply with reasonable
directives or policies of the Company, the Board of Directors, the Chief
Executive Officer or his designees, but only if the Company has given
Participant written notice specifying the breach or failure to comply,
demanding that the


 


2

















 


Participant remedy the breach or failure to comply and the Participant
(1) failed to remedy the alleged breach or failed to comply within thirty
days after receipt of the written notice and (2) failed to take all
reasonable steps to that end during the thirty days after he received the
notice.


 


(C)                                the
continued use of alcohol or drugs by the Participant to an extent that such use
interferes with the performance of the Participant’s duties and responsibilities.


 


Notwithstanding the foregoing, the term “Cause”
shall not include any one or more of the following: (i) bad management
decision-making by the Participant or (ii) any act or omission reasonably
believed by the Participant in good faith to have been in and not opposed to
the best interests of the Company (without intent of the Participant to gain,
directly or indirectly, a profit to which the Participant was not legally
entitled) and reasonably believed by the Participant not to have been improper
or unlawful.


 


(g)                                 “CEO” means the Chief Executive Officer of the Company.


 


(h)                                 “Company” means Pliant Corporation, a Delaware corporation,
including its successor in interest by merger, consolidation, purchase or
otherwise.


 


(i)                                     “Covered
Classes” shall mean securities
of any of the following classes and series of stock issued by the
Company:  (a) Series AA
Preferred Stock, (b) Common Stock, and (c) any class or
series of equity securities which are issued as a dividend or distribution
with respect to, or pursuant to a recapitalization of, any then outstanding
Covered Class of equity securities.


 


(j)                                     “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 Participant unable to perform his
duties hereunder, as certified by a physician jointly selected by the Company
and the Participant or the Participant’s legal representative.


 


(k)                                  “Effective
Date” means July 18, 2006.


 


(l)                                     “Good
Reason” means:


 


(i)                                    with
respect to Harold Bevis, “good reason” as defined in the Bevis Employment
Agreement; and


 


(ii)                                 with
respect to any other Participant, any of the following events in response to
which the Participant terminates his employment with the Company and its
subsidiaries:


 


3

















 


(A)                              the
assignment to the Participant of any material duty materially inconsistent with
the Participant’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities;


 


(B)                                any
reduction in the Participant’s base salary or bonus compensation (other than
any decrease in bonus compensation as a result of a failure to achieve
reasonable performance targets which are consistent with past performance
targets applied in connection with determining bonus compensation); or


 


(C)                                the
Company requires the Participant to, or assigns duties to the Participant which
would reasonably require him to, relocate his principal business office more
than forty (40) miles from where it is located on the date hereof;


 


provided, however that an event described above will
not constitute “Good Reason” unless (1) such event occurs without the
Participant’s express written consent, (2) the Participant delivers a
written notice to the Company of the occurrence of any such event not more than
ninety (90) days following the occurrence of such events, and (3) the
Company fails to cure or remedy such event within thirty days (the “Cure
Period”) after receiving written notice thereof from the Participant. The
failure by the Participant to terminate his or her employment with the Company
and its subsidiaries within thirty days after the end of the Cure Period in
respect of an event otherwise qualifying as Good Reason will preclude the
Participant from invoking such event as the basis for Good Reason.


 


(m)                               “Grossed-Up
Other Distributions”
shall mean the quotient of (x) the amount of Other Distributions divided by (y)
the then applicable Inverse Multiple.


 


(n)                                 “Hurdle
Amount” shall mean an amount
equal to $224.8 million; provided that upon any redemption by the Company of
Series AA Preferred Stock in accordance with the terms thereof, the Hurdle
Amount shall be reduced by an amount equal to the aggregate Redemption Proceeds
in connection with such redemption; provided, that in no event shall the Hurdle
Amount be less than zero.


 


(o)                                 “Inverse
Multiple” shall mean 0.92.


 


(p)                                 “JPMP” means J.P. Morgan Partners (BHCA), L.P., a Delaware
limited partnership, and its Affiliates (as defined pursuant to the Charter).


 


(q)                                 “Liquidation” has the meaning set forth in Article Four,
Part C, Section 6 of the Certificate of Incorporation.


 


4

















 


(r)                                    “Liquidation
Event” has the meaning set forth in
Article Four, Part C, Section 6 of the Certificate of
Incorporation.


 


(s)                                  “Liquidation
Proceeds” means (a) in
connection with an Asset Sale or a Liquidation, the quotient of (x) the Net
Asset Proceeds divided by (y) the then applicable Inverse Multiple and
(b) in connection with a Stock Sale or a Merger, the quotient of (x) Net
Stock Proceeds divided by (y) the then applicable Inverse Multiple. Any
Liquidation Proceeds which are deposited into an escrow account (whether such
escrow account is established by the Corporation or any purchaser, acquiror or
other similar party in connection with a Liquidation Event) or subject to being
held-back by the purchaser for distribution upon the occurrence or satisfaction
of any event shall not be included in calculating “Liquidation Proceeds” until
such time as such amounts are released to the Corporation (in the case of an
Asset Sale or a Liquidation) or its stockholders (in the case of a Stock Sale
or a Merger).


 


(t)                                    “Merger” has the meaning set forth in the definition of
“Liquidation Event” contained in Article Four, Part C, Section 6
of the Certificate of Incorporation.


 


(u)                                 “Net Asset
Proceeds” has the meaning set
forth in Article Four, Part C, Section 6 of the Certificate of
Incorporation.


 


(v)                                 “Net Stock
Proceeds” has the meaning set
forth in Article Four, Part C, Section 6 of the Certificate of
Incorporation.


 


(w)                               “Other
Distributions has the meaning set
forth in Article Four, Part C, Section 6 of the Certificate of
Incorporation.


 


(x)                                   “Participant” means a person who at the time of designation is an
employee of the Company or a subsidiary of the Company and is designated for
participation in this Plan by the Company’s Chief Executive Officer with the
approval of the Board; provided, however, that it shall be a
condition to the participation in this Plan, and partial consideration for the
rights granted hereunder, that any employee who owned Series B Preferred
Stock in the Company’s predecessor agree
to waive his or her right to receive any cash payment payable in consideration
of the extinguishment of the Series B Preferred Stock pursuant to the
Company’s Plan of Reorganization. The Participants shall be identified in
Exhibit A, which may be amended by the Company’s Chief Executive
Officer with the approval of the Board to reflect the addition of additional
Participants; provided, however, that the Bonus Percentages of any Participant
may not be reduced with the written consent of such Participant.


 


(y)                                 “Plan” means the Pliant Corporation Deferred Cash Incentive
Plan, as set forth herein and as amended from time to time.


 


(z)                                   “Qualified
Public Offering”
shall mean the sale in an underwritten public offering registered under the
Securities Act of 1933, as amended, of shares of capital stock of the Company
to the public resulting in aggregate proceeds (net of underwriting


 


5

















 


discounts
and commissions) to the Company of not less than one hundred million dollars
($100 million).


 


(aa)                            “Redemption”
means either an Initial Redemption or a
Subsequent Redemption as follows:


 


(i)                                     An
“Initial Redemption” will occur at
such time as the Company has redeemed shares of Company’s Series AA
Preferred Stock resulting in aggregate Redemption Proceeds, including, without
limitation the Redemption Proceeds from any prior such Redemptions, of not less
than $50 million.


 


(ii)                                  A
“Subsequent Redemption” will occur
on any date after the Initial Redemption that the Company redeems any shares of
Series AA Preferred Stock.


 


(bb)                          “Redemption
Proceeds” means, with respect to
any redemption of the Company’s Series AA Preferred Stock, the cash
proceeds received by the holders of the Series AA Preferred Stock upon
such redemption divided by the Inverse Multiple in effect at the time of such
redemption.


 


(cc)                            “Retained
Securities” shall mean, in
connection with any Liquidation Event which is a Merger or Stock Sale,
(i) any capital stock in Covered Classes not transferred, if any, by the
stockholders of the Company in connection with such Liquidation Event and/or
(ii) any capital stock or debt securities received in consideration or
exchange for, capital stock in Covered Classes in connection with such
Liquidation Event.


 


(dd)                          “Stock Sale”
has the meaning set forth in the
definition of “Liquidation Event” contained in Article Four, Part C,
Section 6 of the Certificate of Incorporation.


 


2.                                       Eligibility
for Bonus.


 


(a)                                  A Participant (other than Harold Bevis) shall be
eligible to receive payment of his or her Bonus with respect to a Liquidation
Event or a Redemption as provided in Section 3(a) if and only if the
Liquidation Event or Redemption occurs:


 


(i)                                     While the Participant is employed by the
Company or a subsidiary; or


 


(ii)                                  At
any time within ninety (90) days after the Participant’s termination of
employment with the Company or a subsidiary of the Company (x) by the Company
or a subsidiary of the Company without Cause, (y) by the Participant for Good
Reason, or (z) due to the Participant’s death or Disability.


 


6

















 


(b)                                 Harold Bevis shall be eligible to receive payment of
his Bonus with respect to a Liquidation Event or Redemption as provided in
Section 3(a) if the Liquidation Event or Redemption occurs:


 


(i)                                     While Harold Bevis is employed by the Company
or a subsidiary of the Company;


 


(ii)                                  At any time within one (1) year after
Harold Bevis’ termination of employment with the Company and all subsidiaries
of the Company (x) by the Company or subsidiary of the Company without Cause or
(y) by Harold Bevis for Good Reason; or


 


(iii)                               At any time within ninety (90) days after
Harold Bevis’ termination of employment with the Company and all subsidiaries
of the Company due to his death or Disability.


 


(c)                                  Harold Bevis shall be eligible to receive payment of
his Bonus with respect to a Liquidation Event or Redemption as provided in
Section 3(b) if he does not otherwise meet the eligibility criteria
in Section 2(b) and Harold Bevis’ employment with the Company and all
of its subsidiaries is terminated after the effective date of the Company’s
plan of reorganization.


 


(d)                                 Notwithstanding any provision herein to the contrary,
no Bonus will be paid to any Participant if no Liquidation Event or Redemption
occurs prior to the twentieth (20th) anniversary of the effective
date of this Plan.


 


3.                                       Bonus Payable Upon
Creation of a Bonus Pool.


 


(a)                                  Simultaneously with the occurrence of a Liquidation
Event or a Redemption, the Company shall pay each eligible Participant who
satisfies the eligibility requirements described in Section 2(a) or
(b) above a Bonus, payable, subject to the terms of Section 3(c), in
cash, in an amount equal to the Bonus Pool established with respect to such
Liquidation Event or Redemption multiplied by the Participant’s Bonus
Percentage, as set forth in Exhibit A.


 


(b)                                 If Harold Bevis does not otherwise meet the
eligibility criteria in Section 2(b) with respect to a Liquidation
Event or Redemption and his employment with the Company and its subsidiaries is
terminated after the effective date of the Company’s plan of reorganization,
then simultaneously with the occurrence of a Liquidation Event or Redemption,
the Company shall pay Harold Bevis a Bonus in an amount equal to the product of
(x) the Bonus Pool established with respect to such Liquidation Event or
Redemption multiplied by (y) Harold Bevis’ Bonus Percentage multiplied by (z) a
fraction (not to exceed one (1)), the numerator of which is the number of
months, if any, that transpire from the effective date of the Company’s plan of
reorganization and his termination of employment with the Company and all of
the subsidiaries of the Company, and the denominator of which is thirty-six
(36).


 


7

















 


(c)                                  Notwithstanding anything in this Section 3 to
the contrary, to the extent that in connection with a Liquidation Event which
is a Merger or Stock Sale in which there are Retained Securities, if (x) the
aggregate fair market value of the Retained Securities (as determined in good
faith by the Board) divided by the then applicable Inverse Multiple is in
excess of (y) the greater of (1) $0 and (2) the difference of the
Liquidation Proceeds in connection with such Liquidation Event minus the then
applicable Hurdle Amount (the amount of any such excess of (x) over (y) being
referred to as the “Pre-Hurdle Retained Securities Amount”), the Company shall
have the option to pay a portion of the Bonuses payable pursuant to this Plan
in connection with such Liquidation Event, not to exceed the Maximum In-Kind
Amount (as defined in Section 3(d) below), by the delivery of
securities in the same class and/or series as the Retained Securities
having a fair market value (as determined in good faith by the Board) equal to the
portion of the Bonuses to be so paid; provided that Participants receiving any
such Retained Securities are provided similar rights relating to registration
of securities, redemption rights and tag along rights as provided to any holder
of Covered Classes of an equivalent class or series with respect to
such Retained Securities (it being understood that such Participants will be
entitled to participate in any collective rights of a class or group of
former holders of Covered Classes (such as rights permitting a majority of the
holders of a class or series of securities to require a redemption or
a registration), and the foregoing shall not provide any Participant an
individual (rather than collective) right with respect to such matter). If there
is more than one class or series of Retained Securities, the portion
of the Bonuses payable by the delivery of Retained Securities shall include a
proportionate amount of each such class or series. In the event that any
portion of the Bonuses hereunder are paid in Retained Securities, the Bonuses
received by each Participant will consist of substantially identical (subject
to rounding in order to avoid delivery of fractional shares) proportions of
(i) cash and (ii) Retained Securities of each such class or
series.


 


(d)                                 For the purposes of this Section 3, the “Maximum
In-Kind Amount” shall mean the lesser of (x) the aggregate amount of the Bonus
Pool created in connection with such Liquidation Event minus the Mandatory Cash
Portion and (y) the Applicable Percentage of the Pre-Hurdle Retained Securities
Amount. For the purposes hereof, the “Mandatory Cash Portion” shall mean the
greater of:


 


(i)                                     the
Applicable Percentage of the sum of (x) any Grossed-Up Other Distributions plus
(y) only to the extent that the Initial Redemption had not occurred prior to
the date of such Liquidation Event but there has been redemption of
Series AA Preferred Stock for which no Bonus Pool had been created, the
Redemption Proceeds in connection with all such prior redemptions; and


 


(ii)                                  40%
of the Bonus Pool created in connection with such Liquidation Event.


 


8

















 


(e)                                  Any portion of the Bonus Pool not delivered to the
Participants as a result of a deferral of payment of any Liquidation Proceeds by
reason of any escrow or holdback obligation, or otherwise, shall be delivered
to the Participants pro rata in accordance with the payments of the Bonus Pool
promptly upon release of any such Liquidation Proceeds to the Corporation (in
the case of an Asset Sale or a Liquidation) or its stockholders (in the case of
a Stock Sale or a Merger).


 


(f)                                    To the extent that a Participant is not also a holder
of Series M Preferred Stock issued pursuant to the Company’s 2006
Restricted Stock Incentive Plan (the “Restricted Stock Incentive Plan”), then,
by acceptance of an award pursuant to this Plan, the Participant will be deemed
to be bound by, and agree to the terms of, Section 8.9 of the Restricted
Stock Incentive Plan, as if such Participant was a holder of Series M
Preferred Stock with respect to such Participant’s award hereunder and payment
in respect of such award under the circumstances described in Section 8.9
of the Restricted Stock Incentive Plan.


 


4.                                       Withholding Taxes. The Company shall
withhold from the Bonus payable under this Plan, all income, employment and
payroll taxes which, by applicable federal, state, local or other law, the
Company is required to withhold.


 


5.                                       Termination or Amendment
of Plan.


 


(a)                                  Subject to subsection (b) below, this Plan
shall remain in effect until the earliest to occur of (i) the twentieth
(20th) anniversary of the Effective Date, (ii) the first
occurrence of a Liquidation Event, (iii) there have been Redemptions
resulting in Redemption Proceeds in excess of $243.8 million or (iii) the
consummation of a Qualified Public Offering. Upon consummation of a Qualified
Public Offering, the Plan will be terminated after distribution of all Bonuses
payable with respect to any Bonus Pool to be established as a result of any
Redemption in connection with, or as a result of the use of proceeds from, the
Qualified Public Offering. Except as provided in the preceding sentence, no
Bonuses will be payable hereunder with respect to any Liquidation Event or
Redemption that occurs after the termination of this Plan.


 


(b)                                 The Company may amend, modify or terminate this
Plan, in writing, at any time; provided, however; that no amendment,
modification or termination of the Plan that may adversely affect the
rights or potential rights of any Participant shall become effective, unless
the Participant consents to such amendment, modification or termination in
writing. Notwithstanding the foregoing, as a purely ministerial action, the
Company’s Chief Executive Officer may amend or modify Exhibit A from
time to time as necessary to reflect the identification of the Participants and
their respective Bonus Percentages in accordance with the terms of the Plan.


 


6.                                       Action by the Company. Any action required or
permitted to be taken by the Company under this Plan shall be approved by the
Board of Directors of the Company.


 


9

















 


(a)                                  If the payment of any Bonus hereunder is prohibited
by, or would result in or cause a default or an event of default under, any of
the agreements governing any Indebtedness (as defined in the Company’s
Certificate of Incorporation), then consummation of the Liquidation Event
(other than an involuntary liquidation, dissolution or liquidation winding up
of the affairs of the Corporation) or the making of a redemption of the
Series AA Preferred Stock shall be prohibited until the provisions of
Section 6(b) have been satisfied in full.


 


(b)                                 If the provisions of any Indebtedness Agreement (as
defined in the Company’s Certificate of Incorporation) would prohibit the
Corporation from paying any Bonus pursuant hereto, or if immediately after
giving effect to the payment of any such Bonus, a default or event of default under any such agreement or instrument would
be caused thereby, as a condition to the consummation of a Liquidation
Event or a redemption of Series AA Preferred Stock, and the payment of any
Bonus hereunder, the Company shall, to the extent required to permit the
payment of the applicable Bonuses hereunder, (i) obtain the consent of the
requisite holders of such Indebtedness to permit the payment of such Bonuses by
the Company, (ii) refinance all such Indebtedness outstanding with the
proceeds of other Indebtedness or equity securities that permit or do not
prohibit the payment of such Bonuses by the Company or (iii) otherwise
comply with the terms of such Indebtedness required to permit the payment by
the Company of the Bonuses. The Company shall not consummate a Liquidation
Event or a redemption of Series AA Preferred Stock unless the conditions
contained in this Section 6(b) are satisfied or waived by the
Participants with a majority of the outstanding Bonus Percentages then
outstanding pursuant to this Plan.


 


7.                                       Successors.


 


(a)                                  Subject to Section 5(a), this Plan shall not be
terminated by any merger, consolidation, stock exchange or similar event
involving the Company whereby the Company is or is not the surviving or
resulting corporation or other entity. In the event of any merger,
consolidation, stock exchange or similar event, the provisions of this Plan
shall be binding upon the surviving or resulting corporation or other entity.


 


(b)                                 This Plan shall inure to the benefit of and be
enforceable by each Participant’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If a
Participant shall die while any amounts are payable to the Participant
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Plan to such person or persons appointed in
writing by the Participant to receive such amounts or, if no person is so
appointed, to the Participant’s estate.


 


8.                                       Governing Law; Validity. The interpretation,
construction and performance of this Plan shall be governed by and construed
and enforced in accordance with the laws of the State of New York without
regard to the principle of conflicts of laws. The invalidity or


 


10

















 


unenforceability of any provision of this Plan shall not
affect the validity or enforceability of any other provision of this Plan,
which other provisions shall remain in full force and effect.


 


9.                                       Miscellaneous.


 


(a)                                  The Company shall not be required to fund or
otherwise segregate assets to be used for the payment of any benefits under the
Plan. The Company shall make such payments only out of its general assets, and
therefore its obligation to make such payments shall be subject to any claims
of its other creditors having priority as to its assets.


 


(b)                                 This Plan does not constitute a contract of
employment or impose on the Company any obligation to retain the Participant as
an employee, to change the status of the Participant’s employment, or to change
the policies of the Company regarding termination of employment.


 


(c)                                  This Plan does not grant to any Participant any of
the rights or privileges of equity ownership in the Company.


 


(d)                                 This Plan and Exhibit A attached hereto
constitute the sole agreement by and between the Company and the Participants
with respect to the subject matter contained herein.


 


11

















 


Exhibit A


 


[To be completed.]


 






 













 


Exhibit
D


 


JOINDER
AGREEMENT


 


The
undersigned is executing and delivering this Joinder Agreement pursuant to the
Stockholders’ Agreement dated as of July 18, 2006 (as amended, modified,
restated or supplemented from time to time, the “Stockholders’ Agreement”),
among Pliant Corporation, a Delaware corporation (the “Company”), and
its stockholders named therein.


 


By
executing and delivering this Joinder Agreement to the Company, the undersigned
hereby agrees to become a party to, to be bound by, and to comply with the
provisions of the Stockholders’ Agreement in the same manner as if the
undersigned were an original signatory to such agreement.


 


The
undersigned agrees that the undersigned shall be [a] [an] [Investor
Stockholder] [Other Stockholder] [Bond Stockholder], as such term[s] [is] [are]
defined in the Stockholders’ Agreement.(1)


 


Accordingly,
the undersigned has executed and delivered this Joinder Agreement as of                                      .


 


 


	
   

  	
   

  	
   

  
	
   

  	
  Signature of Stockholder

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name of Stockholder

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone

  



 






(1) Type of Stockholder shall be the same as
the transferor of the transferred Securities. 
Any Person purchasing Stockholder Shares from the Company shall sign
this Joinder Agreement as an Other Stockholder if such Person is not already a
Stockholder at the time of such purchase. If such Person is already a
Stockholder at such time, such Person shall sign this Joinder Agreement as the
same type of Stockholder.  A Stockholder
cannot be classified into more than one type of Stockholder simultaneously (e.g.,  a Stockholder cannot simultaneously be an
Other Stockholder and a Bond Stockholder).


 

















 


Exhibit E


 


Section 1.                                          Regulatory
Matters Generally.


 


(a)                                  In
the event that any Investor reasonably determines that it has a Regulatory
Problem, the Company agrees to take all such actions as are reasonably
requested by the Investor in order (i) to effectuate and facilitate any
transfer by the Investor of any equity interests of the Company then held by
the Investor to any Person designated by the Investor, (ii) to permit the
Investor (or any of its Affiliates) to exchange all or any portion of the
voting equity interests then held by such Person on a share-for-share basis for
shares of a class of non-voting equity interests of the Company, which
non-voting equity interests shall be identical in all respects to such voting
equity interests, except that such new equity interests shall be non-voting and
shall be convertible into voting equity interests on such terms as are
requested by the Investor and reasonably acceptable to the Company in light of
regulatory considerations then prevailing, and (iii) to grant the Investor or
its designee the reasonable equivalent of any voting rights arising out of the
Investor’s ownership of voting equity interests and/or provided for in the
By-laws and the Stockholders’ Agreement that were diminished as a result of the
transfers and amendments referred to above; provided, that, in the case
of clause (i) above, such transferee shall agree to be bound by and subject to
the terms of the By-laws and the Stockholders’ Agreement in the same manner as
the Investor. If the Investor elects to transfer equity interests of the
Company in order to avoid a Regulatory Problem to an Affiliate (subject to
limitations on its voting or total ownership interest in the Company), the
Company and such Affiliate shall enter into such mutually acceptable agreements
as such Affiliate may reasonably request in order to assist such Affiliate in
complying with applicable Laws. Such agreements may include restrictions on the
redemption, repurchase or retirement of equity interests of the Company that
would result or be reasonably expected to result in such Affiliate holding more
voting equity interests or total interests (determined by such Affiliate’s
ownership of equity and debt of the Company) than it is permitted to hold under
such Laws.


 


(b)                                 In
the event any Investor has the right to acquire any of the Company’s equity
interests from the Company or any other Person (as the result of a preemptive
offer, pro rata offer or otherwise), and the Investor reasonably determines
that it has a Regulatory Problem, at the Investor’s request the Company will
offer to sell to the Investor non-voting equity interests (or, if the Company
is not the proposed seller, will arrange for the exchange of any voting equity interests
for non-voting equity interests immediately prior to or simultaneous with such
sale) on the same terms as would have existed had the Investor acquired the
equity interests so offered and immediately requested their exchange for
non-voting equity interests pursuant to subsection (a) above.


 


(c)                                  In
furtherance of its obligations pursuant to Section 1(b), the Company and the
Stockholders shall take all corporate actions necessary so as to permit the
issuance of non-voting equity interests.


 


(d)                                 In
the event that any Affiliate of the Company ever offers to issue any of its
securities to an Investor, then the Company will cause such Affiliate to enter
into an agreement with the Investor with terms substantially similar to those
contained in this Agreement.


 

















 


Section 2.                                          Cross
Marketing Activities.


 


The Company hereby represents and warrants that
neither the Company nor any of the Subsidiaries (i) offers or markets, directly
or through any arrangement, any product or service of any depository
institution that is owned by J.P. Morgan Chase & Co. or (ii) permits any of
its products or services to be offered or marketed, directly or through any
arrangement, by or through any depository institution that is owned by J.P.
Morgan Chase & Co.


 


Section 3.                                          Covenants.


 


(a)                                  The
Company shall give the Investor thirty (30) days prior written notice before
taking any affirmative steps which would cause the representations and
warranties contained in Section 2 to become untrue.


 


(b)                                 The
Company shall use its best efforts to notify the Investor promptly at any time
in which the Company reasonably believes the representations contained in Section
2 to be untrue, whether as a result of the Company’s affirmative action or
otherwise.


 


Section 4.                                          Participation
Interests and Pledge.


 


Notwithstanding anything to the contrary contained in the Stockholders’
Agreement, an Investor shall be permitted to grant participation interests in
the Company’s equity interests held by the Investor to Affiliates of the
Investor without prior disclosure or consent of the Company or any other
Person, so long as the participation agreement or other agreement or document
pursuant to which such participation interest is granted requires such
Affiliate to comply with the Stockholders’ Agreement as if it were a record
owner of such equity interests and a direct party to the Stockholders’
Agreement.


 


Section 5.                                          No
Change of Control.


 


Notwithstanding
anything to the contrary set forth in this Exhibit E, the Investor shall
comply with its obligations under Section 2.1(d) of the Stockholders’ Agreement
and the Company shall take no action under this Exhibit E that would
facilitate a Transfer of Stockholder Shares by the Investor in contravention of
such Section 2.1(d).


 


Section 6.                                          Definitions.


 


Any terms used
in this Exhibit E and not otherwise defined in the Stockholders’
Agreement shall have the meanings ascribed to them as follows:


 


“Banking Regulations”
means all federal, state and foreign Laws applicable to banks, bank holding
companies and their Affiliates, including without limitation, the Bank Holding
Company Act and the Federal Reserve Act.


 


“Investor” means, collectively: (i) Flexible
Films, LLC, a Delaware limited liability company; (ii) Flexible Films II, LLC,
a Delaware limited liability company; (iii) Southwest Industrial Films, LLC, a
Delaware limited liability company; and (iv) Southwest Industrial Films II,
LLC, a Delaware limited liability company.


 

















 


“Law” with respect to any
Person, means (i) all provisions of all laws, statutes, ordinances, rules,
regulations, permits, certificates or orders of any governmental authority
applicable to such Person or any of its assets or property or to which such
Person or any of its assets or property is subject, including, without
limitation, Banking Regulations, and (ii) all judgments, injunctions,
orders and decrees of all courts and arbitrators in proceedings or actions in
which such Person is a party or by which it or any of its assets or properties
is or may be bound or subject.


 


“Regulatory Problem” means
any set of facts or circumstances in which the Investor’s ownership of equity
interests issued by the Company (i) gives rise to a violation of Law by the
Investor or any of its Affiliates, or gives rise to a reasonable belief by the
Investor that such a violation is likely to occur or (ii) gives rise to a
limitation in Law that will impair the ability of the Investor or any Affiliate
to conduct its business or gives rise to a reasonable belief by the Investor
that such a limitation is likely to arise.


 


*                                         *                                         *                                         *                                         *


 

















 




 





 


 


 


PLIANT CORPORATION









STOCKHOLDERS’ AGREEMENT









DATED AS OF JULY 18, 2006


 


 


 




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS;
  RULES OF CONSTRUCTION

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  Rules of Construction

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  ISSUANCES
  AND TRANSFERS OF SECURITIES

  	
  9

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Issuances
  and Transfers of Securities

  	
  9

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Intentionally
  Omitted

  	
  10

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Required
  Sale in Connection with a Sale of the Company

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  RIGHTS TO
  SUBSCRIBE FOR SECURITIES

  	
  12

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  General

  	
  12

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Excluded Securities

  	
  13

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Application

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  BOARD

  	
  14

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Election of
  Directors; Voting

  	
  14

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Subsidiaries

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REGISTRATION
  RIGHTS

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Required
  Registration

  	
  15

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Piggyback
  Registration

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Registrations on
  Form S-3

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Holdback Agreement

  	
  18

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Preparation and
  Filing

  	
  19

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Expenses

  	
  22

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Indemnification

  	
  22

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Underwriting
  Agreement

  	
  25

  
	
   

  	
   

  	
   

  
	
  5.9

  	
  Information by Holder

  	
  25

  
	
   

  	
   

  	
   

  
	
  5.10

  	
  Suspension

  	
  25

  
	
   

  	
   

  	
   

  
	
  5.11

  	
  Exchange Act Compliance

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  MANAGEMENT INCENTIVE PLAN

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  LEGENDS; NO REPRESENTATIONS

  	
  26

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Restrictive
  Legends

  	
  26

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  No
  Representations

  	
  27

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  AMENDMENT AND WAIVER

  	
  27

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Amendment

  	
  27

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Waiver

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  TERMINATION

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  MISCELLANEOUS

  	
  28

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Severability

  	
  28

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Entire
  Agreement

  	
  28

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Independence
  of Agreements and Covenants

  	
  29

  
	
   

  	
   

  	
   

  
	
  10.4

  	
  Successors
  and Assigns

  	
  29

  
	
   

  	
   

  	
   

  
	
  10.5

  	
  Counterparts;
  Facsimile Signatures; Validity

  	
  29

  
	
   

  	
   

  	
   

  
	
  10.6

  	
  Remedies

  	
  29

  
	
   

  	
   

  	
   

  
	
  10.7

  	
  Notices

  	
  30

  
	
   

  	
   

  	
   

  
	
  10.8

  	
  Governing Law

  	
  31

  
	
   

  	
   

  	
   

  
	
  10.9

  	
  Waiver of
  Jury Trial

  	
  31

  
	
   

  	
   

  	
   

  
	
  10.10

  	
  Further
  Assurances

  	
  32

  
	
   

  	
   

  	
   

  
	
  10.11

  	
  Prior
  Agreements

  	
  32

  
	
   

  	
   

  	
   

  
	
  10.12

  	
  Regulatory
  Covenants

  	
  32

  
	
   

  	
   

  	
   

  
	
  10.13

  	
  Third
  Party Reliance

  	
  32

  
	
   

  	
   

  	
   

  
	
  10.14

  	
  Confidentiality

  	
  32

  



 


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