Document:

EXHIBIT
10.27

 

INDEMNITY,
SUBROGATION and CONTRIBUTION AGREEMENT dated as of February 17, 2004,
among PLIANT CORPORATION, a Utah corporation (the “Parent Borrower”),
UNIPLAST INDUSTRIES CO. (the “Canadian Subsidiary Borrower”), each Subsidiary
of the Parent Borrower listed on Schedule I hereto (together with the
Canadian Subsidiary Borrower, the “Guarantors”) and CREDIT SUISSE FIRST
BOSTON, acting through its Cayman Islands Branch, as administrative agent (in
such capacity, the “Administrative Agent”) for the Lenders (as defined
in the Credit Agreement referred to below).

 

Reference is made to (a) the Credit Agreement dated as of
February 17, 2004 (as amended, supplemented or otherwise modified from
time to time, the “Credit Agreement”), among the Parent Borrower, the
subsidiaries of the Parent Borrower party thereto as domestic subsidiary
borrowers (the “Domestic Subsidiary Borrowers”), the Canadian Subsidiary
Borrower (together with the Parent Borrower and the Domestic Subsidiary
Borrowers, the “Borrowers”), the lenders from time to time party thereto
(the “Lenders”), the Administrative Agent, Deutsche Bank Trust Company
Americas, as collateral agent (the “Collateral Agent”), General Electric
Capital Corporation, as co-collateral agent, and JPMorgan Chase Bank, as
syndication agent and, (b) the Guarantee Agreement dated as of
February 17, 2004, among the Parent Borrower, the Guarantors and the
Administrative Agent (the “Guarantee Agreement”).  Capitalized terms used herein and not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.

 

The Lenders have agreed to make Loans to the Borrowers, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Parent
Borrower, pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement.  The
Guarantors have guaranteed such Loans and the other Obligations (as defined in
the Guarantee Agreement) of the Borrowers under the Credit Agreement pursuant
to the Guarantee Agreement; the Parent Borrower has guaranteed such Loans and
the other Obligations of the Domestic Subsidiary Borrowers and the Canadian
Subsidiary Borrower under the Credit Agreement pursuant to the Guarantee
Agreement; the Parent Borrower and the Guarantors also have granted Liens on
and security interests in certain of their assets to secure such
guarantees.  The obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are
conditioned on, among other things, the execution and delivery by the Parent
Borrower and the Guarantors of an agreement in the form hereof.

 

Accordingly, the Parent Borrower, the Canadian Subsidiary Borrower,
each other Guarantor and the Administrative Agent agree as follows:

 

SECTION 1.  Indemnity
and Subrogation.  In addition to all
such rights of indemnity and subrogation as the Guarantors may have under
applicable law (but subject

 

 

to
Section 3), the Parent Borrower agrees that (a) in the event a
payment shall be made by any Guarantor under the Guarantee Agreement, the
Parent Borrower shall indemnify such Guarantor for the full amount of such
payment and such Guarantor shall be subrogated to the rights of the Person to
whom such payment shall have been made to the extent of such payment and
(b) in the event any assets of any Guarantor shall be sold pursuant to any
Security Document to satisfy a claim of any Secured Party (other than any such
claim against such Guarantor in respect of Loans made to such Guarantor), the
Parent Borrower shall indemnify such Guarantor in an amount equal to the
greater of the book value or the fair market value of the assets so sold.

 

SECTION 2.  Contribution
and Subrogation.  Each Guarantor (a
“Contributing Guarantor”) agrees (subject to Section 3) that, in
the event a payment shall be made by any other Guarantor under the Guarantee
Agreement or assets of any other Guarantor shall be sold pursuant to any
Security Document to satisfy a claim of any Secured Party and such other
Guarantor (the “Claiming Guarantor”) shall not have been fully indemnified
by the Parent Borrower as provided in Section 1, the Contributing
Guarantor shall (unless such claim related to Loans made to a Borrower that is
a Subsidiary of such Claiming Guarantor) indemnify the Claiming Guarantor in an
amount equal to the amount of such payment or the greater of the book value or
the fair market value of such assets, as the case may be, in each case
multiplied by a fraction of which the numerator shall be the net worth of the
Contributing Guarantor on the date hereof and the denominator shall be the
aggregate net worth of all the Guarantors on the date hereof (or, in the case
of any Guarantor becoming a party hereto pursuant to Section 12, the date
of the Supplement hereto executed and delivered by such Guarantor).  Any Contributing Guarantor making any
payment to a Claiming Guarantor pursuant to this Section 2 shall (subject
to Section 3) be subrogated to the rights of such Claiming Guarantor under
Section 1 to the extent of such payment.

 

SECTION 3.  Subordination.  Notwithstanding any provision of this
Agreement to the contrary, all rights of the Guarantors under Sections 1
and 2 and all other rights of indemnity, contribution or subrogation under
applicable law or otherwise shall be fully subordinated to the indefeasible payment
in full in cash of the Obligations.  No
failure on the part of the Parent Borrower or any Guarantor to make the
payments required by Sections 1 and 2 (or any other payments required
under applicable law or otherwise) shall in any respect limit the obligations
and liabilities of any Guarantor with respect to its obligations hereunder, and
each Guarantor shall remain liable for the full amount of the obligations of
such Guarantor hereunder.

 

SECTION 4.  Termination.  Subject to the provisions of the last
sentence of Section 8 of this Agreement, this Agreement shall survive and
be in full force and effect so long as any Obligation is outstanding and has
not been indefeasibly paid in full in cash, and so long as the LC Exposure has
not been reduced to zero or any of the Commitments under the Credit Agreement
have not been terminated, and shall continue to be effective or be reinstated,
as the case may be, if at any time payment, or any part thereof, of any
Obligation is rescinded or must otherwise be restored by any Secured Party or
any Guarantor upon the bankruptcy or reorganization of the Parent Borrower, any
Guarantor or otherwise.

 

2

 

SECTION 5.  Governing Law. 
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 6.  No Waiver;
Amendment.  (a)  No failure on the part of the
Administrative Agent or any Guarantor to exercise, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy by the
Administrative Agent or any Guarantor preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.  All remedies hereunder are cumulative and
are not exclusive of any other remedies provided by law.  None of the Administrative Agent and the
Guarantors shall be deemed to have waived any rights hereunder unless such waiver
shall be in writing and signed by such parties.

 

(b)  Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement entered into
between the Parent Borrower, the Guarantors and the Administrative Agent, with
the prior written consent of the Required Lenders (except as otherwise provided
in the Credit Agreement).

 

SECTION 7.  Notices.  All communications and notices hereunder
shall be in writing and given as provided in the Guarantee Agreement and
addressed as specified therein.

 

SECTION 8.  Binding
Agreement; Assignments.  Whenever in
this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of the parties that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns. 
Neither the Parent Borrower nor any Guarantor may assign or transfer any
of its rights or obligations hereunder (and any such attempted assignment or
transfer shall be void) without the prior written consent of the Required
Lenders.  Notwithstanding the foregoing,
at the time any Guarantor is released from its obligations under the Guarantee
Agreement in accordance with such Guarantee Agreement and the Credit Agreement,
such Guarantor will cease to have any rights or obligations under this
Agreement.

 

SECTION 9.  Survival of
Agreement; Severability. 
(a)  All covenants and agreements made by the Parent Borrower
and each Guarantor herein and in the certificates or other instruments prepared
or delivered in connection with this Agreement or the other Loan Documents
shall be considered to have been relied upon by the Administrative Agent, the
other Secured Parties and each Guarantor and shall survive the making by the
Lenders of the Loans and the issuance of the Letters of Credit by the Issuing
Bank, and shall continue in full force and effect as long as the principal of
or any accrued interest on any Loans or any other fee or amount payable under
the Credit Agreement or this Agreement or under any of the other Loan Documents
is outstanding and unpaid or the LC Exposure does not equal zero and as long as
the Commitments have not been terminated.

 

3

 

(b)  In case any one or more of the provisions contained in
this Agreement should be held invalid, illegal or unenforceable in any respect,
no party hereto shall be required to comply with such provision for so long as
such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.  The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.

 

SECTION 10.  Counterparts.  This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract.  This
Agreement shall be effective with respect to any Guarantor when a counterpart
bearing the signature of such Guarantor shall have been delivered to the
Administrative Agent.  Delivery of an
executed signature page to this Agreement by facsimile transmission shall be
effective as delivery of a manually signed counterpart of this Agreement.

 

SECTION 11.  Rules of
Interpretation.  The rules of
interpretation specified in Section 1.03 of the Credit Agreement shall be
applicable to this Agreement.

 

SECTION 12.  Additional
Guarantors.  Pursuant to
Section 5.12 of the Credit Agreement, each Subsidiary Loan Party (other
than a Foreign Subsidiary not organized under the laws of Canada or any
province thereof) that was not in existence or not a Subsidiary Loan Party on
the date of the Credit Agreement is required to enter into a Guarantee
Agreement as a Guarantor upon becoming such a Subsidiary.  Upon execution and delivery, after the date
hereof, by the Administrative Agent and such a Subsidiary of an instrument in
the form of Annex 1 hereto, such Subsidiary shall become a Guarantor hereunder
with the same force and effect as if originally named as a Guarantor
hereunder.  The execution and delivery
of any instrument adding an additional Guarantor as a party to this Agreement
shall not require the consent of any Guarantor hereunder.  The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor as a party to this Agreement.

 

4

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing
above.

 

	
   

  	
  PLIANT CORPORATION,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Brian
  E. Johnson

  
	
   

  	
   

  	
  Title:
  Executive Vice-President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EACH OF THE SUBSIDIARIES LISTED ON

  SCHEDULE I HERETO, as a Guarantor,

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  
	
   

  	
  Name: Brian
  E. Johnson

  
	
   

  	
  Title:  Executive Vice-President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE FIRST BOSTON, acting

  through its Cayman Islands Branch, as

  Administrative Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
						

 

5

 

SCHEDULE I

to the Indemnity, Subrogation

and Contribution Agreement

 

Guarantors

 

	
  Name

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  

 

 

Annex 1 to

the Indemnity, Subrogation and

Contribution Agreement

 

SUPPLEMENT NO.
dated as of [     ], to the Indemnity, Subrogation and
Contribution Agreement dated as of February 17, 2004 (as the same may be
amended, supplemented or otherwise modified from time to time, the “Indemnity,
Subrogation and Contribution Agreement”), among PLIANT CORPORATION, a Utah
corporation (the “Parent Borrower”), UNIPLAST INDUSTRIES CO. (the “Canadian Subsidiary
Borrower”),
each Subsidiary of the Parent Borrower listed on Schedule I thereto
(together with the Canadian Subsidiary Borrower, the “Guarantors”) and
CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch, as
administrative agent (the “Administrative Agent”) for the Lenders (as
defined in the Credit Agreement referred to below).

 

A.           Reference is made to (a) the
Credit Agreement dated as of February 17, 2004 (as amended, supplemented
or otherwise modified from time to time, the “Credit Agreement”), among
the Parent Borrower, the domestic subsidiary borrowers party thereto, the
Canadian Subsidiary Borrower, the lenders from time to time party thereto (the
“Lenders”), the Administrative Agent, Deutsche Bank Trust Company
Americas, as collateral agent, General Electric Capital Corporation, as
co-collateral agent, and JPMorgan Chase Bank, as syndication agent, and
(b) the Guarantee Agreement dated as of February 17, 2004 (the “Guarantee
Agreement”), among the Borrower, the Guarantors and the Administrative
Agent.

 

B.             Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Indemnity, Subrogation and Contribution Agreement and the Credit Agreement.

 

C.             The Parent Borrower and the Guarantors
have entered into the Indemnity, Subrogation and Contribution Agreement in
order to induce the Lenders to make Loans and the Issuing Bank to issue Letters
of Credit.  Pursuant to
Section 5.12 of the Credit Agreement, each Subsidiary Loan Party
(other than a Foreign Subsidiary not organized under the laws of Canada or any
province thereof) that was not in existence or not a Subsidiary Loan Party on
the date of the Credit Agreement is required to enter into the Guarantee
Agreement as a Guarantor upon becoming a Subsidiary.  Section 12 of the Indemnity, Subrogation and Contribution
Agreement provides that additional Subsidiaries of the Borrower may become
Guarantors under the Indemnity, Subrogation and Contribution Agreement by
execution and delivery of an instrument in the form of this Supplement.  The undersigned Subsidiary of the Parent
Borrower (the “New Guarantor”) is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Guarantor
under the Indemnity, Subrogation and Contribution Agreement in order to induce
the Lenders to make additional Loans and the Issuing Bank to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.

 

 

Accordingly, the Administrative Agent and the New Guarantor agree as
follows:

 

SECTION 1.  In accordance
with Section 12 of the Indemnity, Subrogation and Contribution Agreement,
the New Guarantor by its signature below becomes a Guarantor under the
Indemnity, Subrogation and Contribution Agreement with the same force and
effect as if originally named therein as a Guarantor and the New Guarantor
hereby agrees to all the terms and provisions of the Indemnity, Subrogation and
Contribution Agreement applicable to it as a Guarantor thereunder.  Each reference to a “Guarantor” in the
Indemnity, Subrogation and Contribution Agreement shall be deemed to include
the New Guarantor.  The Indemnity, Subrogation
and Contribution Agreement is hereby incorporated herein by reference.

 

SECTION 2.  The New
Guarantor represents and warrants to the Administrative Agent and the other
Secured Parties that this Supplement has been duly authorized, executed and delivered
by it and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms.

 

SECTION 3.  This Supplement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which
when taken together shall constitute a single contract.  This Supplement shall become effective when
the Administrative Agent shall have received counterparts of this Supplement
that, when taken together, bear the signatures of the New Guarantor and the
Administrative Agent.  Delivery of an
executed signature page to this Supplement by facsimile transmission shall be
effective as delivery of a manually signed counterpart of this Supplement.

 

SECTION 4.  Except as
expressly supplemented hereby, the Indemnity, Subrogation and Contribution
Agreement shall remain in full force and effect.

 

SECTION 5.  THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 6.  In case any one
or more of the provisions contained in this Supplement should be held invalid,
illegal or unenforceable in any respect, neither party hereto shall be required
to comply with such provision for so long as such provision is held to be
invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein and in the
Indemnity, Subrogation and Contribution Agreement shall not in any way be
affected or impaired.  The parties
hereto shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

 

SECTION 7.  All
communications and notices hereunder shall be in writing and given as provided
in Section 7 of the Indemnity, Subrogation and

 

2

 

Contribution
Agreement.  All communications and
notices hereunder to the New Guarantor shall be given to it at the address set
forth under its signature.

 

SECTION 8.  The New
Guarantor agrees to reimburse the Administrative Agent for its reasonable
out-of-pocket expenses in connection with this Supplement, including the reasonable
fees, other charges and disbursements of counsel for the Administrative Agent.

 

3

 

IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have
duly executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.

 

	
   

  	
  [Name of New Guarantor],

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE FIRST BOSTON, acting

  through its Cayman Islands Branch, as

  Administrative Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  

 

4

 

SCHEDULE I

to Supplement No.       to the Indemnity,

Subrogation and Contribution Agreement

 

 

Guarantors

 

 

	
  Name

  	
   

  	
  AddressEXHIBIT
10.56

 

PLIANT
CORPORATION

MANAGEMENT
INCENTIVE PLAN (“MIP”)

2003

 

	
  Purpose

  	
   

  	
  To
  provide an attractive and competitive at-risk incentive that recognizes the
  achievements of individuals and business groups in the attainment of
  corporate financial and operating goals.

  
	
   

  	
   

  	
   

  
	
  Eligibility

  	
   

  	
  Officers
  of Pliant Corporation (the “Company”), Directors and Plant Managers
  (“Participants”).  At the option of
  the Chief Executive Officer (“CEO”), these percentages may be changed, and
  other employees not normally eligible for this program may be included.  MIP Target Payment Levels are as follows:

  

 

	
  Chief
  Executive Officer

  	
   

  	
  100%
  of Base Salary

  
	
  President

  	
   

  	
  85%
  of Base Salary

  
	
  Executive
  Vice President

  	
   

  	
  70%
  of Base Salary

  
	
  Senior
  Vice President

  	
   

  	
  60%
  of Base Salary

  
	
  Vice
  President

  	
   

  	
  50%
  of Base Salary

  
	
  Director/Plant
  Manager

  	
   

  	
  40%
  of Base Salary

  

 

	
  Summary

  	
   

  	
  The
  2003 Management Incentive Plan (“MIP”) is designed to provide incentive
  compensation based upon the achievement of certain EBITDA levels for Pliant
  Corporation, Pliant US, Pliant International and Pliant Solutions, along with
  the EBITDA performance of Business Units within the segments and/or specific
  operational objectives within the Business Units, at the discretion of the
  President of each segment.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Some
  of the key changes for the 2003 MIP are:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •                                Target payout percentages have increased by
  5% (except for the CEO) to offset the impact of the 2003 MIP-level salary
  freeze.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •        There
  is no longer a Corporate EBITDA “gate” to pass through in order to achieve
  some portion of the MIP.  In other
  words, if your business unit or segment meets its EBITDA goals, you will earn
  some portion of your target payout even if we fail to meet our Corporate
  EBITDA goals.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •        The
  threshold for all levels of achievement will start with 0% of target payout
  at 90% of Plan, then move incrementally to 100% of target payout at 100% of
  Plan.  For every full percentage point
  above 100% of Plan, the payout will increase by 10%.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •        The
  basic structure of the MIP for those within a segment (Pliant US, Pliant
  Flexible Packaging, Pliant International, Pliant Solutions) will be as
  follows:

  

 

 

	
   

  	
   

  	
   Solutions)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •                                For Corporate staff, the structure will be
  as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  50.0% Pliant Corporate EBITDA 

  
	
   

  	
   

  	
  12.5% Pliant US EBITDA

  
	
   

  	
   

  	
  12.5% Pliant Flexible Packaging EBITDA

  
	
   

  	
   

  	
  12.5% Pliant International EBITDA

  
	
   

  	
   

  	
  12.5% Pliant Solutions EBITDA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2003 EBITDA PLAN (million $)

  

 

	
   

  	
   

  	
  Q1

  	
   

  	
  Q2

  	
   

  	
  Q3

  	
   

  	
  Q4

  	
   

  	
  Total

  	
   

  
	
  US

  	
   

  	
  25.54

  	
   

  	
  27.03

  	
   

  	
  26.93

  	
   

  	
  25.53

  	
   

  	
  105.03

  	
   

  
	
  Flexible
  Packaging

  	
   

  	
  8.56

  	
   

  	
  9.57

  	
   

  	
  11.07

  	
   

  	
  9.87

  	
   

  	
  39.07

  	
   

  
	
  International

  	
   

  	
  2.82

  	
   

  	
  3.42

  	
   

  	
  4.03

  	
   

  	
  4.83

  	
   

  	
  15.10

  	
   

  
	
  Solutions

  	
   

  	
  0.40

  	
   

  	
  3.00

  	
   

  	
  4.10

  	
   

  	
  2.40

  	
   

  	
  9.90

  	
   

  
	
  (less
  SG&A)

  	
   

  	
  (4.92

  	
  )

  	
  (4.72

  	
  )

  	
  (5.05

  	
  )

  	
  (4.91

  	
  )

  	
  (19.60

  	
  )

  
	
  Pliant
  Corporation

  	
   

  	
  32.40

  	
   

  	
  38.30

  	
   

  	
  41.08

  	
   

  	
  37.72

  	
   

  	
  149.50

  	
   

  

 

	
   

  	
   

  	
  *For
  Pliant US, MIP participants in Industrial, Specialty, and Converter Business
  Groups, the allocation will be 25% Pliant US EBITDA, 25% Business Group
  EBITDA.

  
	
   

  	
   

  	
   

  
	
  Plan
  Term

  	
   

  	
  The
  MIP for 2003 shall be in effect from January 1, 2003 to
  December 31, 2003 (the “Plan Term”).

  
	
   

  	
   

  	
   

  
	
  Distribution

  	
   

  	
  Quarterly
  Bonus Award distributions will be paid within 45 days of the close of the
  calendar quarter.

  
	
   

  	
   

  	
   

  
	
  Separations

  	
   

  	
  Except
  as set forth below, in order to be eligible to receive Bonus Awards under the
  MIP, a Participant must be employed by the Company on the last day of the
  calendar quarter for which an award is payable to receive a Quarterly Bonus
  Award.  If a Participant retired
  during the Plan Term (and qualifies for an immediate pension under the Pliant
  Corporation Defined Benefit Pension Plan), dies or becomes disabled (as
  defined under the Company’s Long Term Disability Plan), he/she will receive a
  pro rata portion of the MIP Bonus Award on the actual days worked during the
  Plan Term.  Distributions will be made
  at the same time as for all other Participants in the MIP.  If a Participant’s employment is
  terminated at any time prior to the end of the quarter or the Plan Term, by
  the employee or by the Company, with or without cause, for any reason other
  than retirement, death or disability, the Participant shall not be eligible
  to participate in the MIP, shall not receive any MIP Award for such calendar
  quarter or thereafter, and shall forfeit any rights he/she may have had in
  the MIP.

  
	
   

  	
   

  	
   

  
	
  General
  Provisions

  	
   

  	
  1.               Job Change. Eligible officers and executives who
  become eligible to participate in the MIP by reason of a job change will be
  eligible for a prorated Bonus Award based on the actual days worked during
  the Plan Term.  In the case of job
  changes involving a change in the Bonus Plan Payment Level, the Participant
  will receive the new level based on the

  

 

 

	
   

  	
   

  	
  actual days worked during the Plan Term at the new level.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.               Disciplinary Action. 
  In order to participate in the MIP, the Participant must not have been
  subject to any disciplinary action during the Plan Term.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.               No Employment Right. 
  Participation in the MIP shall not confer on a Participant any right
  to continue in the employment of the Company, nor shall it interfere with the
  Company’s right to terminate the employment of a Participant at any time, for
  any reason.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.               Non-transferability.  A
  Participant shall not have any right to assign, transfer, pledge or
  hypothecate any benefits or payments under the MIP, other than by will or by
  the laws of descent and distribution.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.               Creditors.  Award payments held by the
  Company before distribution shall not be subject to execution, attachment or
  similar process at law or in equity.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  6.               Withholding. 
  The Company will deduct and withhold all federal, state and local
  taxes, and any employee benefit related withholdings, required to be withheld
  with respect to the payment of any award.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.               Definitions.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EBITDA - Earnings calculated in accordance with
  GAAP, before interest expense, income taxes, depreciation and amortization
  (and after accruals for Awards paid under the MIP).

  
	
   

  	
   

  	
   

  
	
  Modification
  of the MIP

  	
   

  	
  The
  Company may modify, supplement, suspend or terminate the MIP at any time
  without the authorization of Participants, to the extent allowed by the
  law.  No modification, suspension or
  termination shall adversely alter or affect any right or obligation under the
  MIP that existed prior to such modification, supplement, suspension or
  termination.  The Company’s Board of
  Directors will determine the effect on incentives of any such event and make
  adjustments and/or payments as it, in its sole discretion, determines
  appropriate.

  
	
   

  	
   

  	
   

  
	
  Other

  	
   

  	
  Subject
  to the control of the Executive Committee of the Board of Directors, the
  Company’s CEO will exercise exclusive control over the MIP.  The CEO will have discretion to calculate
  and adjust EBITDA amounts used in calculating MIP Bonus Awards.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  MIP shall be governed by and construed under the laws of the State of
  Illinois.

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