10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to

Commission File Number 333-40067

PLIANT CORPORATION

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

Utah	87-0496065
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1475 Woodfield Road, Suite 700
Schaumburg, IL 60173
(847) 969-3300

(Address of principal executive offices and telephone number)

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  o    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes  o    No  x

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o Accelerated filer  o Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  o    No  x

At March 30, 2006 there were 571,691 outstanding shares of the Registrant’s common stock. As of March 30, 2006,71,659, or approximately 12.5%, of the outstanding shares of the Registrant’s common stock were held by persons other than affiliates of the Registrant. There is no established trading market for the Registrant’s common stock and, therefore, the aggregate market value of shares held by non-affiliates cannot be determined by reference to recent sales or bid and asked prices.

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

PART I

ITEM 1.BUSINESS

General

Pliant Corporation (“Pliant,” the “Company,” “we” or “us”), with 2005 revenues of approximately $1,072.8 million, is one of North America’s leading manufacturers of value-added films and flexible packaging for food, personal care, medical, agricultural and industrial applications. We offer some of the most diverse product lines in the film industry and have achieved leading positions in many of these product lines. We operate 23 manufacturing and research and development facilities worldwide and we currently have approximately 1.0 billion pounds of annual production capacity.

Pliant has a proud heritage that traces back many decades. We have combined strategic acquisitions, internal growth, product innovation and operational improvements to grow our business from net sales of $310.8 million in 1996 to $1,072.8 million in 2005. We have invested to expand our capabilities and value-added product offerings for our customers. Between January 1, 2003 and December 31, 2005, we invested a total of $74.6 million to expand, upgrade and maintain our asset base and information systems.

Recapitalization

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

·we redeemed all of the shares of our common stock held by Jon M. Huntsman, then majority stockholder and then Chairman of the Board;

·an affiliate of J.P. Morgan Partners, LLC purchased approximately one-half of the shares of our common stock held collectively by The Christena Karen H. Durham Trust and by members of our current and former senior management;

·an affiliate of J.P. Morgan Partners, LLC and certain other institutional investors purchased shares of common stock directly from us;

·the trust and the management investors at that time retained or “rolled-over” approximately one-half of the shares of our common stock collectively owned by them prior to the recapitalization; and

·we issued to an affiliate of J.P. Morgan Partners, LLC and to certain other institutional investors a new series of senior cumulative exchangeable redeemable preferred stock and detachable warrants for our common stock.

Controlling Shareholders

As of March 24, 2006, J.P. Morgan Partners (BHCA), L.P. and/or affiliates owned approximately 55% of our outstanding common stock, 74% of our detachable warrants to purchase common stock issued in connection with our Series A preferred stock and 59% of our outstanding Series A preferred stock.

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J.P. Morgan Partners, LLC serves as investment advisor to J.P. Morgan Partners (BHCA), L.P. J.P. Morgan Partners, LLC is the private equity group of J.P. Morgan Chase & Co., which is one of the largest financial holding companies in the United States.

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

Chapter 11 Bankruptcy Proceedings and Plan of Reorganization.

Filing of Voluntary Petitions in Chapter 11

On January 3, 2006, Pliant Corporation and ten subsidiaries (collectively, the “Debtors”) filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) (the “Chapter 11 Cases”). The Chapter 11 Cases are being jointly administered under the caption “In re: Pliant Corporation, et al., Case No. 06-10001”. Three of our subsidiaries with Canadian operations commenced ancillary proceedings in a Canadian court to recognize the Chapter 11 proceedings as “foreign proceedings” pursuant to Canada’s Companies’ Creditors Arrangement Act (“CCAA”). Our operations in Mexico, Germany, and Australia were not included in the Chapter 11 filing and are not subject to the reorganization proceedings.

We intend to use the Chapter 11 Cases to complete our financial restructuring, resulting in a less leveraged capital structure that is expected to facilitate greater capital investment in our business. Our proposed joint plan of reorganization filed on March 17, 2006 with the Bankruptcy Court is expected to reduce our indebtedness, redeemable preferred stock and redeemable common stock by up to $595 million and decrease our annual interest expense by up to $86 million. The proposed plan of reorganization is discussed in more detail below.

During the pendency of the Chapter 11 Cases, the Debtors are operating their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. We expect to continue to operate in the normal course of business during the reorganization process and all of our 23 manufacturing and research and development facilities around the world are open and continuing to serve customers. However, operating in bankruptcy imposes significant risks on our business and we cannot predict whether or when we will successfully emerge from bankruptcy. See Item 1A—“Risk Factors” for a discussion of the risks and uncertainties facing our business as a result of the Chapter 11 Cases.

Commencement of Chapter 11 Cases

As a consequence of our commencement of the Chapter 11 Cases, substantially all pending claims and litigation against the Debtors in the United States have been automatically stayed pursuant to Section 362 of the Bankruptcy Code. In addition, as a consequence of the commencement of the proceedings in Canada to recognize the Chapter 11 proceedings as “foreign proceedings” pursuant to the CCAA, substantially all pending claims and litigation against our debtor subsidiaries operating in Canada also have been stayed by order of the Canadian court.

On the same day as we filed our voluntary petitions, we also filed a motion seeking procedural consolidation of the Chapter 11 Cases for ease of administration, which order was granted by the Bankruptcy Court on January 4, 2006. The Bankruptcy Court also granted certain other motions in

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substantially the manner requested seeking typical “first day” relief to ensure that we were able to transition into the Chapter 11 process with as little disruption to our business as possible and to enable our business to function smoothly while the Chapter 11 Cases were pending. The most significant of these granted “first day” motions authorized us to (i) pay prepetition wages and other benefits to our employees, (ii) honor prepetition customer obligations and continue customer programs, (iii) pay certain prepetition claims of shippers, warehouseman and other lien claimants, (iv) make payments to certain prepetition vendors that were vital to our uninterrupted operations, (v) continue use of our existing cash management system and bank accounts and (vi) obtain postpetition financing and use cash collateral.

As required by the Bankruptcy Code, the United States Trustee for the District of Delaware appointed an official committee of unsecured creditors on January 13, 2006. In addition, three unofficial ad hoc committees of note holders are represented in the Chapter 11 Cases.

DIP Financing

On January 3, 2006 we sought the Bankruptcy Court’s authority to enter into a postpetition financing facility to fund our operations during the pendency of the Chapter 11 Cases. We also sought the Bankruptcy Court’s authority to use the cash generated in the ordinary course of our business, which constituted “cash collateral” securing our obligations to our prepetition secured lenders and prepetition secured note holders. As adequate protection for the use of our cash collateral, we agreed to provide the prepetition secured lenders and prepetition secured note holders with replacement liens, administrative claims and, in some cases, payment of certain interest, fees and expenses. The Bankruptcy Court authorized us to enter into the postpetition financing facility on an interim basis on January 4, 2006 and on a final basis on February 2, 2006 (as amended on March 13, 2006). Accordingly, on January 4, 2006, we entered into the Senior Secured, Super-Priority Priming Debtor-In-Possession Credit Agreement (the “DIP Credit Facility”) with certain lenders led by General Electric Capital Corporation. Although the DIP Credit Facility is nominally in the amount of $200 million, the availability is reduced by the aggregate borrowing base under our prepetition revolving credit facility, and therefore the DIP Credit Facility provides for a maximum of approximately $68.8 million of additional postpetition financing, subject to borrowing base availability. Our obligations under the DIP Credit Facility are secured by valid, binding, enforceable, first priority (i.e., priming) perfected security interests and liens in substantially all of the Debtors’ assets, as well as super-priority administrative expense claims having priority over all of the Debtors’ unencumbered prepetition or postpetition property.

Proposed Plan of Reorganization

A plan of reorganization sets forth the means for satisfying claims against and equity interests in the debtor. The consummation of a plan of reorganization is the principal objective of a chapter 11 reorganization case.

Under the terms of our proposed plan of reorganization, which was filed with the Bankruptcy Court on March 17, 2006, holders of our 13% Senior Subordinated Notes in the aggregate principal amount of $320 million will exchange all of their subordinated notes for a combination of new common stock, new preferred stock and new debt, as well as a cash payment for acceptance of the plan equal to 1% of the principal amount of the subordinated notes so exchanged. The new preferred stock to be issued under our proposed plan of reorganization will be a new Series AA Redeemable Preferred Stock, which will not be subject to mandatory redemption, with an initial liquidation preference of $335.56 million and which will accrue quarterly cumulative dividends at a rate of 13% per annum. The Series AA Preferred Stock to be issued to the subordinated note holders will be in the aggregate face amount of $260 million, representing 77.5% of all of the new Series AA Preferred Stock to be issued under the proposed plan of reorganization (subject to an increase of such percentage to 80% in lieu of the cash payment for plan acceptance). The new common stock to be issued to the subordinated note holders will represent 30% of the common stock

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outstanding upon effectiveness of the proposed plan of reorganization and the new debt to be issued will consist of an additional aggregate principal amount of $20 million of our 115¤8% Senior Secured Notes or, alternatively, $35 million of new senior subordinated notes.

The proposed plan of reorganization also provides that the holders of our mandatorily redeemable Series A Preferred Stock in the aggregate face amount of $289 million (as of December 31, 2005) will exchange all of their preferred stock for a combination of $75.5 million of the new Series AA Redeemable Preferred Stock, representing 22.5% of all of the new Series AA Preferred Stock to be issued under the proposed plan (subject to a decrease to 20% if the subordinated note holders receive 80% of the Series AA Preferred Stock as discussed above) and 28% of our new common stock outstanding upon effectiveness of the proposed plan. The holders of our common stock will receive in exchange for their shares 42% of our new common stock outstanding upon effectiveness of the proposed plan. In addition, the holders of existing Series B Preferred Stock may receive a cash payment of $5,146 per vested share of Series B Preferred Stock. However, holders of Series B Preferred Stock who are eligible to receive shares of a new class of Series M Preferred Stock and participate in a deferred cash management incentive plan intended to represent up to 8% of the equity value of our company upon emergence from bankruptcy are required to forego any cash distribution in respect of their shares of Series B Preferred Stock.

Our proposed plan of reorganization provides that the claims of our senior secured note holders and the Debtors’ trade and other general unsecured creditors will remain unimpaired. In connection with the implementation of the proposed plan, we intend to reincorporate Pliant as a Delaware corporation and the new common stock, Series AA Preferred Stock, Series M Preferred Stock and new debt will be issued by the reincorporated Delaware corporation.

Approval of Plan of Reorganization

A plan of reorganization must be voted on by holders of impaired claims and equity interests, and must satisfy certain requirements of the Bankruptcy Code and be confirmed by the bankruptcy court. Confirmation of a plan of reorganization by a bankruptcy court makes the plan binding upon the debtor, any issuer of securities under the plan, any person acquiring property under the plan and any creditor or equity interest holder of a debtor. Subject to certain limited exceptions, the order approving confirmation of a plan generally discharges a debtor from any debt that arose prior to the date of confirmation of the plan and substitutes for such debt the obligations specified under the confirmed plan.

A plan has been accepted by holders of claims against and equity interests in a debtor if (1) at least one-half in number and two-thirds in dollar amount of claims actually voting in each impaired class of claims have voted to accept the plan and (2) at least two-thirds in amount of equity interests actually voting in each impaired class of equity interests have voted to accept the plan. Under certain circumstances set forth in the provisions of section 1129(b) of the Bankruptcy Code, the Bankruptcy Court may confirm a plan even if such plan has not been accepted by all impaired classes of claims and equity interests. A class of claims or equity interests that does not receive or retain any property under the plan on account of such claims or interests is deemed to have voted to reject the plan.

On December 28, 2005 we entered into Support Agreements (the “Support Agreements”) with the holders of more than two-thirds in amount of our 13% Senior Subordinated Notes, the holders of a majority of the outstanding shares of our Series A Preferred Stock and the holders of a majority of the outstanding shares of our common stock pursuant to which such holders agreed, subject to the terms and conditions contained in the Support Agreements, to vote in favor of and support our proposed plan of reorganization. However, there can be no assurance that our proposed plan will be approved by all requisite holders of claims or interests or by the Bankruptcy Court or that all conditions precedent to the implementation of the proposed plan of reorganization will be satisfied. Moreover, the Support

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Agreements may be terminated if the proposed plan of reorganization is not confirmed by the Bankruptcy Court by June 2, 2006 and will expire by their terms on June 15, 2006.

Industry Overview

We manufacture and sell a variety of plastic films and flexible packaging products. The plastic film industry serves a variety of flexible packaging markets, including the pharmaceutical, medical, personal care, household, industrial and agricultural film markets, as well as secondary packaging and non-packaging end use markets. According to the Flexible Packaging Association, the North American market for flexible packaging was approximately $21.3 billion in 2004 and has grown at a compound annual growth rate, or CAGR, of approximately 2.3% from 1999-2004. Many of our plastic films are flexible packaging products as defined by the Flexible Packaging Association. However, the flexible packaging market, as defined by the Flexible Packaging Association, does not include certain of the products we sell, such as agricultural films, and includes certain products we do not sell, such as wax papers and aluminum foils. We believe, however, that trends affecting the flexible packaging industry also affect the markets for many of our other products.

Flexible packaging is used to package a variety of products, particularly food, which accounts for approximately half of all flexible packaging shipments. Recent advancements in film extrusion and resin technology have produced new, sophisticated films that are thinner and stronger and have better barrier and sealant properties than other materials or predecessor films. These technological advances have facilitated the replacement of many traditional forms of rigid packaging with film-based, flexible packaging that is lighter, is lower in cost and has enhanced performance characteristics. For example, in consumer applications, stand-up pouches that use plastic films are now often used instead of paperboard boxes, glass jars and metal cans. In industrial markets, stretch and shrink films are often used instead of corrugated boxes and metal strapping to unitize, bundle and protect items during shipping and storage.

Certain industry and market share data reported herein are based on estimates made by the Flexible Packaging Association in a “State of the Industry Report 2005,” which was compiled based on data compiled from surveys submitted by its members, or from data provided by the Flexible Packaging Association in an investment base report titled “Paper and Packaging: Industry Overview and Outlook” issued in December 2004. Mr. Bevis serves on the Board of Directors of the Flexible Packaging Association and Pliant is a dues-paying member of the FPA. Unless otherwise indicated, the market share and industry data used throughout this report were obtained primarily from internal company surveys and management estimates based on these surveys and our management’s knowledge of the industry. We have not independently verified any of the data from third-party sources. Similarly, internal company surveys and management estimates, while we believe them to be reliable, have not been verified by any independent sources. While we are not aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Statement for Forward-Looking Information” in this report.

Products, Markets and Customers

Our products are sold into numerous markets for a wide variety of end uses and are offered through four operating segments: Specialty Products Group, Industrial Films, Engineered Films, and Performance Films. Operating segments are components of our business for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. For more information on our operating segments and geographic information, see Note 14 to the consolidated financial statements included elsewhere in this report.

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Specialty Products Group

The Specialty Products Group includes our Specialty Films and Printed Products Films divisions and accounted for 38.2%, 40.3%, and 41.1% of our consolidated net sales in 2005, 2004, and 2003, respectively. Our Specialty Films division produces personal care films, medical films, and agricultural films.

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

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

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

Our Printed Products Films division provides printed rollstock, bags and sheets used to package food and consumer goods. Printed bags or rollstock are sold to bakeries, fresh and frozen food processors, manufacturers of personal care products, textile manufacturers and other dry goods processors. Bread and bakery bags represent a significant portion of our Printed Products Films business. Our Printed Products Films division produces approximately four billion bread and bakery bags each year, with an estimated share of between 20% to 25% of the North American market.

The Specialty Products Group also includes our Mexican subsidiary, which is a leading producer of printed products for Mexico and other Latin American countries. It also produces personal care and barrier films for these markets. In 2005, approximately 34.9% of our Printed Products sales were outside the United States, primarily in Mexico and Latin America.

Industrial Films

The Industrial Films segment accounted for 28.6%, 26.2%, and 24.6% of our consolidated net sales in 2005, 2004, and 2003, respectively.

Our Industrial Films segment manufactures stretch and PVC films. In 2005, approximately 27% of our Industrial Films sales were outside the United States, primarily in Canada, Europe and Australia. Our customers in this segment include national distributors, such as Bunzl, and Xpedx; grocery chains, such as A&P, Kroger, Publix and Safeway; and end-users, such as P&G, Costco, and Wal-Mart.

Stretch Films.   Our stretch films are used to bundle, unitize and protect palletized loads during shipping and storage. Stretch films continue to replace more traditional packaging, such as corrugated boxes and metal strapping, because of stretch films’ lower cost, higher strength, and ease of use. We are

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North America’s fourth largest producer of stretch films, with an estimated market share of between 12% and 13%.

PVC Films.   Our PVC films are used by supermarkets, delicatessens and restaurants to wrap meat, cheese and produce. PVC films are preferred in these applications because of their clarity, elasticity and cling. We also produce PVC films for laundry wrap and other industrial applications. Finally, we produce cutterboxes for sale in retail and food service markets in North America, Latin America and Asia. In 2005, we were the second largest producer of PVC films in North America, with an estimated market share of approximately 22%. In addition, we are a leading producer of PVC films in Australia and the second largest producer in Europe, with estimated market shares of approximately 54% and 15%, respectively.

Engineered Films

The Engineered Films segment accounted for 22.5%, 22.6%, and 21.9% of our consolidated net sales in 2005, 2004, and 2003, respectively.

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

Performance Films

The Performance Films segment accounted for 9.9%, 10.1%, and 11.8% of our consolidated net sales in 2005, 2004, and 2003, respectively.

We manufacture a variety of barrier and custom films, primarily for smaller, but profitable, niche segments in flexible packaging and industrial markets. For example, in 2005 we were North America’s second largest producer of films for cookie, cracker and cereal box liners, with an estimated market share of approximately 20%. We are also a leading manufacturer of barrier films for liners in multi-wall pet food bags and films for photoresist coatings for the electronics industry.

Sales and marketing

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

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

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

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

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

Manufacturing

Between January 1, 2003 and December 31, 2005, excluding acquisitions, we have invested a total of $74.6 million to expand, upgrade and maintain our asset base and information systems. With 23 plants, we are often able to allocate lines to specific products. Our multiple manufacturing sites and varied production capabilities also allow us to offer multiple plant service to our national customers. Generally, our manufacturing plants operate 24 hours a day, seven days a week.

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

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

Technology and research and development

We believe our technology base and research and development provide critical support to our business and customers. Our research and development group provides the latest resin and extrusion technology to our manufacturing facilities and allows us to test new resins and process technologies. Our technical center in Newport News, Virginia and Chippewa Falls, Wisconsin have pilot plants that allow customer sampling and the ability to run commercial scale-ups for new products without interrupting operations in our manufacturing plants. We are able to use our broad product offerings and technology to transfer technological innovations from one market to another.

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

We spent $8.7 million, $6.5million, and $7.3 million on research and development for the years ended December 31, 2005, 2004 and 2003, respectively, before giving effect to revenues from pilot plant sales. In addition, we participate in several U.S. government funded research and development programs.

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Intellectual property rights

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

Raw materials

Polyethylene, PVC, polypropylene and other resins and additives constitute the major raw materials for our products. We purchase most of our resin from major oil companies and petrochemical companies in North America. For the year ended December 31, 2005, raw material costs, which consist primarily of resin costs, comprised approximately 65% of our cost of goods sold. Significant increases in the price of resins increases our costs, reduces our operating margins, and impairs our ability to service debt unless we are able to pass all of these cost increases on to our customers. The price of resin is a function of among other things, manufacturing capacity, demand, and the price of crude oil and natural gas feed stocks. Resin shortages or significant increases in the price of resin could have a significant adverse effect on our business. Since the middle of 2002, we have experienced a period of significant uncertainty with respect to resin supplies and prices. High crude oil and natural gas pricing, resulting from the hurricanes in the second half of 2005, have had significant impact on the price and supply of resins. Major suppliers of resin have implemented price increases to cover their increases in petroleum costs, and to improve their operating margins as capacity utilization increases. Due in part to consolidation in the resin supply industry, suppliers have resisted the consumers’ efforts to limit or defer the effect of these increases. Conversely, the prices of our products generally fluctuate with the price of resins. Approximately half of our sales are made on a transactional basis, which allows us to pass through resin price increases, although competitive market conditions in our industry from time to time limit our ability to pass the full cost of higher resin pricing through to our customers immediately or completely. The other approximately one half of our sales are made pursuant to customer contracts, most of which dictate the timing in our ability to pass through the increase. A vast majority of these contracts have been renegotiated to allow resin cost changes to be passed along on a monthly basis, with some allowing cost changes to be passed through quarterly and a small number requiring a longer delay. In combination, the cost to the Company of the gap between the speed in which resin price changes are passed on to us and the time in which we can pass these cost changes on to our customers has an impact on both our results of operations and our working capital needs. This trend is industry wide and its impact was significant in 2005. However, the Company believes that the renegotiation of many of its customer contracts should reduce the impact of resin price changes in the future.

As one of the largest consumers of packaging resin in the United States, the Company is working with its suppliers to minimize the effects and the timing of the pass through of increased resin costs and to maximize the likelihood that resin supplies continue to be available to the Company in sufficient quantities and on timetables necessary to meet the needs of our customers. We also regularly evaluate commodity hedging, collar agreements, and other protective strategies and will implement them if and when appropriate.

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Competition

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

Employees

As of December 31, 2005, we had approximately 2,940 employees, of which approximately 830 employees were subject to a total of 8 collective bargaining agreements that expire on various dates between January 28, 2006 and February 28, 2009. The collective bargaining agreement covering our Mexico union facility that expired on January 28, 2006 was replaced by a new bargaining agreement that was officially signed and delivered to the Mexican authorities on Friday, March 10, 2006. As of December 31, 2005 we had approximately 211 employees under a collective bargaining agreement in South Deerfield, which expires in October 2006.

Environmental matters

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

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

Available Information

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

We maintain an Internet web site at http://www.pliantcorp.com. We do not currently make our annual, quarterly and current reports available on or through our web site. We do not have publicly traded stock, and copies of our reports are mailed to holders of our outstanding debt securities under the terms of our indentures. In addition, we believe virtually all of our investors and potential investors in our debt

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securities have access to our reports through the SEC’s web site or commercial services. Therefore, we do not believe it is necessary to make our reports available through our web site. We also provide electronic or paper copies of our filings free of charge upon written or oral request directed to Pliant Corporation, 1475 Woodfield Road, Suite 700, Schaumburg, Illinois 60173, telephone: (866) 878-6188.

Cautionary Statement for Forward-Looking Information

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

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

·general economic and business conditions, particularly an economic downturn;

·inability to conclude our financial restructuring;

·continuing losses and charges against earnings resulting from restructuring or the impairment of assets;

·industry trends;

·risks of high leverage and any increases in our leverage;

·interest rate increases;

·changes in our ownership structure;

·raw material costs and availability, particularly resin;

·the timing and extent to which we pass through resin cost changes to our customers;

·changes in credit terms from our suppliers;

·competition;

·the loss of any of our major customers;

·changes in demand for our products;

·new technologies;

·changes in distribution channels or competitive conditions in the markets or countries where we operate;

·costs of integrating any future acquisitions;

·loss of our intellectual property rights;

·foreign currency fluctuations and devaluations and political instability in our foreign markets;

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·changes in our business strategy or development plans;

·availability, terms and deployment of capital;

·availability of qualified personnel;

·labor relations and work stoppages;

·increases in the cost of compliance with laws and regulations, including environmental laws and regulations; and

·other risks and uncertainties listed or described from time to time in reports we periodically file with the SEC.

We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements. All forward-looking statements, including, without limitation, management’s examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. But, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

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

ITEM 1A.   RISK FACTORS

The following risks and uncertainties are among the factors that could cause our actual operating results, financial condition or liquidity to differ materially from the forward-looking statements made in this report or which could otherwise adversely affect our business. There may be other factors, including those discussed elsewhere in this report or in other filings made by us with the Securities and Exchange Commission, that may cause our actual operating results, financial condition or liquidity to differ materially from the forward-looking statements made in this report or which could otherwise adversely affect our business. You should carefully consider these factors in evaluating any forward-looking statements made in this report and prior to making any investment decisions with respect to our securities.

Risks related to the Financial and Capital Structure of the Company

Operating in bankruptcy imposes significant risks on our business and we cannot predict whether or when we will successfully emerge from bankruptcy.

On January 3, 2006, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code and initiated related proceedings in Canada. On March 17, 2006, we filed a proposed plan of reorganization with the bankruptcy court in Delaware. In addition to approval by the bankruptcy court, the plan is subject to certain conditions that must be satisfied prior to its implementation. Although we believe that our plan of reorganization will satisfy all requirements for confirmation under the Bankruptcy Code, there can be no assurance that the plan will be approved by the bankruptcy court or that the conditions precedent to its implementation will be satisfied or when, if ever, such confirmation and satisfaction will occur. Failure to obtain such confirmation or to satisfy such conditions to implementation

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may result in lengthier bankruptcy proceedings as we attempt to negotiate and implement an alternative plan of reorganization or ultimately may result in the liquidation of our business in a proceeding under Chapter 7 of the Bankruptcy Code.

The timing of our emergence from bankruptcy and the terms of our emergence may affect our relationship with our creditors, customers, suppliers and employees and have a significant impact on our business, financial condition and results of operations. Our ability to continue to operate in bankruptcy and to emerge from bankruptcy will depend on various factors, including:

·our ability to comply with and operate under the terms of the DIP Credit Facility and any cash management orders entered by the bankruptcy court from time to time, which subject us to restrictions on transferring cash and other assets;

·our ability to maintain adequate debtor-in-possession financing and cash on hand and to generate cash from operations;

·our ability to obtain exit financing sufficient to fund emergence and to fund our operations after emergence from the bankruptcy process on reasonable terms;

·our ability to retain key employees during the pendency of our bankruptcy proceedings; and

·our ability to maintain good customer and supplier relationships in light of developments in our bankruptcy proceedings and the terms of our emergence.

For further information regarding our Chapter 11 proceedings and our plan of reorganization, please see “Business—Chapter 11 Bankruptcy Proceedings and Plan of Reorganization” in Item 1 of this report.

Limits on our borrowing capacity under the DIP Credit Facility may affect our ability to finance our operations.

While our DIP Credit Facility provides for a maximum of approximately $68.8 million of postpetition financing, our ability to borrow funds under the DIP Credit Facility is subject to the amount of eligible receivables, inventory and real estate in our borrowing base under the facility and the application of reserves against such amounts. Our ability to make borrowings under our DIP Credit Facility also is conditioned upon our compliance with certain covenants including a requirement to maintain a minimum fixed-charge coverage ratio.

Uncertainty regarding the terms of our exit financing may adversely affect our ability to emerge from bankruptcy and to finance post-emergence operations.

As indicated above, one of the key factors to our ability to successfully emerge from bankruptcy is the ability to obtain exit financing sufficient to fund such emergence and our post-emergence operations on reasonable terms. We do not yet know the final terms upon which we will be able to obtain exit financing and whether such terms will be reasonable to us. In addition, even if exit financing may be obtained on reasonable terms, we may be restricted in our ability to fully access the maximum amount that may be borrowed under any exit financing facility if we are unable to satisfy applicable financial covenants or maintain a sufficient borrowing base. Moreover, covenants contained in our indentures may further impose limits on the amount we may borrow under any exit financing facility.

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

We are highly leveraged, which means that we have a large amount of indebtedness relative to our assets, particularly in comparison to some of our competitors. As of December 31, 2005, we had total debt of $981.7 million, and for the 2005 fiscal year, earnings were insufficient to cover fixed charges by approximately $109.9 million. Although our proposed plan of reorganization is expected to result in the elimination of $320 million of our subordinated debt and approximately $289 million of our mandatorily redeemable preferred stock, we will continue to have a significant amount of indebtedness upon emergence from bankruptcy.

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

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

Our estimated cash debt service for 2006 is expected to be approximately $37.5 million, consisting of $27.8 million of scheduled bond interest payments and approximately $9.7 million of interest payments on our revolving credit facility.

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

·Our ability to generate cost savings and manufacturing and operational efficiencies sufficient to achieve projected financial performance, including, but not limited to, initiatives to obtain new business and to generate and manage working capital consistent with such projections;

·Variations in the financial or operational condition of our significant customers;

·Material shortages, transportation systems delays or other difficulties in markets where we purchase supplies for the manufacturing of our products;

·Significant work stoppages, disputes or any other difficulties in labor markets where we obtain materials necessary for the manufacturing of their products or where their products are manufactured, distributed or sold;

·Increased development of competitive alternatives to our products;

·Fluctuations in interest rates;

·Unscheduled plant shutdowns;

·Increased operating costs;

·Changes in prices and supply of raw materials;

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·Changes in credit terms offered by our suppliers;

·Our ability to obtain cash adequate to fund our needs;

·Various worldwide economic and political factors, changes in economic conditions, currency fluctuations and devaluations, credit risks in foreign markets or political instability in foreign countries where we have manufacturing operations or suppliers;

·Physical damage to or loss of significant manufacturing or distribution property, plant and equipment due to fire, weather or other factors beyond our control;

·Legislative activities of governments, agencies and similar organizations, both in the United States and in foreign countries, that may affect our operations;

·Our ability to comply with government regulations, including public market disclosure requirements such as those contained within the Sarbanes-Oxley Act;

·Legal actions and claims of undetermined merit and amount involving, among other things, product liability, recalls of products manufactured or sold by us and environmental and safety issues involving our products or facilities; and

·Possible terrorist attacks or acts of aggression or war, which could exacerbate other risks such as slowed production or interruptions in the transportation system.

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

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

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Our variable rate indebtedness subjects us to interest rate risk.

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

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

Although we are an operating company, a significant amount of our revenue is generated by our subsidiaries. For the year ended December 31, 2005, 19% of our net sales was generated by our subsidiaries. As a result, our ability to satisfy our debt service obligations will depend significantly on our receipt of dividends or other intercompany transfers of funds from our operating subsidiaries. The payment of dividends to us by our subsidiaries is contingent upon the earnings of those subsidiaries and is subject to various business considerations as well as certain contractual provisions which may restrict the payment of dividends and the transfer of assets to us. In the event of a subsequent bankruptcy, liquidation or reorganization of our subsidiaries, claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims as the holder of the equity of our subsidiaries.

Risks related to our business

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

Polyethylene, PVC, polypropylene and other resins and additives constitute the major raw materials for our products. We purchase most of our resin from major oil companies and petrochemical companies in North America. For the year ended December 31, 2005, raw material costs, which consist primarily of resin costs, comprised approximately 65% of our total cost of goods sold. Significant increases in the price of resins increases our costs, reduces our operating margins and impairs our ability to service debt unless we are able to pass all of these cost increase on to our customers. The price of resin is a function of, among other things, manufacturing capacity, demand, and the price of crude oil and natural gas feed stocks. Resin shortages or significant increases in the price of resin could have a significant adverse effect on our business. Since the middle of 2002, we have experienced a period of significant uncertainty with respect to resin supplies and prices. High crude oil and natural gas pricing, resulting from the hurricanes in the second half of 2005, have had significant impact on the price and supply of resins. Major suppliers of resin have implemented price increases to cover their increases in petroleum costs, and to improve their operating margins as capacity utilization increases. Due in part to consolidation in the resin supply industry, suppliers have resisted the consumers’ efforts to limit or defer the effect of these increases. Conversely, the prices of our products generally fluctuate with the price of resins. Approximately half of our sales are made on a transactional basis, which allows us to pass through resin price increases, although competitive market conditions in our industry from time to time limit our ability to pass the full cost of higher resin pricing through to our customers immediately or completely. The other approximately one half of our sales are made pursuant to customer contracts, most of which dictate the timing in our ability to pass through the increase. A vast majority of these contracts have been renegotiated to allow resin cost changes to be passed along on a monthly basis, with some allowing cost changes to be passed through quarterly and a small number requiring a longer delay. In combination, the cost to the Company of the gap between the speed in which resin price changes are passed on to us and the time in which we can pass these

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cost changes on to our customers has an impact on both our results of operations and our working capital needs. This trend is industry wide and its impact was significant in 2005. However, the Company believes that the renegotiation of many of its customer contracts should reduce the impact of resin price changes in the future.

As one of the largest consumers of packaging resin in the United States, the Company is working on behalf of its customers with its suppliers to minimize the effects and the timing of the pass through of increased resin costs and to maximize the likelihood that resin supplies continue to the Company in sufficient quantities and on timetables necessary to meet the needs of our customers. We also regularly evaluate commodity hedging, collar agreements, and other protective strategies and will implement them if and when appropriate.

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

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

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

Although no single customer accounted for more than 10% of our net sales for the year ended December 31, 2005, we are dependent upon a limited number of large customers with substantial purchasing power for a significant percentage of our sales. Our top ten customers accounted for approximately 28.2% of our net sales in 2005. Several of our largest customers satisfy some of their film requirements by manufacturing film themselves. The loss of one or more major customers, or a material reduction in sales to these customers as a result of competition from other film manufacturers, insourcing of film requirements or other factors, would have a material adverse effect on our results of operations and on our ability to service our indebtedness. See “Management’s discussion and analysis of financial condition and results of operations” and “Business—Products, markets and customers.”

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

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

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

We rely on patents, trademarks and licenses to protect our intellectual property, which is significant to our business. We also rely on unpatented proprietary know-how, continuing technological innovation and other trade secrets to develop and maintain our competitive position. We routinely seek to protect our

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patents, trademarks and other intellectual property, but our precautions may not provide meaningful protection against competitors or protect the value of our trademarks. In addition to our own patents, trade secrets and proprietary know-how, we license from third parties the right to use some of their intellectual property. We routinely enter into confidentiality agreements to protect our trade secrets and proprietary know-how. However, these agreements may be breached, may not provide meaningful protection or may not contain adequate remedies for us if they are breached.

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

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

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

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

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

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

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

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

As of December 31, 2005, we had approximately 2,940 employees, of which approximately 830 employees were subject to a total of 8 collective bargaining agreements that expire on various dates between, January 28, 2006 and February 28, 2009. The collective bargaining agreement covering our

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Mexico union facility that expired on January 28, 2006 was replaced by a new bargaining agreement that was officially signed and delivered to the Mexican authorities on Friday, March 10, 2006. As of December 31, 2005 we had approximately 211 employees under a collective bargaining agreement in South Deerfield, which expires in October 2006.

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

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

Other Uncertainties

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

ITEM 1B.UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.PROPERTIES

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

Since 2001, the Company has undertaken an effort to maximize the efficiency of our facilities by closing and disposing of a number of facilities. Production from these facilities was moved in large part to plants that were not operating at capacity. In 2005, we sold the intellectual property, working capital and equipment assets used in our Alliant operations in Shelbyville, Indiana. During 2004, we closed our Harrisville, Rhode Island manufacturing facility and transferred production to more efficient plants. We also acquired ownership of that portion of our Macedon, New York facility that we previously leased from ExxonMobil Oil Corporation.

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We have an annual film production capacity of approximately 1.0 billion pounds. Our principal manufacturing plants are listed below. Unless otherwise indicated, we own each of these properties.

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

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

ITEM 3.LEGAL PROCEEDINGS

On January 3, 2006, Pliant Corporation and ten subsidiaries (collectively, the “Debtors”) filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) (the “Chapter 11 Cases”). The Chapter 11 Cases are being jointly administered under the caption “In re: Pliant Corporation, et al., Case No. 06-10001”. Three of our subsidiaries with Canadian operations commenced ancillary proceedings in a Canadian court to recognize the Chapter 11 proceedings as “foreign proceedings” pursuant to Canada’s Companies’ Creditors Arrangement Act (“CCAA”). Our operations in Mexico, Germany, and Australia were not included in the Chapter 11 filing and are not subject to the reorganization proceedings.

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As a consequence of our commencement of these Chapter 11 Cases, substantially all pending claims and litigation against us in the United States have been automatically stayed pursuant to Section 362 of the Bankruptcy Code. In addition, as a consequence of the commencement of the proceedings in Canada to recognize the Chapter 11 proceedings as “foreign proceedings” pursuant to the CCAA, substantially all pending claims and litigation against our subsidiaries operating in Canada also have been stayed by order of the Canadian court. During the pendency of the Chapter 11 Cases, the Debtors are operating their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

On the same day as we filed our voluntary petitions, we also filed a motion seeking procedural consolidation of these Chapter 11 Cases for ease of administration, which order was granted by the Bankruptcy Court on January 4, 2006. The Bankruptcy Court also granted certain other motions in substantially the manner requested seeking typical “first day” relief to ensure that we were able to transition into the Chapter 11 process with as little disruption to our business as possible and to enable our business to function smoothly while the Chapter 11 Cases were pending. The most significant of these granted “first day” motions authorized us to (i) pay prepetition wages and other benefits to our employees, (ii) honor prepetition customer obligations and continue customer programs, (iii) pay certain prepetition claims of shippers, warehouseman and other lien claimants, (iv) make payments to certain prepetition creditors that were vital to our uninterrupted operations, (v) continue use of our existing cash management system and bank accounts and (vi) obtain postpetition financing and use cash collateral. In addition, the Bankruptcy Court authorized us to enter into a postpetition debtor-in-possession financing facility on an interim basis on January 4, 2006 and on a final basis on February 2, 2006 (as amended on March 13, 2006).

The United States Trustee for the District of Delaware appointed an official committee of unsecured creditors on January 13, 2006. In addition, three unofficial ad hoc committees of note holders are represented in the Chapter 11 Cases. On March 17, 2006, we filed a proposed plan of reorganization with the Bankruptcy Court, which plan has not yet been voted on by the holders of impaired claims or interests or confirmed by the Bankruptcy Court. See Item 1—“Business—Chapter 11 Bankruptcy Proceedings and Plan of Reorganization” for additional information regarding the proposed plan of reorganization and these proceedings.

The Company filed a patent infringement complaint against MSC Marketing & Technology, Inc., d/b/a Sigma Stretch Film and Atlantis Plastics, Inc. on May 19, 2004, Case No. 04-C-3509 (N.D. Ill.) The Company sells a patented plastic film that is used to wrap pallet loads. The patent infringement lawsuit was filed to protect the Company’s exclusive right to this film’s patented features, which provide the Company’s product with advantages in this industry. In this lawsuit, the Company seeks an injunction and past damages relating to sales of competing film products. This case currently is in the discovery phase.

In June 2005, the Company received an information request from the U.S. Environmental Protection Agency Region 4 (the “EPA”) relating to the Constitution Road Drum Site (the “Site”). The EPA stated that the Company may have arranged for disposal of non-hazardous waste at the former Southeastern Research and Recovery (“SRR”) facility in Atlanta, Georgia. SRR operated as a RCRA transfer facility and apparently abandoned its operations. The EPA has informally requested that more than 100 potentially responsible parties, including the Company, conduct a removal action at the Site. A group of PRPs has formed and has negotiated an agreement in principle with EPA to conduct a cleanup at the Site. The estimated cost of the work will be $2.2 million. The EPA has agreed to waive its claim for past costs. Based on the allocation formula developed by the PRP group, the Company’s share is estimated to be approximately $28,000. Pliant plans to seek approval from the bankruptcy court to participate in a settlement consistent with these terms.

On June 30, 2005, George Miller filed a complaint against the Company, Case No. 05-0580 (Ontario, Canada Superior Court of Justice). In this lawsuit, Miller seeks general damages of $200,000 and

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aggravated and punitive damages of $2 million plus costs for constructive discharge. This case is currently subject to the automatic stay provisions of the Bankruptcy Code, as noted above. Prior to the stay taking effect, the case was in the pleading stage.

On August 11, 2005, Montague Claybrook, Chapter 7 Trustee for BakeLine Industries, Inc. filed a bankruptcy preference complaint against the Company, Adversary Proceeding 05-52265 - PBL (Bankruptcy Court, District of Delaware). The complaint alleges preferential transfers of $274,500 to the Company. Pliant has responded to the complaint, raising new value and ordinary course defenses. Discovery in this case has been concluded. This case is currently subject to the automatic stay provisions of the Bankruptcy Code, as noted above.

On August 30, 2005, Tredegar Film Products Corp. filed a complaint against the Company, Case No. 05 CH 14715 (Cook County, Illinois Circuit Court, Chancery Division). In this lawsuit, Tredegar seeks compensatory damages in excess of $30,000 and $2 million in punitive damages against the Company for alleged misappropriation and misuse of alleged Tredegar trade secrets related to the hiring by the Company of two former Tredegar employees. This case is currently subject to the automatic stay provisions of the Bankruptcy Code, as noted above. Prior to the stay taking effect on January 3, 2006, the case was in the early stages of discovery.

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

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

We did not submit any matters to a vote of security holders during the fourth quarter of 2005.

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PART II

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

Market Information, Holders and Dividends

At March 30, 2006, we had 571,691 shares of common stock outstanding and there were 36 holders of record of our common stock. There is no established trading market for our common stock.

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

Recent Sales of Unregistered Securities

Since the adoption of the 2004 Restricted Stock Incentive Plan, we sold 720 shares of a newly created Series B Preferred Stock to our Chief Executive Officer and certain other officers in private transactions at $162 per share, which was determined to be the fair market value of those shares based on an independent appraisal received by the Board. We believe that the issuance of these shares was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof because the issuance did not involve a public offering or sale. As of December 31, 2005, 628 shares of Series B Preferred Stock are outstanding.

Equity Compensation Plans

As required by Item 201(d) of SEC Regulation S-K, a table presenting securities authorized for issuance under equity compensation plans is included in Item 12.

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ITEM 6.SELECTED FINANCIAL DATA

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

	Years ended December 31,
	2001			2002			2003			2004			2005
	(Dollars in millions)
Statement of operations data:(1)
Net sales	$	840.4		$	850.9		$	894.5		$	968.7		$	1,072.8
Cost of sales	665.1			693.7			758.2			826.8			939.7
Gross profit	175.3			157.2			136.3			141.9			133.1
Total operating expenses(2)	101.1			126.2			128.1			90.1			92.0
Operating income (loss)	74.2			31.0			8.2			51.8			41.1
Interest expense(3)(4)	(76.0		)	(75.3		)	(96.4		)	(145.7		)	(155.1		)
Other income (expense), net	6.5			2.3			0.5			(0.7		)	4.1
Income (loss) from continuing operations before income taxes	4.7			(42.0		)	(87.8		)	(94.6		)	(109.9		)
Income tax expense (benefit)	6.8			(1.5		)	5.2			1.6			2.0
Loss from continuing operations	(2.1		)	(40.5		)	(93.0		)	(96.2		)	(111.9		)
Loss from discontinued operations	—			(2.9		)	(21.3		)	(17.7		)	(1.1		)
Net income (loss)	$	(2.1	)	$	(43.4	)	$	(114.3	)	$	(113.9	)	$	(113.0	)
Other financial data:
EBITDA from continuing operations(5)	$	127.7		$	79.0		$	55.5		$	92.2		$	85.8
Net cash provided by (used in) operating activities	30.3			52.4			(14.2		)	(1.4		)	(56.4		)
Net cash used in investing activities	(87.3		)	(55.2		)	(17.0		)	(17.6		)	(32.6		)
Net cash provided by (used in) financing activities	55.0			12.4			46.0			25.5			97.1
Depreciation and amortization	47.0			45.7			46.9			41.1			40.5
Impairment of goodwill and intangible assets (2)	—			8.6			18.3			—			—
Impairment of fixed assets(2)	—			—			4.8			0.4			—
Restructuring and other costs(2)	(4.6		)	30.1			12.6			2.1			2.4
Financial Restructuring(9)	—			—			—			—			3.8
Non-cash stock-based compensation expense	7.0			—			—			—			—
Capital expenditures	56.4			49.2			17.0			24.1			33.5
Segment profit(10)	141.8			118.8			91.2			94.6			92.0

	December 31,
	2001			2002			2003			2004			2005
	(Dollars in millions)
Balance sheet data (at period end):
Cash and cash equivalents	$	4.8		$	1.6		$	3.3		$	5.6		$	12.8
Working capital(6)	58.4			45.8			70.7			78.5			(833.4		)
Total assets	851.7			853.2			786.8			777.1			820.9
Total debt	713.3			736.4			783.7			842.3			981.7
Total liabilities(7)	903.0			960.1			992.4			1,291.3			1,455.8
Redeemable preferred stock(8)	126.1			150.8			188.2			0.1			0.1
Redeemable common stock	16.8			13.0			13.0			6.6			6.6
Stockholders’ equity (deficit)	(194.5		)	(270.9		)	(407.1		)	(521.0		)	(641.7		)

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(1)On September 30, 2004, we sold substantially all of the assets of Pliant Solutions Corporation which was previously reported as one of our operating segments. In accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets, Pliant Solutions is being accounted for as a discontinued operation and, accordingly, its assets are segregated from continuing operations, and its operating results are segmented and reported as discontinued operations in all periods presented. Net sales of Pliant Solutions for the nine months ended September 30, 2004 were $22.5 million; net sales of Pliant Solutions for the twelve months ended December 31, 2003 were $34.9 million; and net sales of Pliant Solutions for the eight months ended December 31, 2002 were $28.3 million. No tax benefits were recorded on the losses from discontinued operations or the loss on sale of discontinued operations as realization of these tax benefits is not certain.

(2)Total operating expenses include restructuring and other costs of $2.4 million for the year ended December 31, 2005, including $2.1 million in lease termination costs associated with our Shelbyville, Indiana facility and $0.3 million severance costs associated with the sale of our Alliant business. For the year ended December 31, 2004, restructuring and other costs of $2.1 million were included for fixed asset impairment charges of $1.4 million and restructuring and other costs of $0.7 million related to closure of our Harrisville, Rhode Island facility. For the year ended December 31, 2003, restructuring and other costs of $12.6 million were included which consisted of $2.0 million for fixed asset impairment charges related to the closure of our facility in Shelbyville, IN, $0.7 million related to the closure of our facility in Brazil consisting primarily of fixed asset impairment charges, $2.6 million related to the closure and transfer of the production from our facility in Fort Edward, NY to our facilities in Mexico and Danville, KY, $1.4 million related to the consolidation of two plants in Mexico, $2.6 million related to the closure and transfer of production from our Merced, CA facility, and other costs related to the closure of our Shelbyville, IN facility, our Singapore office and a section of our Toronto facility. In addition, during 2003 we accrued the present value of future lease payments on three buildings we do not currently occupy in an amount equal to $3.3 million and a provision for litigation of $7.2 million.

Total operating expenses for the year ended December 31, 2003 also included $18.2 million for the impairment of goodwill, consisting of  $10 million in our Engineered Films segment for Canada, $7.2 million in our Specialty Products Group segment for Mexico and $1.0 million in our Industrial segment for Germany and Australia, and $4.8 million for impairment of fixed assets, $2.4 million in our Performance Films segment and $1.2 million in both our Specialty Products Group and Industrial Films segment.

Total operating expenses for 2002 include $30.1 million of restructuring and other costs, including $14.8 million related to the closure of our plant in Merced, CA, a portion of our plant in Shelbyville, IN, a part of our plant in Toronto, Canada, and one of our plants in Mexico. In addition, these costs reflect $7.9 million for the costs of relocating several of our production lines related to plant closures and costs associated with production rationalizations at several plants. Total operating expenses for 2002 also include $7.4 million related to severance costs, including benefits for several companywide workforce reduction programs that were completed in 2002.

Total operating expenses for the year ended December 31, 2002 also included $8.6 million for the impairment of goodwill associated with Mexico in our Specialty Products Group segment.

Total operating expenses for 2001 include $7.0 million of non-cash stock-based compensation expense, $3.0 million of restructuring and other costs, $4.0 million for expenses related to the relocation of our corporate headquarters, $6.0 million of fees and expenses relating to our supply chain cost initiative, and a $3.0 million increase in depreciation expenses relating primarily to the purchase of a new computer system. In addition, total operating expenses for 2001 include a credit for $7.6 million related to the reversal of previously accrued charge for the closure of our Harrington, DE plant. In 2001, we decided not to proceed with our previously announced closure of our Harrington, DE plant.

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(3)In May 2003, we prepaid a total of $75 million of revolving loans and $165 million of our term loans with the net cash proceeds from the issuance of $250 million of Senior Secured Notes. As a result, interest expense for 2003 included a $5.3 million charge for expensing a portion of previously capitalized financing fees incurred in connection with our credit facilities. In February 2004, we paid off our then existing term loan facility of $219.6 million and revolving loan facility of $20 million with proceeds from the issuance of $306 million Senior Secured Discount Notes. As a result, interest expense in 2004 included a $7.9 million charge for expensing a portion of our previously capitalized financing fees.

(4)In 2004 and 2005, we recognized $35.3 million and $40.8 million, respectively, of dividends and accretion on redeemable preferred stock as interest expense in accordance with SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.

(5)EBITDA from continuing operations reflects income from continuing operations before interest expense, income taxes, depreciation, and amortization. We believe that EBITDA information enhances an investor’s understanding of our ability to satisfy principal and interest obligations with respect to our indebtedness and to utilize cash for other purposes. EBITDA does not represent and should not be considered as an alternative to net income or cash flows from operating activities as determined by U.S. generally accepted accounting principles and may not be comparable to other similarly titled measures of other companies. In addition, there may be contractual, legal, economic or other reasons which may prevent us from satisfying principal and interest obligations with respect to our indebtedness and may require us to allocate funds for other purposes. A reconciliation of EBITDA to net cash provided by (used in) operating activities as set forth in our consolidated statements of cash flows is as follows:

	2001			2002			2003			2004			2005
	(Dollars in millions)
EBITDA from continuing operations	$	127.7		$	79.0		$	55.5		$	92.2		$	85.8
Adjustments:
Interest expense	(76.0		)	(75.3		)	(96.4		)	(145.7		)	(155.1		)
Income tax (expense) benefit	(6.8		)	1.5			(5.2		)	(1.8		)	(1.0		)
Impairment of fixed assets	—			—			4.8			0.4			—
Preferred dividends and accretion on preferred shares	—			—			—			35.3			40.8
Amortization of deferred financing costs and accretion of debt discount	2.7			3.7			9.9			35.1			34.9
Deferred income taxes	3.0			(5.4		)	1.5			0.2			(1.0		)
Provision for loss on accounts receivable	0.3			2.6			1.7			1.6			1.7
Non-cash compensation expense related to stock options	7.0			—			—			—			—
Discount on stockholder note receivable	—			—			—			—			—
Non-cash plant closing costs	(7.6		)	9.7			3.3			1.4			—
Write-down of impaired goodwill and intangible assets	—			8.6			18.3			—			—
Curtailment gain	—			—			—			1.6			—
(Gain) loss on disposal of assets	(0.4		)	0.4			1.4			0.5			(4.2		)
Minority interest	0.3			(0.1		)	0.1			(0.3		)	—
Change in operating assets and liabilities, net of effects of acquisitions	(19.9		)	27.7			(9.1		)	(21.9		)	(58.3		)
Net cash provided by (used in) operating activities	$	30.3		$	52.4		$	(14.2	)	$	(1.4	)	$	(56.4	)

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(6)The working capital amount for 2005 includes $971.9 million of debt in default consisting of $130.9 million of revolving credit facility, $250 million in 111¤8% Senior Secured Notes, $269.8 million in 115¤8% Senior Secured Notes, $7.0 million in 111¤8 Senior Secured Discount Notes and $314.1 million in Senior Subordinated debt.

(7)The Company adopted Statement of Financial Accounting Standard No. 150 (“SFAS 150”), Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, effective January 1, 2004. As a result, our Series A redeemable preferred stock, which has an unconditional mandatory redemption feature, was recorded as a liability on the date of adoption. In addition, effective January 1, 2004, the dividends and accretion on the preferred shares are included as a part of interest expense in the statement of operations. As a result of adopting SFAS 150, the Company’s redeemable common shares that have been put for redemption by a shareholder have also been recorded as a liability.

(8)The amount presented includes proceeds of $141.0 million from the issuance of our Series A preferred stock in 2000, 2001 and 2003, plus the accrued and unpaid dividends, less the unamortized discount due to detachable warrants to purchase common stock issued in connection with our preferred stock and unamortized issuance costs which were $76.3 million and $29.1 million, respectively as of December 31, 2003. The amount as of December 31, 2004 includes $0.1 million of proceeds from the sale of 720 shares of newly-created, non-voting Series B Redeemable Preferred Stock to selected officers of the Company.

(9)   Total operating expenses include financial restructuring costs of $3.8 million for the year ended December 31, 2005 for legal, financial advisory, tax and other professional services.

(10) Segment profit reflects income from continuing operations adjusted for interest expense, income taxes, depreciation, amortization, restructuring and other costs and other non-cash charges (principally the impairment of goodwill, intangible assets and fixed assets).

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

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

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

Company Profile

Pliant generates revenues, earnings and cash flows from the sale of film and flexible packaging products throughout the world. We manufacture these products at 23 facilities located in the United States, Australia, Canada, Germany and Mexico. Our sales have grown primarily as a result of strategic acquisitions made over the past several years, increased levels of production at acquired facilities, return on capital expenditures and the overall growth in the market for film and flexible packaging products.

Overview

On January 3, 2006, Pliant Corporation and ten subsidiaries (collectively, the “Debtors”) filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) (the “Chapter 11 Cases”). The Chapter 11 Cases are being jointly administered under the caption “In re: Pliant Corporation, et al., Case No. 06-10001”. Three of our subsidiaries with Canadian operations commenced ancillary proceedings in a Canadian court to recognize the Chapter 11 proceedings as “foreign proceedings” pursuant to Canada’s Companies’ Creditors Arrangement Act (“CCAA”). Our operations in Mexico, Germany, and Australia were not included in the Chapter 11 filing and are not subject to the reorganization proceedings.

As a consequence of our commencement of these Chapter 11 Cases, substantially all pending claims and litigation against the Debtors in the United States have been automatically stayed pursuant to Section 362 of the Bankruptcy Code. In addition, as a consequence of the commencement of the proceedings in Canada recognizing the Chapter 11 proceedings as “foreign proceedings” pursuant to the CCAA, substantially all pending claims and litigation against our subsidiaries operating in Canada also have been stayed by order of the Canadian court.

We intend to use the Chapter 11 Cases to complete our financial restructuring, resulting in a less leveraged capital structure that is expected to facilitate greater capital investment in our business. Our proposed plan of reorganization filed on March 17, 2006 with the Bankruptcy Court is expected to reduce our indebtedness, redeemable preferred stock and redeemable common stock by up to $595 million and decrease our annual interest expense by up to $86 million. See Item 1—“Business—Chapter 11 Bankruptcy Proceedings and Plan of Reorganization—Proposed Plan of Reorganization” for a discussion of the terms of the proposed plan.

During the pendency of the Chapter 11 Cases, the Debtors are operating their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. In addition, we have entered into a

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postpetition debtor-in-possession financing facility with certain lenders led by General Electric Capital Corporation that provides for a maximum of approximately $68.8 million of additional postpetition financing. We expect to continue to operate in the normal course of business during the reorganization process and all of our 23 manufacturing and research and development facilities around the world are open and continuing to serve customers. However, operating in bankruptcy imposes significant risks on our business and we cannot predict whether or when we will successfully emerge from bankruptcy. See Item 1A—“Risk Factors” for a discussion of the risks and uncertainties facing our business as a result of the Chapter 11 Cases.

For 2005, the Company’s net sales were $1,072.8 million, up $104.1 million or 10.8% over 2004, excluding Pliant Solutions, which was sold in the third quarter of 2004 and is accounted for as a discontinued operation. Overall, our average selling price per pound increased by 12.3% primarily due to pass-through of resin cost increases along with favorable product mix changes. Our volume, measured in trade pounds sold, declined 1.3% or 11.8 million pounds from 878.9 million pounds in 2004 to 867.1 million pounds in 2005.

Segment profit, defined as net income adjusted for interest expense, income taxes, depreciation, amortization, restructuring and other non-cash charges (principally the impairment of goodwill, intangible assets and fixed assets), was $92.0 million in 2005, down $2.6 million or 2.7% from 2004. Sales volume and mix contributed $1.8 million of additional profit while operational excellence programs, including significant reductions in waste, improved by $5.0 million. Selling, general and administrative costs were lower than the prior year by $4.0 million. Offsetting these improvements was a $11.1 million negative volume impact, $5.5 million in additional freight and utilities costs and $3.3 million of increased packaging costs. In addition, in the second quarter of 2005, we recorded a gain of $4.1 million on the sale of our Alliant business.

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

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

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

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

On September 24, 2004, the Company adopted a 2004 Restricted Stock Incentive Plan, pursuant to which we sold to our President and Chief Executive Officer and selected additional officers of the Company all 720 authorized shares of a newly-created, non-voting Series B Redeemable Preferred Stock for a cash purchase price of $162 per share. These shares were issued in private transactions with officers of the Company and therefore were exempt from the registration requirements of the Securities Act of 1933. On December 22, 2004, the remaining 16 authorized shares were issued to an officer for a cash purchase price of $162 per share. During 2005, 92 of the 720 issued shares were repurchased by the Company for $162 per share.

On February 17, 2004, we completed the sale of $306,000,000 in aggregate principal amount at maturity of 111¤8% Senior Secured Discount Notes due 2009 (the “2004 Notes”). The net proceeds from such sale in the amount of $220.2 million (after deducting underwriters’ fees) together with borrowings of $30 million under our revolving credit facility described below, were used to pay off our then existing term loan facilities in the amount of $219.6 million and our then existing revolving loan facility of $20 million.

On April 8, 2005, we commenced a consent solicitation relating to the 2004 Notes seeking consents, among other things, to (i) eliminate the requirement to pay cash interest on the notes beginning in 2007 and, in lieu thereof, pay non-cash interest in the form of additional notes through maturity; (ii) increase the interest rate of the notes for which consents were received; (iii) increase the redemption prices of the notes for which consents were received; and (iv) eliminate certain restrictive covenants as they apply to notes for which consents were not received. On May 6, 2005, we consummated this solicitation as consents to the proposed amendments were delivered with respect to $298.2 million aggregate principal amount at maturity of the 2004 Notes, all of which were accepted by Pliant. In addition, $7.8 million aggregate principal amount at maturity of 2004 Notes with respect to which consents were not delivered remain outstanding.

Critical accounting policies

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

Bankruptcy Proceedings.   The accompanying financial statements have been prepared on a going concern basis, which contemplates continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business. On January 3, 2006, Pliant Corporation and ten of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions in the United States Bankruptcy Court and three subsidiaries with Canadian operations commenced ancillary proceedings pursuant to Canada’s Companies’ Creditors Arrangement Act. During these bankruptcy proceedings, we will operate the Debtors’ businesses as debtors-in-possession and with the approval of the Bankruptcy Court, or otherwise as permitted in the ordinary course of business, we may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the consolidated financial statements.

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

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

Accounts receivable.   We evaluate accounts receivable on a quarterly basis and review any significant customers with delinquent balances to evaluate future collectibility. We base our evaluations on legal issues (such as bankruptcy status), past history, current financial and credit agency reports, and the experience of the credit representatives. We reserve accounts that we deem to be uncollectible in the quarter in which we make the determination. We maintain additional reserves based on our historical bad debt experience. We believe, based on past history and proven credit policies, that the net accounts receivable as of December 31, 2005 are of good quality.

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

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

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

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

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

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

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Recent accounting pronouncements

In December 2004, the FASB issued SFAS 123(R) (revised December 2004), “Share-Based Payment”, which is a revision of SFAS 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This statement requires that the fair value at the grant date resulting from all share-based payment transactions be recognized in the financial statements. Further SFAS 123(R) requires entities to apply a fair-value based measurement method in accounting for these transactions. This value is recorded over the vesting period. This statement is effective for the first interim reporting period beginning after December 15, 2005. The impact of adoption of SFAS 123(R) cannot be predicted at this time because it will depend on the level of share based payments in the future. However, had the Company adopted SFAS 123(R) in prior periods, the impact of the standard would have been approximately the impact described in the disclosure of pro forma income in Note 1 to the consolidated financial statements.

Results of operations

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

(Dollars in millions)	2005				2004				2003
Net sales	$	1,072.8	100.0	%	$	968.7	100.0	%	$	894.5	100.0	%
Cost of sales	939.7		87.6	%	826.8		85.3	%	758.2		84.8	%
Gross profit	133.1		12.4	%	141.9		14.7	%	136.3		15.2	%
Operating expenses before restructuring and other costs, goodwill and asset impairment costs	85.8		8.0	%	87.5		9.0	%	92.4		10.3	%
Restructuring and other costs	2.4		0.2	%	2.1		0.2	%	12.6		1.4	%
Financial Restructuring	3.8		0.4	%	—		—	%	—		—	%
Impairment of goodwill and intangible assets	—		—	%	—		—	%	18.3		2.1	%
Impairment of fixed assets	—		—	%	0.4		0.1	%	4.8		0.5	%
Total operating expenses	92.0		8.6	%	90.0		9.3	%	128.1		14.3	%
Operating (loss) income	$	41.1	3.8	%	$	51.9	5.4	%	$	8.2	0.9	%

Year ended December 31, 2005 compared with the year ended December 31, 2004

Net sales.Net sales increased by $104.1 million, or 10.8%, to $1,072.8 million for the year ended December 31, 2005 from $968.7 million for the year ended December 31, 2004. The increase was primarily due to a 12.3% increase in average selling price offset by a 1.3% decline in sales volumes. See “Operating segment review” below for a detailed discussion of sales volumes and selling prices by segment and division.

Gross profit.Gross profit decreased by $8.8 million, or 6.2%, to $133.1 million for the year ended December 31, 2005, from $141.9 million for the year ended December 31, 2004. This decrease was primarily due to $5.5 million of incremental freight and utilities costs and $3.3 million of incremental packaging costs.

Total operating expenses before restructuring and other costs.   Total operating expenses before restructuring and other costs decreased by $1.7 million, or 1.9%, to $85.8 million for the year ended December 31, 2004 from $87.5 million for the year ended December 31, 2005.

Restructuring and other costs.Restructuring and other costs were $2.4 million for the year ended December 31, 2005, as compared to $2.1 million for the year ended December 31, 2004, an increase of $0.3 million. These costs in 2005 include $2.1 million in lease termination costs associated with equipment formerly in our Shelbyville, Indiana facility and $0.3 million in severance costs associated with our Alliant

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business which was sold in 2005. These costs in 2004 include $1.4 million in fixed asset impairment charges and severance and other costs of $0.2 million and $0.5 million, respectively, related to the closure of our Harrisville, RI facility.

Operating income (loss).Operating income decreased by $10.8 million to $41.1 million for the year ended December 31, 2005, from $51.9 million for the year ended December 31, 2004, due to the factors discussed above.

Interest expense.Interest expense increased $9.4 million, or 6.4%, to $155.1 million for the year ended December 31, 2005 from $145.7 million for the year ended December 31, 2004. Dividends and accretion on the preferred shares was $40.8 million for the year ended December 31, 2005 compared to $35.3 million for the year ended December 31, 2004, and account for $5.5 million of this $9.4 million increase. Interest on long term debt was $114.3 million for the year ended December 31, 2005 compared to $110.4 million for the year ended December 31, 2004 due to higher costs associated with our outstanding Senior Secured Notes.

Other income (expense).   Other income was $4.1 million for the year ended December 31, 2005 compared to other expense of $(0.7) million for the year ended December 31, 2004. Other income for the year ended December 31, 2005 includes a $4.1 million gain on sale of our Alliant business. Other income for the year ended December 31, 2004 includes $1.3 million loss on the sale of real property, $0.1 million currency gain, and $0.5 million other less significant items.

Income tax expense (benefit).   In 2005 our income tax expense was $2.0 million, compared to an income tax expense of $1.6 million in 2004. These amounts represent effective tax rates of 1.8% and 1.7% for the years ended December 31, 2005 and 2004, respectively. The fluctuation in the effective tax rate is principally the result of foreign tax rate differences, the provision for valuation allowances, the write-off of goodwill and the accrued dividends on preferred stock. As of December 31, 2005, our deferred tax assets totaled approximately $149.7 million, of which $118.5 million related to net operating loss carry forwards. Our deferred tax liabilities totaled approximately $84.9 million. Due to uncertainty regarding the timing of the future reversals of existing deferred tax liabilities, the realization of our foreign tax credit carry forwards, and the realization of other deferred tax assets and carry forwards, we have recorded valuation allowances of approximately $85.0 million to offset the net operating loss carry forward and certain other deferred tax assets and carry forwards. Net taxes of zero were provided for the losses from discontinued operations due to any potential tax benefit being offset by the valuation allowance for net operating loss carry forwards.

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

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

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

Total operating expenses before restructuring and other costs.   Total operating expenses before restructuring and other costs decreased by $4.9 million, or 5.3%, to $87.5 million for the year ended

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December 31, 2004 from $92.4 million for the year ended December 31, 2003. This decrease includes a provision for litigation of $7.2 million recorded in 2003. Excluding the 2003 litigation provision, other operating expenses increased $2.3 million.

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

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

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

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

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

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

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

Operating Segment Review

General

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

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

Summary for years ended December 31, 2005 2004 and 2003:

	Specialty Products Group			Industrial Films			Engineered Films			Performance Films			Corporate/ Other				Total
Year ended December 31, 2005
Net sales		$	410.2		$	307.0		$	241.8		$	106.1		$	7.7		$	1,072.8
Segment profit (loss)(1)		51.7			26.6			29.1			13.8			(29.2		)	92.0
Year ended December 31, 2004
Net sales		$	390.7		$	254.1		$	219.0		$	98.1		$	6.8		$	968.7
Segment profit (loss)(1)		49.0			26.2			33.4			15.6			(29.6		)	94.6
Year ended December 31, 2003
Net sales		$	367.7		$	219.6		$	196.1		$	105.2		$	5.9		$	894.5
Segment profit (loss)(1)		50.4			27.2			35.2			20.5			(42.1		)	91.2

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

Year ended December 31, 2005 compared to the year ended December 31, 2004

Specialty Products Group

Net sales.The net sales of our Specialty Products Group segment increased $19.5 million, or 5.0%, to $410.2 million for the year ended December 31, 2005 from $390.7 million for the year ended

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December 31, 2004. This increase was primarily due to a 11.7% increase in our average selling price, offset by a 6.0% decline in sales volume.

Net sales in our Specialty Films division increased $11.4 million, or 6.2%, to $195.2 million for the year ended December 31, 2005 from $183.8 million for the year ended December 31, 2004. This increase was principally due to an increase in our average selling price of 11.5% offset by a decline in sales volume of 4.7%. Net sales in our Printed Products Films division increased $8.1 million, or 3.9%, to $215.0 million for the year ended December 31, 2005 from $206.9 million for the year ended December 31, 2004. This increase was principally due to an increase in our average selling price of 12.7%, offset by a decline in sales volume of 7.8%. We saw continued growth in our personal care and medical products markets, both in plain and printed products. These gains were offset by a decline in our agricultural products growth due to foreign competition, along with product platform changes at one of our major personal care customers and a financial and operational restructuring at one of our printed products bakery customers.

Segment profit.   The Specialty Products Group segment profit was $51.7 million for the year ended December 31, 2005, as compared to $49.0 million for the year ended December 31, 2004. This $2.7 million increase in segment profit was mainly due to $1.5 million less selling, general and administrative expenses and an improvement in our sales product mix.

Industrial Films

Net sales.   The net sales of our Industrial Films segment increased by $52.9 million, or 20.8%, to $307.0 million for the year ended December 31, 2005 from $254.1 million for the year ended December 31, 2004. This increase was due to an increase in our sales volumes of 4.0% and an increase in our average selling prices of 16.2%, primarily due to the pass through of raw material price increases and increased sales of value added products.

Segment profit.   The Industrial Films segment profit was $26.6 million for the year ended December 31, 2005, as compared to $26.2 million for the same period in 2004. This increase in segment profit was primarily due to an increased sales mix of value added products. Segment profit in 2005 was positively impacted by $5.6 million due to higher volumes, an increase in average selling prices of $1.4 million and waste reduction initiatives of $.8 million. These favorable impacts were nearly entirely offset by higher freight and utilities costs of $2.6 million, higher packaging, labor, and outside services costs of $4.3 million resulting from changes in product/customer mix, and other overhead costs of $0.5 million.

Engineered Films

Net Sales.   Net sales in Engineered Films increased by $22.8 million, or 10.4%, to $241.8 million for the year ended December 31, 2005 from $219.0 million for 2004. This increase was principally due to an increase in our average selling prices of 12.1% principally due to the pass-through of raw material price increases and improvements in our sales mix, offset by a decline in sales volume of 1.5%. Increased sales activity and focus on major customers resulted in incremental sales volume in our converter, personal care and medical sales markets.

Segment profit.   The Engineered Films segment profit was $29.1 million for the year ended December 31, 2005, as compared to $33.4 million for the same period in 2004. While segment profit in the Engineered Films Segment was positively impacted in 2005 by $2.9 million resulting from our waste reduction initiatives, it was negatively impacted by $1.5 million due to lower volume, $5.8 million due to compression between our average selling price and average raw material costs, and $1.1 million due to higher freight and utilities costs.

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Performance Films

Net sales.   The net sales of our Performance Films segment increased $8.0 million, or 8.2%, to $106.1 million for the year ended December 31, 2005 from $98.1 million for 2004. This increase was principally due to increased customer focus in our barrier and medical markets resulting in incremental sales volume and an increase in average selling prices of 11.2%, offset by a decline in sales volume of 2.8%, primarily in our custom and converter films markets.

Segment profit.   Performance Films segment profit was $13.8 million for the year ended December 31, 2005, as compared to $15.6 million for the same period in 2004. Segment profit was negatively impacted in 2005 by $1.3 million due to lower volume, and $1.6 million in compression between our average price and raw material costs and was positively affected by favorable manufacturing costs of $0.9 million.

Corporate/Other

Corporate/Other includes our corporate headquarters and our research and development facility in Newport News, Virginia. Unallocated corporate expenses decreased by $0.4 million to $29.2 million for the year ended December 31, 2005, from $29.6 million for the year ended December 31, 2004. This decrease was principally due to an accrual in 2003 of $7.2 million for the estimated costs of litigation discussed in Note 13 to the consolidated financial statements and to elimination of administrative costs associated with our former international segment and Singapore operations. Unallocated research and development costs increased by $2.9 million to $4.2 million for the year ended December 31, 2004.

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

Specialty Products Group

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

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

Segment profit.   The Specialty Products Group segment profit was $49.0 million for the year ended December 31, 2004, as compared to $50.4 million for the year ended December 31, 2003. This $1.4 million decrease was due to an $2.8 million increase in selling, general and administrative costs driven by higher commission costs associated with average sales prices and an accrual of $1.8 million in vacation related payroll costs, offset by reductions in other general and administrative costs.

Industrial Films

Net sales.   The net sales of our Industrial Films segment increased by $34.5 million, or 15.7%, to $254.1 million for the year ended December 31, 2004 from $219.6 million for the year ended December 31,

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2003. This increase was principally due to an increase in our sales volumes of 6.7% and an increase in our average selling prices of 8.4%, primarily due to the pass through of raw material price increases and increased sales of value added products.

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

Engineered Films

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

Segment profit.   The Engineered Films segment profit was $33.4 million for the year ended December 31, 2004, as compared to $35.2 million for the same period in 2003. This decrease in segment profit was primarily due to lower gross margins from compression between our average selling price and average raw material costs to contractual customers and the competitive environment with customers who are not parties to purchase agreements. In addition, this segment recorded an accrual of $1.0 million in vacation related payroll costs.

Performance Films

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

Segment profit.   Performance Films segment profit was $15.6 million for the year ended December 31, 2004, as compared to $20.5 million for the same period in 2003. This decrease in segment profit was primarily due to lower gross margins from compression between our average selling price and average raw material costs to contractual customers.

Corporate/Other

Corporate/Other includes our corporate headquarters and our research and development facility in Newport News, Virginia. Unallocated corporate expenses decreased by $12.5 million to $29.6 million for the year ended December 31, 2004, from $42.1 million for the year ended December 31, 2003. This decrease was principally due an accrual in 2003 of $7.2 million for the estimated costs of litigation discussed in Note 13 to the consolidated financial statements and to elimination of administrative cost associated with our former international segment and Singapore operations. Unallocated research and development costs increased $2.9 million to $4.2 million.

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Liquidity and Capital Resources

Sources of capital

Our principal sources of funds have been cash generated by our operations and borrowings under our revolving credit facility. In addition, we have raised funds through the issuance of our 13% Senior Subordinated Notes due 2010 (the “2000/2002 Notes”), 111¤8% Senior Secured Notes due 2009 (the “2003 Notes”), 111¤8% Senior Secured Discount Notes due 2009 (the “2004 Notes”), and the sale of shares of our preferred stock.

As of December 31, 2005, our outstanding long-term debt consisted of $8.5 million in capital leases. The current portion of our long-term debt and debt in default as of December 31, 2005 consisted of: $130.9 million borrowing under our Amended and Restated Credit Agreement, $314.1 million of our 2000/2002 Notes, $269.8 million of our 115¤8% Senior Secured Notes due 2009 (the “Amended 2004 Notes”), $7.0 million of our 2004 Notes, $250.0 million of our 2003 Notes and $1.4 million in capital leases.

Revolving Credit Facility

2004 Credit Facility

From February 17, 2004 through November 7, 2005, we utilized a revolving credit facility (the “2004 Credit Facility”) providing up to $100 million of availability (subject to the borrowing base and other limitations described below). The 2004 Credit Facility included a $15 million letter of credit sub-facility, with letters of credit reducing availability under the 2004 Credit Facility.

The 2004 Credit Facility was secured by a first priority security interest in substantially all our inventory, receivables and deposit accounts, 100% of the capital stock of, or other equity interests in, our existing and future domestic subsidiaries and foreign subsidiaries that are note guarantors, 65% of the capital stock of, or other equity interests in existing and future first-tier foreign subsidiaries, investment property and other assets of the Company and the note guarantors and a second-priority security interest in our real property, fixtures, equipment, intellectual property and other assets.

The 2004 Credit Facility had a maturity date of February 17, 2009. The interest rates were at LIBOR plus 2.5% to 3.0% or ABR plus 1.5% to 2.0%. The commitment fee for the unused portion of the 2004 Credit Facility was 0.50% per annum.

Our total availability under the 2004 Credit Facility was limited in certain circumstances. Specifically, when our borrowing base was less than $110 million and the Fixed Charge Coverage Ratio (FCCR) was less than 1/1, our total availability was reduced to equal the borrowing base minus $10 million. Furthermore, when the FCCR was less than a second ratio specified in the credit agreement that changed over time (.90/1 as of September 30, 2005), total availability was reduced to equal the lesser of the commitment or the borrowing base minus $15 million. The FCCR was measured as of the end of each quarter and required to be reported to our senior lenders within 45 days after the end of each quarter.

November Amendment

On November 7, 2005, we entered into an amendment and waiver with respect to the 2004 Credit Facility that increased, for the period from November 4, 2005 to November 21, 2005, the aggregate maximum commitments to make loans and provide letters of credit from $100 million to $105 million. The lenders under the 2004 Credit Facility also agreed to a limited waiver of the applicability of the FCCR, so that the reduced availability provisions described above would not apply for the period from September 30, 2005 to November 29, 2005. The amendment and waiver also provided that, until November 29, 2005, total availability under the revolving credit facility would not exceed the borrowing base minus $15 million.

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Amended and Restated Credit Agreement

On November 21, 2005, the Company entered into a new revolving credit facility providing up to $140 million of total availability (the “Amended and Restated Credit Agreement”), subject to the borrowing base described below. The Amended and Restated Credit Agreement includes a $25 million letter of credit sub-facility, with letters of credit reducing availability under the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement replaced the 2004 Credit Facility.

Subject to the priming security interest under the DIP Credit Facility described below, the Amended and Restated Credit Agreement is secured by a first priority security interest in substantially all our inventory, receivables and deposit accounts, 100% of the capital stock of, or other equity interests in, our existing and future domestic subsidiaries, 65% of the capital stock of, or other equity interests in existing and future first-tier foreign subsidiaries, investment property and certain other assets of the Company and its subsidiaries and a second-priority security interest in our real property, fixtures, equipment, intellectual property and other assets.

The Amended and Restated Credit Agreement matures on May 21, 2007. The interest rates are (i) on $20 million outstanding under the Amended and Restated Credit Agreement, LIBOR plus 6.50% or Alternate Base Rate (either prime rate or .50% over the Federal Funds Rate, if higher) plus 5.25% and (ii) on additional amounts outstanding, LIBOR plus 2.75% or Alternate Base Rate plus 1.50%. The commitment fee for the unused portion of the Amended and Restated Credit Agreement is 0.50% per annum.

The borrowing base under the Amended and Restated Credit Agreement is based on specified percentages of our eligible accounts receivable, finished goods inventory and raw material inventory minus $10 million and other reserves. The Amended and Restated Credit Agreement requires us to comply with a monthly minimum fixed charge coverage ratio.

As of December 31, 2005, our borrowing base under the Amended and Restated Credit Agreement was approximately $131.2 million and we had approximately $130.9 million of outstanding borrowings and approximately $0.3 million remaining available for borrowing under the Amended and Restated Credit Agreement.

On December 31, 2005, an Event of Default occurred under the Amended and Restated Credit Agreement as a result of our failure to make the interest payments due on December 1, 2005 under the 2000/2002 Notes described below.

Upon the bankruptcy filing and execution of the DIP Credit Facility described below, the commitments under the Amended and Restated Credit Agreement were terminated. The $130.9 million of borrowings as of December 31, 2005 remain outstanding and are expected to be refinanced upon emergence from bankruptcy through an exit credit facility.

DIP Credit Facility

On January 4, 2006, we entered into a Senior Secured, Super Priority, Priming Debtor-in-Possession Credit Agreement, dated as of January 4, 2006 (the “DIP Credit Facility”), among the Company and certain other Debtors, as joint and several borrowers, General Electric Capital Corporation, as administrative agent, collateral agent and lender, Morgan Stanley Senior Funding, Inc., as syndication agent and lender, and the lenders from time to time party thereto. The DIP Credit Facility provides for a $200 million commitment of debtor-in-possession financing to fund the working capital requirements of Pliant and of Pliant’s ten subsidiaries that filed for bankruptcy (the “Debtors”) during the pendency of the bankruptcy proceeding. Although the DIP Credit Facility is nominally in the amount of $200 million, availability is reduced by the aggregate borrowing base of $131.2 million under the Amended and Restated Credit Agreement as of the bankruptcy filing.

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The DIP Credit Facility provides the Debtors with up to approximately $68.8 million of additional liquidity, subject to the borrowing base described below. The DIP Credit Facility received interim approval by the Bankruptcy Court on January 4, 2006 and final approval on February 2, 2006 (as amended on March 13, 2006). Availability under the DIP Credit Facility is subject to a borrowing base calculated based upon specified percentages of the Debtors’ eligible current and fixed assets, minus $10 million and other reserves. The DIP Credit Facility is guaranteed by the non-borrowing Debtors and secured by a first priority (i.e., priming) lien on substantially all of our domestic and Canadian assets, as well as super-priority administrative expense claims having priority over all our unencumbered prepetition or postpetition property.

The DIP Credit Facility provides for certain financial and other covenants including, but not limited to, a minimum fixed charge coverage ratio, affirmative covenants and negative covenants with respect to additional indebtedness, new liens, declaration or payment of dividends, sales of assets, acquisitions, loans and investments. Payment under the DIP Credit Facility may be accelerated following certain events of default including, but not limited to, dismissal of any of the Chapter 11 Cases or conversion to chapter 7 of the Bankruptcy Code, appointment of a trustee or examiner with expanded powers, failure to make payments when due, noncompliance with covenants, breaches of representations and warranties, and confirmation of any plan of reorganization which does not provide for a termination of the lenders’ commitments and repayment in full in cash of the Debtors’ obligations under the DIP Credit Facility. Interest rates on outstanding loans under the DIP Credit Facility are charged at per annum rates equal to LIBOR plus 2.75%, or Alternate Base Rate (greater of the prime rate and 0.50% over federal funds rate) plus 1.50%. The DIP Credit Facility matures on January 4, 2008.

As of March 27, 2006, the Company had made no borrowings and had approximately $44.1 million of availability under the DIP Credit Facility. Amounts outstanding under the DIP Credit Facility are expected to be refinanced upon emergence from bankruptcy through an exit credit facility from bankruptcy.

115¤8% Senior Secured Notes due 2009 (the “Amended 2004 Notes”)

On April 8, 2005, Pliant Corporation commenced a consent solicitation relating to its 2004 Notes seeking consents, among other things, to (i) eliminate the requirement to pay cash interest on the notes beginning in 2007 and, in lieu thereof, pay non-cash interest in the form of additional notes through maturity; (ii) increase the interest rate of the notes for which consents were received; (iii) increase the redemption prices of the notes for which consents were received; and (iv) eliminate certain restrictive covenants as they apply to notes for which consents were not received. On May 6, 2005, Pliant consummated this solicitation as consents to the proposed amendments were delivered with respect to $298.2 million aggregate principal amount at maturity of the 2004 Notes, all of which were accepted by Pliant. As a result, $250.6 million principal amount of the Amended 2004 Notes were outstanding as of May 6, 2005. On June 15, 2005, we issued an additional $3.1 million principal amount of the Amended 2004 Notes as payment in kind interest pursuant to the amended and restated indenture (the “Additional Notes”).

In addition, $7.8 million aggregate principal amount at maturity of 2004 Notes with respect to which consents were not delivered remain outstanding. Pliant, certain of its subsidiaries and the trustee also executed an amended and restated indenture governing the Amended 2004 Notes and the 2004 Notes with respect to which consents were not delivered. Pliant, certain of its subsidiaries and J.P. Morgan Securities Inc., the solicitation agent for the consent solicitation, executed a registration rights agreement with respect to the Amended 2004 Notes.

The transaction in which the terms of the 2004 Notes were amended to become the Amended 2004 Notes was not registered under the Securities Act of 1933, as amended, or any state securities laws. Pursuant to a registration rights agreement, Pliant consummated an exchange offer for the Amended 2004 Notes in which the company exchanged the $253.8 million aggregate principal amount of the original

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Amended 2004 Notes for essentially identical notes which are registered under the Securities Act of 1933, as amended. The interest rate of the Amended 2004 Notes increased from 111¤8% per annum to 115¤8% per annum. The Amended 2004 Notes no longer require payment of cash interest beginning in 2007. Instead, they require payment of non-cash interest in the form of additional notes through maturity. In addition, the amended and restated indenture eliminates substantially all the restrictive covenants contained in the indenture, as they relate to holders of the 2004 Notes with respect to which consents were not delivered.

On or after June 15, 2007, we may redeem some or all of the Amended 2004 Notes at the following redemption prices (expressed as percentages of the sum of the principal amount, plus accrued and unpaid interest); 111.625% if redeemed prior to June 15, 2007; 108.719% if redeemed prior to December 15, 2007; 105.813% if redeemed prior to June 15, 2008; 102.906% if redeemed prior to December 15, 2008; and 100.000% if redeemed on or before June 15, 2009.

The Amended 2004 Notes mature on June 15, 2009. Prior to June 15, 2007, we may redeem up to a maximum of 35% of the principal amount of the Amended 2004 Notes with the net cash proceeds of certain equity offerings by us at a redemption price equal to 111.625% of the sum of the principal amount plus accrued and unpaid interest, provided that after giving effect to such redemption (i) at least 65% of the principal amount of the notes remain outstanding and (ii) any such redemption by us is made within 120 days after such equity offering.

The Amended 2004 Notes are secured (subject to the priming security interest under the DIP Credit Facility) on a first-priority basis by a security interest in our real property, fixtures, equipment, intellectual property and other assets other than the Second Priority Collateral (the “First-Priority Collateral”) and on a second-priority basis by a security interest in substantially all our inventory, receivables and deposit accounts, 100% of the capital stock of, or other equity interests in existing and future domestic subsidiaries and foreign subsidiaries that are note guarantors, 65% of the capital stock of, or other equity interests in existing and future first-tier foreign subsidiaries, investment property and certain other assets of the Company and the note guarantors (the “Second-Priority Collateral”).

The bankruptcy filing constituted an Event of Default under the Amended 2004 Notes, but the holders of the notes and the trustee under the indenture are prohibited from exercising remedies thereunder without prior approval by the Bankruptcy Court. Our proposed plan of reorganization provides for the Amended 2004 Notes to be reinstated in accordance with their terms.

111¤8% Senior Secured Discount Notes due 2009 (the “2004 Notes”)

On February 17, 2004 we completed the sale of $306 million ($225.3 million of proceeds) principal at maturity of our 2004 Notes. The proceeds of the offering were used to repay and terminate the credit facilities that existed at December 31, 2003. The 2004 Notes are guaranteed by the same domestic subsidiaries that guarantee the 2000/2002 Notes and the 2003 Notes and certain of our foreign subsidiaries that guarantee indebtedness of the Company. The 2004 Notes were issued under an indenture dated February 17, 2004, among us, the subsidiary guarantors party thereto and Wilmington Trust Company, as trustee.

The 2004 Notes are senior secured obligations of the Company and are secured (subject to the priming security interest under the DIP Credit Facility) by first-priority security interests in the First-Priority Collateral, which consists of substantially all the real property, fixtures, equipment, intellectual property and all other assets, other than Second-Priority Collateral, of the Company and the subsidiary guarantors, together with the proceeds therefrom and improvements, alterations and repairs thereto, as well as any assets required to be added to the First-Priority Collateral pursuant to the terms of the indenture or related security documents. The 2004 Notes are secured (again, subject to the priming security interest under the DIP Credit Facility) by a second-priority interest in the Second-Priority Collateral, rank equally in right of payment with all existing and any future senior obligations of the

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Company and are effectively subordinated to all liabilities and preferred stock of each subsidiary guarantor. The 2004 Notes will mature on June 15, 2009. On May 6, 2005 we completed the consent solicitation relating to our 2004 Notes. Consents were delivered with respect to $298.2 million aggregate principal amount at maturity of the 2004 Notes. As a result, $7.8 million aggregate principal amount at maturity of 2004 Notes remain outstanding.

Unless we elect to pay cash interest as described below, and except under certain limited circumstances, the 2004 Notes will accrete from the date of issuance at the rate of 111¤8% until December 15, 2006, compounded semiannually on each June 15 and December 15 commencing June 15, 2004, to an aggregate principal amount of $1,000 per note ($7.8 million in the aggregate assuming no redemption or other repayments). Commencing on December 15, 2006, interest on the 2004 Notes will accrue at the rate of 111¤8% per annum and will be payable in cash semiannually on June 15 and December 15, commencing on June 15, 2007.

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

At any time prior to June 15, 2007, we may redeem up to 35% of the accreted value of the 2004 Notes with the net cash proceeds of certain equity offerings by us at a redemption price equal to 111.125% of the accreted value thereof plus accrued interest, so long as (i) at least 65% of the accreted value of the notes remains outstanding after such redemption and (ii) any such redemption by us is made within 120 days after such equity offering.

The bankruptcy filing constituted an Event of Default under the 2004 Notes, but the holders of the notes and the trustee under the indenture are prohibited from exercising remedies thereunder without prior approval by the Bankruptcy Court. Our proposed plan of reorganization provides  for the 2004 Notes to be reinstated in accordance with their terms.

111¤8% Senior Secured Notes due 2009 (the “2003 Notes”)

On May 30, 2003, we completed the sale of $250 million aggregate principal amount of our 2003 Notes. The 2003 Notes mature on September 1, 2009, and interest is payable on March 1 and September 1 of each year. The net proceeds from the sale of the 2003 Notes were used to repay borrowings under our then existing credit facilities in accordance with an amendment to our then existing credit facilities. The 2003 Notes rank equally with our existing and future senior debt and rank senior to our existing and future subordinated indebtedness, including the 13% Senior Subordinated Notes due 2010. The 2003 Notes are secured, on a second-priority lien basis (subject to the priming security interest under the DIP Credit Facility), by a substantial portion of our assets. Due to this second-priority status, the 2003 Notes effectively rank junior to our obligations secured by a first-priority lien on the collateral securing the 2003 Notes to the extent of the value of such collateral. These obligations secured by first-priority liens (subject to the primary security interest under the DIP Credit Facility) consist of the Amended and Restated Credit Agreement with respect to Second-Priority Collateral and the 2004 Notes and Amended 2004 Notes with respect to First-Priority Collateral. In addition, the 2003 Notes effectively rank junior to any of our obligations that are secured by a lien on assets that are not part of the collateral securing the 2003 Notes, to the extent of the value of such assets. The 2003 Notes are guaranteed by some of our subsidiaries.

Prior to June 1, 2007, we may, on one or more occasions, redeem up to a maximum of 35% of the original aggregate principal amount of the 2003 Notes with the net cash proceeds of one or more equity offerings by us at a redemption price equal to 111.125% of the principal amount thereof, plus accrued and unpaid interest. Otherwise, we may not redeem the 2003 Notes prior to June 1, 2007. On or after that date,

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we may redeem some or all of the 2003 Notes at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest: 105.563% if redeemed prior to June 1, 2008; 102.781% if redeemed prior to June 1, 2009; and 100% if redeemed on or after June 1, 2009.

The bankruptcy filing constituted an Event of Default under the 2003 Notes, but the holders of the notes and the trustee under the indenture are prohibited from exercising remedies thereunder without prior approval by the Bankruptcy Court.  Our proposed plan of reorganization provides for the 2003 Notes to be reinstated in accordance with their terms.

The Company did not make the $13.9 million interest payment that was due under the 2003 Notes on March 1, 2006. The Company intends to make such payment as part of its plan to reinstate the 2003 Notes upon emergence from bankruptcy.

13% Senior Subordinated Notes due 2010 (the “2000/2002 Notes”)

In 2000, we issued $220 million aggregate principal amount of 13% Senior Subordinated Notes due 2010. In 2002, we issued an additional $100 million of 13% Senior Subordinated Notes due 2010. The 2000/2002 Notes mature on June 1, 2010, and interest is payable on June 1 and December 1 of each year. The 2000/2002 Notes are subordinated to all of our existing and future senior debt, rank equally with any future senior subordinated debt, and rank senior to any future subordinated debt. The 2000/2002 Notes are guaranteed by some of our subsidiaries. The 2000/2002 Notes are unsecured. We may not redeem the 2000/2002 Notes prior to June 1, 2005. On or after that date, we may redeem the 2000/2002 Notes, in whole or in part, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest: 106.5% if redeemed prior to June 1, 2006; 104.333% if redeemed prior to June 1, 2007; 102.167% if redeemed prior to June 1, 2008; and 100% if redeemed on or after June 1, 2008.

The Indentures for the 2000/2002 Notes contain covenants that limit the amount and type of senior indebtedness that we can incur. On November 4, 2005, we amended each of the Indentures for the 2000/2002 Notes to increase the amount of senior indebtedness permitted to be incurred thereunder by $25 million. On November 17, 2005, we further amended each of the Indentures for the 2000/2002 Notes to modify the anti-layering covenant and related definition of “senior indebtedness” and to increase the amount of senior indebtedness permitted to be incurred under the indenture for the 2000/2002 Notes issued in 2000 by an additional $20 million. Those amendments allowed us to enter into the Amended and Restated Credit Agreement, which designates a portion of the indebtedness incurred thereunder as junior in right of payment to the balance of such indebtedness, and permit us to utilize the maximum availability thereunder.

The Company did not make the $20.8 million interest payments that were due under the 2000/2002 Notes on December 1, 2005. As a result of the failure to make those interest payments by December 31, 2005, an Event of Default occurred under the 2000/2002 Notes on December 31, 2005. The holders of the notes and the trustee under the indentures are prohibited from exercising remedies thereunder without prior approval by the Bankruptcy Court. Our proposed plan of reorganization provides for the 2000/2002 Notes to be exchanged for a combination of new debt, new preferred stock, new common stock and, in certain circumstances, cash.

Preferred stock

We are authorized to issue up to 200,000 shares of Preferred Stock. As of December 31, 2005, we have approximately $264.3 million of Series A Cumulative Exchangeable Redeemable Preferred Stock outstanding. The Series A preferred stock initially accrued dividends at a rate of 14% per annum; however, our board of directors has never declared or paid any dividends on the Series A preferred stock. Unpaid dividends accumulate and are added to the liquidation amount of the Series A preferred stock. Beginning October 1, 2005 the annual dividend rate increased to 16%. The Series A preferred stock is mandatorily

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redeemable on May 31, 2011. See Note 11 to the consolidated financial statements included elsewhere in this report. Our proposed plan of reorganization provides for the Series A preferred stock to be exchanged for a combination of new preferred stock and new common stock.

On September 24, 2004, we adopted a 2004 Restricted Stock Incentive Plan, pursuant to which we sold to our President and Chief Executive Officer and selected additional officers of the Company, 704 shares of a total of 720 shares of a newly-created, non-voting Series B Redeemable Preferred Stock for a cash purchase price of $162 per share. These shares were issued in private transactions with officers of the Company and therefore were exempt from the registration requirements of the Securities Act of 1933. On December 22, 2004, the remaining 16 authorized shares were issued to an officer for a cash purchase price of $162 per share. The Series B Preferred Stock will be automatically converted into common equity of the Company upon the consummation of an underwritten public offering registered under the Securities Act of shares of capital stock of the Company resulting in aggregate proceeds (net of underwriters discounts and commissions) to the Company of not less than $100 million. During 2005, 92 authorized shares of Series B Preferred were repurchased from officers for $162 per share.

Net cash used in operating activities from continuing operations

Net cash used in operating activities was $56.4 million for the year ended December 31, 2005, compared to net cash used in operations of $1.4 million for the same period in 2004, a difference of $55.0 million. This difference between years was primarily associated with the reduction in accounts payable between years of $44.8 million due to tightening of supplier credit terms. Compared to a $6.4 million source of funds in 2004, these contractions of credit accounted for $51.2 million of our total $55.0 million increase in funds used in operations. In addition, increased resin prices resulted in increased carrying values of inventories and trade receivables of $12.4 million and $17.9 million, respectively, offset in part by non-payment of $20.8 million in accrued interest that was due on December 1, 2005 under our 2000/2002 Notes.

Net cash used in investing activities from continuing operations

Net cash used in investing activities was $32.6 million for the year ended December 31, 2005, as compared to $17.6 million for the same period in 2004. Capital expenditures in 2005 of $37.8 million included $8.5 million for new production lines, while capital expenditures in 2004 of $24.1 million were principally for upgrading the operating efficiencies at our manufacturing facilities. In addition, during the third quarter of 2004, the Company sold substantially all the assets of our wholly-owned subsidiary, Pliant Solutions, receiving $6.5 million in cash proceeds.

Net cash provided by financing activities from continuing operations

Net cash provided by financing activities was $97.1 million for the year ended December 31, 2005, as compared to net cash provided by financing activities of $25.5 million for the year ended December 31, 2004.

Liquidity

As of December 31, 2005, we had approximately $127.0 million of working capital excluding current maturities of long term debt and debt in default and approximately $12.8 million in cash and cash equivalents. A portion of our cash and cash equivalents are held by our foreign subsidiaries. Repatriation tax rates may limit our ability to access cash and cash equivalents generated by our foreign operations for use in our U.S. operations, including to pay principal and interest on outstanding borrowings.

As of December 31, 2005 we had approximately $130.9 million of outstanding borrowings and approximately $0.3 million of remaining availability under the Amended and Restated Credit Agreement.

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Daily borrowings outstanding under the 2004 Credit Facility and Amended and Restated Credit Agreement averaged $53.8 million during 2005. Our outstanding borrowings under our revolving credit facilities fluctuate significantly as a result of the timing of payments for raw materials, capital and interest, as well as the timing of customer collections. The average interest rate on borrowings outstanding under the 2004 Credit Facility and the Amended and Restated Credit Agreement during 2005 was 8.01%.

Our total capital expenditures were approximately $24 million in 2004, $38 million in 2005 and are expected to be approximately $47 million in 2006. These expenditures are focused on projects to lower operating costs, add capacity for high value products, expand research and development programs, and bring new innovative products to market.

A number of factors had a significant negative effect on the Company’s liquidity position during the last six months of 2005. As noted above, increases in raw material, freight, and energy costs that the Company could not pass on immediately to customers negatively impacted our results of operations and reduced the cash provided by operations as compared with prior periods. The negative impact of these factors on the Company during the last half of 2005 was exacerbated by the continued high prices of oil (which directly impact the cost of the major raw material input to our products) and the impact of Hurricanes Katrina and Rita on the cost and supply of our raw materials and on the availability and cost of freight for our products.

These factors also negatively impacted many of our competitors and caused concerns for the suppliers of raw materials to our industry, and they responded by tightening credit terms and conditions to many of their customers. Due to the combination of these conditions and our highly-leveraged financial position, many of our key suppliers reduced or eliminated credit terms for the Company’s raw material purchases, in some cases to a greater extent than for the industry as a whole. The amount of cash that the Company was required to invest in its working capital increased significantly due to both the higher cost of the raw materials that are a major component of our products and these reduced credit terms.

The credit rating assigned to the Company’s debt was downgraded by Standard & Poors and Moody’s during the early part of September, 2005. This downgrade was precipitated in part by the negative industry factors noted above and the Company’s highly-leveraged position. This downgrade in part contributed to the continued tightening of credit terms from the Company’s suppliers. The Company’s credit rating was further downgraded in late November following our disclosure that we did not expect to make the December interest payment due on the 2000/2002 Notes. That downgrade contributed to even further tightening of trade credit terms.

The bankruptcy filing and the entry into the DIP Credit Facility have resulted in a significant amount of potential additional liquidity becoming available to the Company. Since the bankruptcy filing, the Company has been able to meet its operational cash needs from cash flow from operations and has not yet borrowed any funds under the DIP Credit Facility. The Company currently believes that cash flow from operations and amounts available under the DIP Credit Facility will be adequate to address our foreseeable liquidity needs in the normal course of business prior to emergence from bankruptcy.

In order to successfully emerge from bankruptcy, the Company will be required to restore trade credit terms to more normal levels and to obtain an exit credit facility to refinance the outstanding indebtedness under the Amended and Restated Credit Facility and DIP Credit Facility (if any) and to finance the expected cash needs of future operations. Although the terms of post-emergence trade credit and exit financing are not known and are impossible to predict with certainty, the Company believes that it will be able to obtain trade credit terms and exit financing that will be sufficient to allow it to meet its expected cash needs following emergence from bankruptcy.

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The following table sets forth our total contractual cash obligations as of December 31, 2005 (in thousands):

	Payments Due by Period
Contractual Cash Obligations	Total		Less than 1 year		1-3 years		3-5 years			After 5 years
Long-term debt (including capital lease obligations)	$	981,695	$	973,244	$	2,117		$	2,542	$	3,792
Operating leases	32,232		8,929		10,809			5,806		6,688
Redeemable preferred stock	264,327		—		—			—		264,327
Pension obligations	5,420		5,420		—			—		—
Raw material and other purchase obligations	70,118		70,118		—			—		—
Total contractual cash obligations	$	1,353,792	$	1,057,711	$	12,926		$	8,348	$	274,807

Cash used in discontinued operations

Net cash used in discontinued operations was $0.2 million for the year ended December 31, 2005 compared to net cash used of $4.8 million for the year ended December 31, 2004.

Off-Balance Sheet Arrangements

Not Applicable.

Other developments

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

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Our revolving credit facility is at a variable rate of interest. An increase of 1% in interest rates would result in an additional $1.3 million of annual interest expense based on our revolving credit facility balance of $130.9 million as of December 31, 2005.

Our raw material costs are comprised primarily of resins. Our resin costs comprised approximately 65% of our total manufacturing costs in 2005. Market risk arises from changes in resin costs. Although the average selling prices of our products generally increase or decrease as the cost of resins increases or decreases, the impact of a change in resin prices is more immediately reflected in our raw material costs than in our selling prices. From time to time we enter into commodity collar agreements to manage resin market risks. At December 31, 2005, we did not have any commodity collar agreements outstanding. Prices for resin have risen dramatically during 2005 and are expected to continue to rise. Average industry prices for resin were approximately 25-30% higher at the end of 2005 than at the end of 2004.

Fluctuations in exchange rates may also adversely affect our financial results. The functional currencies for our foreign subsidiaries are the local currency. As a result, certain of our assets and

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liabilities, including certain bank accounts, accounts receivable and accounts payable, exist in non U.S. dollar-denominated currencies, which are sensitive to foreign currency exchange rate fluctuations.

We enter into certain transactions denominated in foreign currencies but, because of the relatively small size of each individual currency exposure, we have employed hedging techniques designed to mitigate foreign currency exposures. Gains and losses from these transactions as of December 31, 2004 and 2005, have been immaterial and are reflected in the results of operations.

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

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

None.

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Controls

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

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PART III

ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information about our executive officers and directors is presented below. Pursuant to the stockholders’ agreement among us, the holders of our common stock and the holders of warrants to purchase our common stock, our board of directors currently consists of seven members, five of whom were designated by our institutional common stockholders and warrant holders, one of whom was designated by The Christena Karen H. Durham Trust and one of whom is our Chief Executive Officer. Two of these seven members are independent directors. In addition to these seven members, the trust has the right to designate a second director and our board has a right to appoint a member of senior management to the board. These two seats on our board of directors are currently vacant.

Name	Age			Position
Harold C. Bevis		46	President and Chief Executive Officer and Director
John D. Bowlin		55	Director
Edward A. Lapekas		62	Director and Non-Executive Chairman
Albert (Pat) MacMillan		62	Director
Stephen McKenna		37	Director
Jeffrey C. Walker		50	Director
Timothy J. Walsh		42	Director
R. David Corey		57	Executive Vice President and Chief Operating Officer
Joseph J. Kwederis		59	Senior Vice President and Chief Financial Officer
Greg E. Gard		45	Senior Vice President, Technology & Innovation
Robert J. Maltarich		54	Senior Vice President and General Manager—Industrial Film
Kenneth J. Swanson		39	Senior Vice President, President Specialty Products Group

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

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

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

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

Stephen McKenna became one of our directors on June 23, 2005. Mr. McKenna has been a Principal of J.P. Morgan Partners, LLC (formerly, Chase Capital Partners) since 2000 and prior to that was an associate of that entity. J.P. Morgan Partners, LLC is a global partnership is a global partnership and has been the Company’s principal stockholder since 2000. Mr. McKenna has extensive experience managing J.P. Morgan Partners, LLC’s portfolio companies and is also on the Board of Directors of National Waterworks, Inc. Mr. McKenna holds a BA from Dartmouth College and an MBA from the GSB at the University of Chicago. Mr. McKenna is one of the persons designated to serve on the board by our institutional common stockholders and warrant holders.

Jeffrey C. Walker became one of our directors on July 1, 2004. Mr. Walker is Managing Partner of J.P. Morgan Partners, LLC (formerly, Chase Capital Partners) and Vice Chairman of JPMorgan Chase. J.P. Morgan Partners, LLC is a global partnership and has been the Company’s principal stockholder since 2000. Before co-founding JPMorgan Partners in 1984, Mr. Walker worked in the Investment Banking and Finance Divisions of Chemical Bank and the Audit and Consulting Divisions of Arthur Young & Co. He is also a director of numerous private and public corporations (1-800-Flowers, Metroplex, Doane Pet Care, House of Blues, Metokote and Axis Insurance). Mr. Walker is a Certified Public Accountant and a Certified Management Accountant, and holds a BS degree from the University of Virginia and an MBA from the Harvard Business School. Mr. Walker is one of the designees to the board by our institutional common stockholders and warrant holders.

Timothy J. Walsh became one of our directors on May 31, 2000. He served as Non-Executive Chairman from June 2002 until October 2003. Mr. Walsh is an executive officer of JPMP Capital Corp., which is the general partner of JPMP Master Fund Manager, L.P., which is the general partner of J.P. Morgan Partners (BHCA), L.P., our principal stockholder. Since 1999, Mr. Walsh has been a Partner of J.P. Morgan Partners, LLC (formerly, Chase Capital Partners). JP Morgan Partners’ primary limited partner is J.P. Morgan Chase & Co. (NYSE: JPM), one of the largest financial institutions in the United States. From 1993 to 1999, Mr. Walsh held various positions with J.P. Morgan Partners in Europe and North America. Prior to 1993, he was a Vice President of J.P. Morgan Chase & Co. (formerly, The Chase Manhattan Corporation). Mr. Walsh is also a director of Better Minerals & Aggregates Company,

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Klockner Pentaplast S.A. and Metokote Corporation. Mr. Walsh received a B.S. degree from Trinity College and an M.B.A. degree from the University of Chicago. Mr. Walsh is one of the designees to the board by our institutional common stockholders and warrant holders.

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

Joseph J. Kwederis was named Chief Financial Officer on August 31, 2005. He joined Pliant Corporation as Senior Vice President, Finance in February of 2005. Prior to joining Pliant Corporation, Mr. Kwederis was Senior Vice President/Chief Financial Officer of Dura-line Corporation from 1999–2004, and Vice President of Finance for International Wire Group from 1996–1999. From 1974 until 1996 he held positions of increasing responsibility in Accounting and Finance at General Cable Corporation. Mr. Kwederis holds a BS in Accounting from Rutgers University and an MBA from the University of Connecticut.

Greg E.Gard joined Pliant Corporation in 1989 and has held numerous technical positions supporting the various market segments within Pliant Corporation. Today, he serves as Senior Vice President of Technology and Innovation. His responsibilities in this regard include Product Development and Technical Service for the Corporation, with particular focus on shortening product development cycles, improving speed to market, and directing a team of packaging professionals in the development of packages that protect and preserve while improving functionality and appearance. Before joining Pliant, Mr. Gard held engineering and management positions with Cryovac Sealed Air Corporation. Prior to this he worked for several years as an engineer with Dresser Atlas in oil and gas exploration. He holds a B.S. degree in electrical and computer engineering from the University of Wisconsin Madison. Mr. Gard is actively involved with Clemson University’s Packaging Science program, one of only four academic institutions in the United States that offers a four-year program leading to a B.S. degree in Packaging Science. Currently, he serves on the Packaging Advisory Board at Clemson.

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

Kenneth J. Swanson is currently President, Specialty Products. Prior to this position, Mr. Swanson was the Senior Vice President and General Manager of the Specialty Films Division at Pliant. Since 1992, Mr. Swanson has had various leadership positions with CT Film, Huntsman Packaging, and Pliant. Mr. Swanson has over 18 years experience in the plastics industry and supervises teams domestically and internationally. Prior to 1992, Mr. Swanson held multiple sales and marketing management positions in the

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injection molding segment of the plastics industry. Mr. Swanson holds a B.S. degree in Business Management from the University of Redlands.

Code of Ethics for Officers

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

Audit Committee

Our Board of Directors has an audit committee. The audit committee maintains oversight responsibilities with respect to our accounting, auditing, financial reporting and internal control processes generally. The members of the audit committee are Timothy J. Walsh and Edward A. Lapekas. Mr. Lapekas is considered independent within the meaning of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended. Mr. Walsh may not be deemed independent in light of the numerous transactions between the Company and J.P. Morgan Partners and its affiliates (see Item 13, “Certain Relationships and Related Transactions”). We are currently seeking a replacement Board member qualified to fill the financial expert position, but have not yet identified such a member.

Compensation Committee

Our Board of Directors has a compensation committee. The compensation committee maintains oversight responsibilities with respect to the compensation of our officers and directors. The members of the compensation committee are John D. Bowlin and Timothy J. Walsh.

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ITEM 11.EXECUTIVE COMPENSATION

The following summary compensation table sets forth information about compensation earned in the fiscal years ended December 31, 2005, 2004 and 2003 by each person serving as Chief Executive Officer during 2005 and the four other most highly compensated persons who were serving as executive officers of the Company (other than the Chief Executive Officer) as of the end of the last fiscal year and two other individuals who would have been in that group of the most highly compensated persons but were not serving as an executive officer as of the end of the last fiscal year (collectively, the “Named Executive Officers”).

Summary compensation table

					Long-term compensation
					Restricted Stock Awards
		Annual compensation(1)			Total Shares
Name and principal position	Year	Salary ($)	Bonus ($)(2)		Granted/Vested (3)		All other Compensation(4)
Harold C. Bevis(5)	2005	675,301	424,700			480/120		6,300
President and Chief Executive	2004	608,333	928,974	(6)		480/30		1,083
Officer	2003	78,974	—			—		—
R. David Corey(7)	2005	377,260	128,625			48/12		161,629	(8)
Executive Vice President and	2004	333,333	224,880	(9)		48/3		65,101
Chief Operating Officer	2003	33,175	—			—		—
Joseph J. Kwederis(10)	2005	187,276	63,000			—		46,372	(11)
Senior Vice President and	2004	—	—			—		—
Chief Financial Officer	2003	—	—			—		—
Robert J. Maltarich	2005	205,250	57,960			16/4		6,300
Senior Vice President and	2004	198,667	73,600			16/1		3,973
General Manager-Industrial Film	2003	188,000	20,595			—		4,000
Kenneth J. Swanson	2005	230,063	45,700			40/10		6,300
Senior Vice President, President	2004	219,500	150,000			40/2.5		4,000
Specialty Products	2003	168,500	34,518			—		4,000
Brian E. Johnson(12)	2005	300,000	—			—		—
Former Executive Vice President	2004	296,633	46,900			—		4,000
and Chief Financial Officer	2003	267,799	47,860			—		4,000
James L. Kaboski(13)	2005	184,102	111,000	(14)		—		44,563	(15)
Vice President of Strategy and	2004	—	—			—		—
Business Development	2003	—	—			—		—

(1)  Perquisites and other personal benefits, securities or property, in the aggregate, are less than either $50,000 or 10% of the total annual salary and bonus reported for the applicable Named Executive Officer.

(2)  All amounts for 2005 include amounts paid in 2006 pursuant to the 2005 Management Incentive Compensation Plan. All amounts for 2004 include discretionary bonuses paid in 2004 and amounts paid in 2005 pursuant to the 2004 Management Incentive Compensation Plan.

(3)  Pursuant to the 2004 Restricted Stock Incentive Plan, certain executive officers of the Company were permitted to purchase shares of Series B Redeemable Preferred Stock in September of 2004 for $162.00 per share, which we determined to be the fair market value of those shares pursuant to an independent appraisal. One 48th of those shares vest each month, subject to the holder being employed by the Company as of such dates.

(4)  All amounts reflect contributions for employer’s 401(k) contributions, except as indicated.

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(5)  Mr. Bevis was appointed President and Chief Executive Officer in October 2003.

(6)  Includes bonus of $850,000 paid in 2005 pursuant to Mr. Bevis’s Employment Agreement and an additional discretionary bonus of $78,974 paid in 2004.

(7)  Mr. Corey was appointed Executive Vice President of Global Operations in November 2003. He was promoted to Chief Operating Officer in March 2004.

(8)  Includes moving expenses of $155,329 paid in 2005.

(9)  Includes bonus of $200,000 paid in 2005 pursuant to the 2004 Management Incentive Compensation Plan and an additional discretionary bonus of $24,880 paid in 2004.

(10) Mr. Kwederis was appointed Senior Vice President, Finance in February 2005. He was promoted to Chief Financial Officer in August of 2005.

(11) Includes $40,384 of moving expenses paid in 2005.

(12) Mr. Johnson resigned as Executive Vice President and Chief Financial Officer effective September 16, 2004, but remained a non-executive officer employee of the Company until December 31, 2004. Pursuant to a Release Agreement with Mr. Johnson, as described below, during 2005 the Company made salary continuation payments to Mr. Johnson until December 31, 2005.

(13) Mr. Kaboski was appointed Vice President of Strategy and Business Development in February, 2005.

(14) Includes $55,000 sign-on bonus.

(15) Includes moving expenses of $37,657 paid in 2005.

Management Incentive Compensation Plans

Effective January 1, 2004, our Board of Directors adopted the 2004 Management Incentive Compensation Plan. The participants in the 2004 Management Incentive Compensation Plan were paid an aggregate bonus of $4,075,780 in 2005 relating to extent of achievement of certain EBITDA and operating free cash flow goals for 2004. All Named Executive Officers participated in this plan and received bonuses for their 2004 performance, except the Chief Executive Officer, in the amounts indicated in the foregoing table.

Effective January 1, 2005, our Board of Directors adopted the 2005 Management Incentive Compensation Plan. The participants were paid an aggregate bonus of $2,920,901 in 2006 relating to extent of achievement of certain EBITDA and operating free cash flow goals for 2005. All Named Executive Officers participated in this plan and received bonuses for their 2005 performance, except the Chief Executive Officer and Brian E. Johnson in the amounts indicated in the foregoing table.

The Chief Executive Officer did not participate in the 2004 or 2005 Management Incentive Compensation Plans, but has a separate annual bonus arrangement in his employment agreement. The Company’s practice has been to determine the Chief Executive Officer’s bonus in accordance with the methodology and factors used in the applicable Management Incentive Compensation Plan for a given year.

Stock Options and Restricted Stock

Pursuant to the recapitalization, options covering a total of 8,902 common shares were rolled over from a previous plan. In addition, we adopted our 2000 Stock Incentive Plan. The 2000 plan became effective as of the consummation of the recapitalization and authorizes grants of nonqualified stock options or restricted stock to employees, officers, directors, managers or advisors of Pliant or any of its subsidiaries. As amended, a total of 65,600 shares are authorized for issuance under the 2000 plan. As of December 31, 2003, we had outstanding grants of restricted stock covering 8,041 shares of common stock and options to acquire 45,012 shares of common stock under the 2000 plan. Shares of restricted stock that are forfeited, and unissued shares reserved for issuance pursuant to options that terminate, expire or are

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cancelled without having been fully exercised, become available to be issued pursuant to new grants under the 2000 Plan.

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

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

During the year ended December 31, 2005, no options to purchase common stock were exercised and 4,282options were cancelled. No stock options were granted to the Named Executive Officers during 2005.

The following table provides information as to the options held by each of the Named Executive Officers at the end of 2005. There is no established trading market for our common stock and, therefore, the aggregate market value of our shares cannot be determined by reference to recent sales or bid and asked prices. None of the Named Executive Officers exercised any options during the last fiscal year.

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

Name	Shares acquired on exercise		Value realized		Number of securities underlying unexercised options at fy-end (#) exercisable/unexercisable		Value of unexercised in-the-money options at fy-end ($) exercisable/unexercisable
Robert J. Maltarich		—		—		266/1,234		0/0
Kenneth J. Swanson		—		—		137/1,363		0/0
Brian E. Johnson		—		—		0/0		0/0

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

The rights of the holders of the Series B Redeemable Preferred Stock would be significantly modified pursuant to our proposed plan of reorganization, if confirmed as described in Item 1 above.

Long Term Incentive Plan

Effective January 1, 2004, we adopted the 2004 MIP Long Term Incentive Plan to provide performance based incentives to eligible management associates for their contributions to the Company

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over a period of years. Pursuant to this plan, participants in the Long Term Incentive Plan are eligible to receive a Long Term Incentive Plan award equal to the aggregate of one half of any award granted to any participants under each applicable management incentive plan during the four-year period beginning January 1, 2004 through December 31, 2007. A participant is eligible to receive such an award only if he or she (i) is actively employed by the Company or an affiliate during that four-year period and on the date of the payment of the award (targeted for March 15, 2008), (ii) has performed his or her duties to the satisfaction of the Board, and (iii) meets certain other criteria requiring not acting in a way that in the Board’s judgment is inimical to the best interests of the Company or any affiliate, complying with Company policies, not breaching the Long Term Incentive Plan or certain other agreements benefiting the Company. Mr. Bevis does not participate in the 2004 MIP Long Term Incentive Plan. Our Board of Directors extended the 2004 MIP Long Term Incentive Plan for 2005. Participants in the 2004 MIP Long Term Incentive Plan received a credit of half of the 2005 Management Incentive Compensation Plan bonus amount to the accumulated amount of their Long term Incentive Plan Award that they can earn under the 2004 MIP Long Term Incentive Plan, which can be become payable on December 31, 2007 under the terms of that plan. The following Named Executive Officers participate in this plan and accrued the following award amounts under the plan as a result of bonuses paid with respect to performance during 2004 and 2005 fiscal years, respectively, under the 2004 and 2005 Management Incentive Compensation Plans:

Long-Term Incentive Plans

Name	Award Amount Accrued in 2004		Award Amount Accrued in 2005		End of Performance Period
R. David Corey		100,000		64,312	December 31, 2007
James L. Kaboski		0		28,000	December 31, 2007
Joseph J. Kwederis		0		31,500	December 31, 2007
Robert J. Maltarich		36,800		28,980	December 31, 2007
Kenneth J. Swanson		75,000		22,850	December 31, 2007
Brian E. Johnson		0		0	—

Pension plans

Effective July 1, 2004, we adopted the Fourth Amendment to the Pliant Corporation Defined Benefit Pension Plan. The purpose of this amendment was to “freeze” the benefits payable under such plan as of June 30, 2004, for all participants in the plan who are not subject to the collective bargaining agreement between the Company, South Deerfield, Massachusetts and the United Electrical Radio and Machine Workers of America and Local 274, such that no further benefits will accrue to current or future employees under that plan. Persons employed by the Company as of December 31, 2002, who did not have 5 years of vesting service as of June 30, 2004 (the minimum service period required to qualify for benefits under the Plan) will continue to accrue vesting service toward this minimum so long as they continue to be employed by the Company after June 30, 2004. For all employees that qualify for benefits under the Plan, as amended, their average final compensation and years of service credit (except as noted above) will be fixed as of June 30, 2004. Mr. Swanson and Mr. Maltarich were the only Named Executive officers that met the 5 year service requirement at June 30, 2004. As of June 30, 2004, the accrued pension plan benefit for (i) Mr. Swanson was $1,878 per month payable beginning November 1, 2031 or $600 per month payable beginning January 1, 2020 and (ii) for Mr. Maltarich was $2,861 per month payable beginning May 1, 2016 or $1,346 per month payable beginning January 1, 2005. None of the other Named Executive Officers are eligible to participate in the Pliant Corporation Defined Benefit Pension Plan.

Employment agreements

Effective January 1, 2004, the Company entered into a four-year employment agreement with Mr. Bevis, our President and Chief Executive Officer. The employment agreement provides for the payment of a base salary of $650,000. For 2004 Mr. Bevis was guaranteed an annual minimum target bonus of $650,000 if he was employed during the calendar year, payable no later than ten business days following

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the Company’s receipt from its public accountants of the audited consolidated financial statements of the Company for such calendar year. The employment agreement sets forth applicable bonus calculation percentages for calendar years after 2004. As noted, the Company’s practice has been to determine Mr. Bevis’s bonus in accordance with the methodology and factors used in the applicable annual management incentive plan. The employment agreement also provides that Mr. Bevis will participate in all bonus and incentive plans or arrangements which may be provided by the Company from time to time to its senior executives, with award opportunities commensurate with this position, duties and responsibilities. The employment agreement expressly excludes from these benefits the Management Incentive Plan, the Pliant 2000 Stock Incentive Plan, the Pliant 2002 Stock Incentive Plan and any other equity based incentive or compensation plans. The employment agreement expressly includes the Pliant 2004 Restricted Stock Incentive Plan, at least four weeks paid vacation per year, and includes non-disclosure of confidential information provisions and a non-compete provision for one year following termination of employment with us (unless termination was due to the term expiring). Mr. Bevis also is eligible for other employee and fringe benefits made generally available to senior executives. Mr. Bevis has agreed in his employment agreement that any inventions, improvements, technical or software developments, trademarks, patents and similar information relating to us or our business, products or services conceived, developed or made by him while employed by us belong to us. If Mr. Bevis’ employment is terminated without cause or he resigns for good reason, he will be entitled to receive severance payments and continue to participate in our medical and dental plans for two years. Mr. Bevis also is eligible for certain severance amounts if his employment is terminated due to his death or disability. Notwithstanding the foregoing, the Company is prohibited by Section 503(c)(2) of the Bankruptcy Code from paying any severance amounts to Mr. Bevis under his employment agreement or otherwise, regardless of the reason for his termination, during the pendency of the Company’s Chapter 11 proceedings. Once the Company emerges from Chapter 11 proceedings, the applicable severance provisions in his employment agreement will become effective once again, provided that he is employed at that time.

Effective June 10, 2005, the Company entered into a four-year employment agreement with Mr. Corey, our Executive Vice President and Chief Operating Officer. The employment agreement provides for the payment of a base salary of $367,500. The employment agreement also provides that Mr. Corey will participate in all bonus and incentive plans or arrangements which may be provided by the Company from time to time to its senior executives, with award opportunities commensurate with his position, duties and responsibilities. The employment agreement expressly excludes from these benefits the Pliant 2000 Stock Incentive Plan, the Pliant 2002 Stock Incentive Plan and any other equity based incentive or compensation plans. The employment agreement expressly includes the Pliant 2004 Restricted Stock Incentive Plan, at least four weeks paid vacation per year, and includes non-disclosure of confidential information provisions and a non-compete provision for one year following termination of employment with us (unless termination was due to the term expiring). Mr. Corey also is eligible for other employee and fringe benefits made generally available to senior executives. Mr. Corey has agreed in his employment agreement that any inventions, improvements, technical or software developments, trademarks, patents and similar information relating to us or our business, products or services conceived, developed or made by him while employed by us belong to us. If Mr. Corey’s employment is terminated without cause or he resigns for good reason, he will be entitled to receive severance payments and continue to participate in our medical and dental plans for two years, among other benefits. Mr. Corey also is eligible for certain severance amounts if his employment is terminated due to his death or disability. Notwithstanding the foregoing, the Company is prohibited by Section 503(c)(2) of the Bankruptcy Code from paying any severance amounts to Mr. Corey under his employment agreement or otherwise, regardless of the reason for his termination, during the pendency of the Company’s Chapter 11 proceedings. Once the Company emerges from Chapter 11 proceedings, the applicable severance provisions in his employment agreement will become effective once again, provided that he is employed at that time.

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The Company provided Joseph J. Kwederis, our Chief Financial Officer, with a letter dated February 2, 2005 that outlines certain terms and conditions of his employment. The letter provides for the payment of a base annual salary of $200,000 and for three weeks annual vacation. It also provides that Mr. Kwederis will participate in the annual Management Incentive Plan and the 2004 Long Term Incentive Plan, as well as the salaried employees’ health and welfare benefit plans. The letter states that if Mr. Kwederis’ employment is involuntarily terminated without cause (as determined by our Board), he will be eligible for one year of severance pay in a lump sum and outplacement support. By letter dated August 26, 2005, the Company confirmed Mr. Kwederis’ promotion to Chief Financial Officer, increased his base annual salary to $225,000, and confirmed his participation in the annual Management Incentive Plan and the 2004 Long Term Incentive Plan. Notwithstanding the foregoing, the Company is prohibited by Section 503(c)(2) of the Bankruptcy Code from paying any severance amounts to Mr. Kwederis under his employment agreement or otherwise, regardless of the reason for his termination, during the pendency of the Company’s Chapter 11 proceedings. Once the Company emerges from Chapter 11 proceedings, the applicable severance provisions in his employment agreement will become effective once again, provided that he is employed at that time.

On March 18, 2005, we entered into a Severance and Release Agreement with Lori Roberts, terminating her employment as our Senior Vice President, Human Resources, effective April 1, 2005. Pursuant to the Severance and Release Agreement, Ms. Roberts received a lump sum severance payment in the amount of $404,437, which included the Company’s payment for 28 shares of the Company’s Series B Preferred Stock at $162 per share held by Ms. Roberts pursuant to the Company’s right to repurchase such shares pursuant to the 2004 Restricted Stock Incentive Plan. After such repurchase, Ms. Roberts will retain four shares of the Series B Preferred Stock and will be entitled to continue participation in the Company’s medical, dental and basic life insurance plans through March 31, 2006. Beginning April 1, 2006, Ms. Roberts may elect extended continuation coverage under such plans for a period of 18 months. Ms. Roberts is also entitled to receive outplacement services for a period of 12 months, which shall not exceed $20,000, as well as reimbursement by the Company of Ms. Robert’s legal fees incurred in connection with the negotiation of the Severance and Release Agreement, which shall not to exceed $7,500. Ms. Roberts has agreed not to compete with the Company for one year.

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

We have not entered into employment agreements with, Mr. Kaboski, Mr. Maltarich or Mr. Swanson.

Compensation of directors

Each director who is not an employee of ours or a partner or senior advisor of J.P. Morgan Partners, LLC is entitled to receive director’s fees. Currently there are three directors who receive director fees: Messrs. Bowlin, Lapekas and MacMillan. In 2005, Messrs. Bowlin and MacMillan received $22,500 in director’s fees. Mr. Lapekas received a fee of $100,000 in 2005 for his service as Non-Executive Chairman and a fee of $30,000 in 2005 for serving on our audit committee.

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

Security Ownership of Certain Beneficial Owners and Management

The following table contains information with respect to the ownership of our common stock as of March 30, 2006 by:

·each person known to own beneficially more than 5% of our common stock,

·each of our directors,

·each of our Named Executive Officers, and

·all of our executive officers and directors as a group.

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

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

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

	Number of shares of common stock beneficially owned		Percent of class
JPMP Capital Corp.(1)(2)		405,169		61.44	%
Southwest Industrial Films, LLC/Southwest Industrial Films II, LLC(1)(2)		405,169		61.44	%
The Christena Karen H. Durham Trust(3)		158,917		27.8	%
Perry Acquisition Partners-2, L.P.(4)		34,527		6.0	%
Harold C. Bevis		0		0.0	%
R. David Corey		0		0.0	%
Joseph J. Kwederis		0		0.0	%
Timothy J. Walsh(2)		0		0.0	%
Edward A. Lapekas		207		*
Albert (Pat) MacMillan		0		0.0	%
Brian E. Johnson (5)		18.27		*
Jeffery C. Walker (2)		0		0.0	%
John D. Bowlin		0		0.0	%
Stephen McKenna (2)		0		0.0	%
Robert J. Maltarich (6)		112.48		*
Kenneth J. Swanson		45		*
James L. Kaboski		0		0.0	%
All directors and executive officers as a group (12 persons)		382.75		*

*Less than 1%.

(1)Includes (i) 317,306 shares of common stock held by Southwest Industrial Films, LLC, which is controlled by J.P. Morgan Partners (BHCA), L.P., as managing member, (ii) 43,047 shares of common stock which are issuable upon exercise of warrants to purchase common stock issued in connection with our Series A preferred stock held by Southwest Industrial Films II, LLC, which is controlled by J.P. Morgan (BHCA), L.P., as managing member, and (iii) 44,816 shares of common stock which are issuable upon exercise of warrants to purchase common stock issued in connection with our preferred stock held by Southwest Industrial Films, LLC. JPMP Capital Corp. is the indirect general partner of J.P. Morgan Partners (BHCA), L.P., and a wholly-owned subsidiary of J.P. Morgan Chase & Co., a publicly traded company. JPMP Capital Corp. and each of the foregoing entities is an affiliate of J.P. Morgan Partners, LLC and has an address c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas, 39th Floor, New York, New York 10020.

(2)Mr. Walsh, Mr. Walker and Mr. McKenna may be deemed the beneficial owner of the shares of common stock and warrants owned by each of Southwest Industrial Films, LLC and Southwest Industrial Films II, LLC, respectively, due to his positions with JPMP Capital Corp. and J.P. Morgan Partners, LLC, which are affiliates of J.P. Morgan Partners (BHCA), L.P., which in turn controls each of Southwest Industrial Films, LLC and Southwest Industrial Films II, LLC, as managing member.

(3)The address of The Christena Karen H. Durham Trust is P.O. Box 17600, Salt Lake City, Utah 84117. The trustee of the Trust is Richard P. Durham. The Trust was established for the benefit of Christena H. Durham and her children.

(4)Includes 231 shares of common stock held by Perry Principals Holdings, LLC and 4,060 shares of common stock which are issuable upon exercise of warrants to purchase common stock issued in connection with our preferred stock held by Perry Acquisition Partners-3, L.P. Richard C. Perry is the

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managing member of Perry Principals Holdings, LLC and the managing member of Perry Investors-2, LLC, which is the general partner of Perry Acquisition Partners-2, L.P. Richard C. Perry is also the president of Perry Corp., which is the indirect general partner of Perry Acquisition Partners-3, L.P. As such, Richard C. Perry may be deemed to have voting and investment power with respect to the shares of common stock and warrants owned by Perry Acquisition Partners-2, L.P., Perry Acquisition Partners-3, L.P. and Perry Principals Holdings, LLC. Richard C. Perry disclaims beneficial ownership of such shares and warrants, except to the extent of his pecuniary interest therein. Each of the foregoing entities is an affiliate of Perry Acquisition Partners L.P. and has an address c/o Perry Acquisition Partners L.P., 599 Lexington Avenue, New York, New York 10022.

(5)Includes 18.27 shares of Common Stock issuable upon exercise of warrants.

(6)Includes 80 shares of issued Common Stock and 32.48 shares of Common Stock issuable upon exercise of warrants.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information relating to our equity compensation plans as of December 31, 2005. Our equity securities are closely held and are not publicly traded. In addition, as required by our stockholders’ agreement, a majority of our board of directors has been appointed by our institutional common stockholders and warrant holders, including our controlling shareholder. Therefore, our board of directors approves our equity compensation plans without obtaining approval directly from our shareholders.

Equity Compensation Plan Information

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

(1)Pursuant to the 2004 Restricted Stock Incentive Plan, during 2004 the Company issued 720 shares of Series B Redeemable Preferred Stock to the officers at a purchase price of $162 per share, which was deemed to be the fair market value of those shares based on an independent appraisal received by the Board. During 2005, the Company repurchased 92 shares of Series B Redeemable Preferred Stock from officers of the Company at a purchase price of $162 per share. At December 31, 2005, 628 shares of Series B Redeemable Preferred Stock were outstanding.

(2)Includes 8,041 shares of restricted stock issued under the 2000 Stock Incentive Plan.

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

The rights of the holders of our common stock and options and warrants or other rights relating thereto would be significantly modified pursuant to our proposed plan of reorganization, if confirmed as described in Item 1 above.

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ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management

Agreements with Executive Officers and Directors

Effective January 1, 2004, we entered into a four-year employment agreement with Harold C. Bevis, our President and Chief Executive Officer. On December 31, 2004, we entered into a Release Agreement with Brian E. Johnson (see Item 11—Executive Compensation). On January 26, 2005, we entered into a Letter Agreement with James Ide, terminating his employment as our Executive Vice President and Chief Financial Officer, effective February 28, 2005. Pursuant to such Letter Agreement, Mr. Ide received a $70,000 bonus for 2004 which was paid in 2005. Effective June 10, 2005, the Company entered into a four-year employment agreement with Mr. Corey, our Executive Vice President and Chief Operating Officer.

On March 18, 2005, we entered into a Severance and Release Agreement with Lori Roberts, terminating her employment as our Senior Vice President, Human Resources, effective April 1, 2005. Pursuant to the Severance and Release Agreement, Ms. Roberts received a lump sum severance payment in the amount of $404,437, which includes the Company’s payment for 28 shares of the Company’s Series B Preferred Stock at $162 per share held by Ms. Roberts pursuant to the Company’s right to repurchase such shares pursuant to the 2004 Restricted Stock Incentive Plan. After such repurchase, Ms. Roberts retained four shares of the Series B Preferred Stock and is entitled to continue participation in the Company’s medical, dental and basic life insurance plans through March 31, 2006. Beginning April 1, 2006, Ms. Roberts may elect extended continuation coverage under such plans for a period of 18 months. Ms. Roberts is also entitled to receive outplacement services for a period of 12 months, which shall not exceed $20,000, as well as reimbursement by the Company of Ms. Robert’s legal fees incurred in connection with the negotiation of the Severance and Release Agreement, which could not exceed $7,500. Ms. Roberts has agreed not to compete with the Company for one year.

The Company provided Joseph J. Kwederis, our Chief Financial Officer, with a letter dated February 2, 2005 that outlines certain terms and conditions of his employment, including certain severance pay provisions. By letter dated August 26, 2005, the Company confirmed Mr. Kwederis’ promotion to Chief Financial Officer and addressed certain other employment terms and conditions.

2004 Restricted Stock Incentive Plan and Series B Preferred Stock

On September 24, 2004, we adopted a 2004 Restricted Stock Incentive Plan, pursuant to which we sold to our President and Chief Executive Officer and selected additional officers of the Company, 704 shares of a total of 720 shares of a newly-created, non-voting Series B Redeemable Preferred Stock for a cash purchase price of $162 per share. These shares were issued in private transactions with officers of the Company and therefore were exempt from the registration requirements of the Securities Act of 1933. On December 22, 2004, the remaining 16 authorized shares were issued to an officer for a cash purchase price of $162 per share. The Series B Preferred Stock will be automatically converted into common equity of the Company upon the consummation of an underwritten public offering registered under the Securities Act of shares of capital stock of the Company resulting in aggregate proceeds (net of underwriters discounts and commissions) to the Company of not less than $100 million. During 2005, the Company repurchased 92 shares of Series B Redeemable Preferred Stock from officers of the Company at a purchase price of $162 per share.

We are authorized to issue up to 200,000 shares of Preferred Stock. On September 24, 2004 we authorized 720 shares of Series B Redeemable Preferred Stock. On September 24, 2004 we issued 704 shares of such Series B Redeemable Preferred Stock. On December 22, 2004, we issued the remaining 16 authorized shares. Upon the sale of all or substantially all of the Company’s assets, sale of the majority of the outstanding Common Stock of the Company to a person other than J.P. Morgan or its affiliates;

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

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

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

Transactions Between Pliant and Stockholders

Common Stock Registration Rights Agreement

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

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The stockholders’ agreement

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

The provisions of the stockholders’ agreement also govern:

·restrictions on the transfer of shares of common stock and warrants to purchase common stock issued in connection with our preferred stock;

·preemptive rights for holders of our common stock and warrants to purchase certain equity securities to be issued by us in the amounts required to maintain their percentage ownership;

·stockholder or company rights of first refusal to purchase certain shares of our common stock to be sold by other stockholders;

·agreement by stockholders and holders of the warrants to consent to the sale of all of, or a controlling interest in, us to a third party, if such sale is approved by our board of directors, and to sell their shares of common stock and warrants if so required;

·rights of stockholders and holders of the warrants to participate in certain sales of the shares of our common stock by other stockholders; and

·rights of holders of our common stock and warrants to receive certain financial and other information.

Credit facilities and note offerings

JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) was the syndication agent and its affiliate, J.P. Morgan Chase & Co., was a lender under our 2004 Credit facility. The Amended and Restated Credit Agreement replaced the 2004 Credit Facility. JPMorgan Chase Bank and J.P. Morgan Chase & Co. received customary fees under the 2004 Credit Facility for acting in such capacities. J.P. Morgan Securities Inc. served as the arranger for our 2004 Credit Facility and in connection with certain amendments to our previous credit facilities and received customary fees in such capacity. An affiliate of JPMorgan Chase Bank received customary fees for arranging the December 2003 waiver with respect to our then existing credit facilities.

J.P. Morgan Securities Inc. was one of the initial purchasers in our May 2000 offering of our 13% Senior Subordinated Notes due 2010 and was also the dealer manager for the debt tender offer and consent solicitation relating to our 91¤8% Senior Subordinated Notes due 2007. J.P. Morgan Securities Inc. received fees of approximately $8.7 million for acting in such capacities. J.P. Morgan Securities Inc. was also one of the initial purchasers in our April 2002 offering of our 13% Senior Subordinated Notes due 2010 and received fees of approximately $1.9 million for acting in such capacity. We used approximately $93.3 million of the net proceeds from the April 2002 offering to repay indebtedness under our then existing credit facilities. J.P. Morgan Securities Inc. was an initial purchaser in our May 2003 offering of 111¤8% Senior Secured Notes due 2009 and received fees of approximately $4.4 million for acting in such capacity. We used approximately $240 million of the net proceeds from the May 2003 offering to repay

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indebtedness under our then existing credit facilities. J.P. Morgan Securities Inc. was an initial purchaser in our February 2004 offering of 111¤8% Senior Secured Discount Notes due 2009 and received fees of approximately $2.5 million for acting in such capacity. We used the proceeds of this February 2004 offering to repay and terminate then existing credit facilities. In addition, JP Morgan Chase Bank is a lending party under our existing credit facility completed in February 2004 and received fees of approximately $0.9 million for acting in such capacity. In addition, we paid fees of approximately $0.6 million in September 2000, approximately $0.5 million in July 2001, approximately $0.6 million in April 2002, approximately $0.6 million in October 2002, approximately $0.5 million in March 2003, approximately $0.3 million in May 2003 and approximately $0.1 million in December 2003, to JPMorgan Chase Bank, in each case in connection with amendments to our then existing credit facilities. On May 6, 2005, we completed a consent solicitation relating to our 111¤8% Senior Secured Discount Notes due 2009. J.P. Morgan Securities Inc. served as the solicitation agent for the consent solicitation and received fees of approximately $1.4 million for acting in such capacity.

Each of JPMorgan Chase Bank, J.P. Morgan Chase & Co. and J.P. Morgan Securities Inc. is an affiliate of Southwest Industrial Films, LLC, which owns approximately 55% of our outstanding common stock and currently has the right under the stockholders’ agreement to appoint five of our directors, and of Flexible Films, LLC, which, together with affiliates, owns approximately 59% of our outstanding preferred stock. Southwest Industrial Films, LLC and Flexible Films, LLC are subsidiaries of J.P. Morgan Partners (BHCA), L.P. Stephen McKenna is a principal of J.P. Morgan Partners, LLC and Jeffrey C. Walker is Managing Partner of J.P. Morgan Partners, LLC. Timothy Walsh is an executive officer of JPMP Capital Corp. and a limited partner of JPMP Master Fund Manager, L.P. J.P. Morgan Partners, LLC serves as investment advisor to J.P. Morgan Partners (BHCA), L.P. and JPMP Capital Corp. JPMP Capital Corp. is a subsidiary of J.P. Morgan Chase & Co. and is the general partner of JPMP Master Fund Manager, L.P., which is the general partner of J.P. Morgan Partners (BHCA), L.P.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

	2005		2004
Audit fees	$	1,456,724	$	861,157
Audit-related fees	—		3,680
Tax fees	145,500		382,451
All other fees	—		—
	$	1,602,224	$	1,247,288

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

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

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

(a)(1)	Pliant Corporation and Subsidiaries Financial Statements:
	Index to Financial Statements and Financial Statement Schedule
	Report of Independent Registered Public Accounting Firm
	Consolidated Balance Sheets as of December 31, 2005 and 2004
	Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003
	Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2005, 2004 and 2003
	Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
	Notes to Consolidated Financial Statements
(a)(2)	Financial Statement Schedule:
	Schedule II—Valuation and Qualifying Accounts
	The remaining schedules set forth in Regulation S-X have not been included because they are not applicable to our business.

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INDEX TO EXHIBITS

Exhibit  Number
2.1	Recapitalization Agreement, dated as of March 31, 2000 (the “Recapitalization Agreement”), among Pliant Corporation, Chase Domestic Investments, L.L.C., Richard P. Durham as Representative, and the shareholders of Pliant Corporation signatory thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Pliant Corporation on April 12, 2000).
2.2	Amendment No. 1, dated as of April 3, 2000, to the Recapitalization Agreement (incorporated by reference to Exhibit 2.2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
2.3	Amendment No. 2, dated as of May 31, 2000, to the Recapitalization Agreement (incorporated by reference to Exhibit 2.3 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
2.4	Debtors’ Joint Plan of Reorganization (incorporated by reference to Exhibit 2 to the Current Report on Form 8-K filed by Pliant Corporation on March 20, 2006).
3.1	Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
3.2	Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.2 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
3.3	Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.3 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-65754)).
3.4	Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.4 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
3.5	Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.5 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
3.6	Fourth Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation’s Current Report on Form 8-K filed on September 30, 2004).
3.7	Second Amended and Restated Bylaws of Pliant Corporation (incorporated by reference to Exhibit 3.6 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
4.1	Indenture, dated as of May 31, 2000, among Pliant Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).

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4.2	First Supplemental Indenture, dated as of July 16, 2001, among Pliant Corporation, the New Note Guarantors party thereto, the existing Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.3 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-65754)).
4.3	Form of Second Supplemental Indenture, dated as of April 30, 2004, among Pliant Corporation, the New Note Guarantor party thereto, the existing Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.3 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.4	First Supplemental Indenture, dated as of November 4, 2005, among Pliant Corporation, as issuer, certain subsidiaries of Pliant Corporation, as guarantors, and The Bank of New York, as trustee, amending the Indenture, dated May 31, 2000, among such parties with respect to Pliant Corporation’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 4.1 to Pliant Corporation’s Current Report on Form 8-K filed on November 10, 2005).
4.5	Second Supplemental Indenture, dated as of November 17, 2005, among Pliant Corporation, as issuer, certain subsidiaries of Pliant Corporation, as guarantors, and The Bank of New York, as trustee, amending the Indenture, dated May 31, 2000 and thereafter amended, among such parties with respect to Pliant Corporation’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 4.1 to Pliant Corporation’s Current Report on Form 8-K filed on November 23, 2005).
4.6	Form of 2000 Notes (incorporated by reference to Exhibit B to Exhibit 4.1).
4.7	Indenture, dated as of April 10, 2002, among Pliant Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.4 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-86532)).
4.8	Form of First Supplemental Indenture, dated as of April 30, 2004, among Pliant Corporation, the New Note Guarantor party thereto, the existing Note Guarantors party thereto and Bank of New York, as trustee (incorporated by reference to Exhibit 4.6 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.9	First Supplemental Indenture, dated as of November 4, 2005, among Pliant Corporation, as issuer, certain subsidiaries of Pliant Corporation, as guarantors, and The Bank of New York, as trustee, amending the Indenture, dated April 10, 2002, among such parties with respect to Pliant Corporation’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 4.2 to Pliant Corporation’s Current Report on Form 8-K filed on November 10, 2005).
4.10	Second Supplemental Indenture, dated as of November 17, 2005, among Pliant Corporation, as issuer, certain subsidiaries of Pliant Corporation, as guarantors, and The Bank of New York, as trustee, amending the Indenture, dated April 10, 2002 and thereafter amended, among such parties with respect to Pliant Corporation’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 4.2 to Pliant Corporation’s Current Report on Form 8-K filed on November 23, 2005).
4.11	Form of 2002 Note (incorporated by reference to Exhibit B to Exhibit 4.4).
4.12	Indenture, dated as of May 30, 2003, among Pliant Corporation, the Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.6 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).

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4.13	Form of First Supplemental Indenture, dated as of April 30, 2004, among Pliant Corporation, the New Note Guarantor party thereto, the existing Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.9 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.14	Form of Senior Secured Note (incorporated by reference to Exhibit 4.6 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).
4.15	Form of Indenture, dated as of February 17, 2004, among Pliant Corporation, the Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.8 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.16	Form of Senior Secured Discount Note (incorporated by reference to Exhibit B to Exhibit 4.8 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.17	Second Priority Security Agreement, dated as of May 30, 2003, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.8 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).
4.18	Form of Supplement No. 1 to Second Priority Security Agreement, dated as of April 30, 2004, among Uniplast Industries Co. and Wilmington Trust Company, as collateral agent (incorporated by reference to Exhibit 4.14 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.19	Form of Security Agreement dated as of February 17, 2004, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.11 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.20	Form of Canadian Security Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the guarantors party thereto, and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.12 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.21	Second Priority Pledge Agreement, dated as of May 30, 2003, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.9 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).
4.22	Form of Supplement No. 1 to Second Priority Pledge Agreement, dated as of April 30, 2004, among Uniplast Industries Co. and Wilmington Trust Company, as collateral agent (incorporated by reference to Exhibit 4.18 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.23	Form of Pledge Agreement dated as of February 17, 2004, among Pliant Corporation, the subsidiary pledgors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.14 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).

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4.24	Form of Canadian Pledge Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the pledgors party thereto, and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.15 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.25	Exchange and Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, the Note Guarantors party thereto, and Chase Securities, Inc. and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.3 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
4.26	Exchange and Registration Rights Agreement, dated as of April 10, 2002, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities, Inc. and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.7 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-86532)).
4.27	Exchange and Registration Rights Agreement, dated as of May 30, 2003, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities Inc., Deutsche Bank Securities, Inc. and Credit Suisse First Boston LLC, as Initial Purchasers (incorporated by reference to Exhibit 4.12 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).
4.28	Form of Exchange and Registration Rights Agreement, dated as of February 17, 2004, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities Inc., Credit Suisse First Boston LLC and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.19 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.29	Amended and Restated Indenture, dated as of February 17, 2004 (as amended and restated as of May 6, 2005) (incorporated by reference to Exhibit 4.26 to Post-Effective Amendment No. 2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-114608)).
4.30	Exchange and Registration Rights Agreement, dated as of May 6, 2005 (incorporated by reference to Exhibit 4.26 to Post-Effective Amendment No. 2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-114608)).
4.31	Fourth Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation’s Current Report on Form 8-K filed on September 30, 2004).
10.1	Note Warrant Agreement, dated as of May 31, 2000, among Pliant Corporation and The Bank of New York, as Warrant Agent, relating to the 220,000 Note Warrants (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.2	Stockholders’ Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrant holders listed on the signature pages thereto (incorporated by reference to Exhibit 10.2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.3	Amendment No. 1 and Waiver, dated as of July 16, 2001, to the Stockholder’s Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.3 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-65754)).

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

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10.14	Amendment No. 2, dated as of March 25, 2003, to the Warrant Agreement dated as of May 31, 2000 among Pliant Corporation and the initial warrantholders listed in Schedule I thereto (incorporated by reference to Exhibit 10.13 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
10.15	Securities Purchase Agreement, dated as of July 16, 2001, among Pliant Corporation and the purchasers of Pliant Corporation’s preferred stock listed on the schedules thereto (incorporated by reference to Exhibit 10.10 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-65754)).
10.16	Securities Purchase Agreement, dated as of March 25, 2003, among Pliant Corporation and the Purchasers named therein (incorporated by reference to Exhibit 10.15 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
10.17	Securities Purchase Agreement, dated as of March 25, 2003, between Pliant Corporation and J.P. Morgan Partners (BHCA), L.P. (incorporated by reference to Exhibit 10.16 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
10.18	Form of Purchase Agreement, dated as of February 6, 2004, among Pliant Corporation, J.P. Morgan Securities Inc., Credit Suisse First Boston LLC and Deutsche Bank Securities Inc. (incorporated by reference to Exhibit 10.18 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
10.19*	Amended and Restated Credit Agreement, dated as of November 21, 2005, by and among Pliant Corporation and certain of its subsidiaries, as borrowers, General Electric Capital Corporation, as Domestic A Agent, Administrative Agent, Collateral Agent and Lender, and Morgan Stanley Senior Funding, Inc., as Domestic B Agent and Lender.
10.20*	Reaffirmation Agreement, dated as of November 21, 2005, among Pliant Corporation and General Electric Capital Corporation, as Collateral Agent.
10.21*	Amended and Restated Guarantee Agreement, dated as of November 21, 2005, among the subsidiaries guarantors party thereto and General Electric Capital Corporation, as Administrative Agent.
10.22*	Amended and Restated Domestic Security Agreement, dated as of November 21, 2005, among the grantors party thereto and General Electric Capital Corporation, as Collateral Agent.
10.23*	Amended and Restated Canadian Security Agreement, dated as of November 21, 2005, among the grantors party thereto and General Electric Capital Corporation,  as Collateral Agent.
10.24*	Amended and Restated Domestic Pledge Agreement, dated as of November 21, 2005, among the pledgors party thereto and General Electric Capital Corporation, as Collateral Agent.
10.25*	Amended and Restated Canadian Pledge Agreement, dated as of November 21, 2005, among the pledgors party thereto and General Electric Capital Corporation, as Collateral Agent.
10.26	Form of Amended and Restated Intercreditor Agreement, dated as of February 17, 2004, among Deutsche Bank Trust Company Americas, as Credit Agent, Wilmington Trust Company, as Second Priority Noteholder Agent and as 2004 Noteholder Agent, and Pliant Corporation (incorporated by reference to Exhibit 10.21 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).

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10.27	Form of Indemnity, Subrogation and Contribution Agreement, dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiary guarantors party thereto and Credit Suisse First Boston, as Administrative Agent (incorporated by reference to Exhibit 10.27 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
10.28	Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.16 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.29	Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.17 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.30	Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.18 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.31	Stock Redemption Agreement, dated as of December 27, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.23 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
10.32	Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.19 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.33	Stock Redemption Agreement, dated as of February 1, 2001, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.25 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
10.34	Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Richard P. Durham (incorporated by reference to Exhibit 10.20 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.35	Amendment No. 1, dated as of March 1, 2001, to the Pledge Agreement dated as of May 31, 2000, among Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.35 to Post-Effective Amendment No. 2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.36	Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Jack E. Knott (incorporated by reference to Exhibit 10.21 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.37	Amendment No. 1, dated as of April 1, 2001, to the Pledge Agreement dated as of May 31, 2000, among Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.36 to Post-Effective Amendment No. 2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.38	Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Scott K. Sorensen (incorporated by reference to Exhibit 10.22 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.39	Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Ronald G. Moffitt (incorporated by reference to Exhibit 10.23 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).

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10.40	1998 Pliant Corporation Stock Option Plan (incorporated by reference to Exhibit 10.10 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 1998).
10.41	Pliant Corporation Management Incentive Plan for Senior Divisional Management (1999) (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
10.42	Pliant Corporation 2000 Stock Incentive Plan (as amended and restated through April 17, 2002) (incorporated by reference to Exhibit 10.54 to Pliant Corporation’s Annual report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
10.43	Second Amended and Restated Stock Option Agreement, dated as of May 31, 2000 between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.27 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.44	Pliant Corporation Management Incentive Plan (2000) (incorporated by reference to Exhibit 10.2 to Pliant Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
10.45	Pliant Corporation Management Incentive Plan (2001) (incorporated by reference to Exhibit 10.48 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001).
10.46	Pliant Corporation Management Incentive Plan (2002) (incorporated by reference to Exhibit 10.49 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001).
10.47	Pliant Corporation Management Incentive Plan (2003) (incorporated by reference to Exhibit 10.56 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
10.48	Pliant Corporation 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
10.49	Consulting Agreement dated as of August 24, 2003, between Pliant corporation and Edward A. Lapekas (incorporated by reference to Exhibit 10.63 to Post-Effective Amendment No. 1 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-107843).
10.50	Employment Agreement, dated January 1, 2004, between Pliant Corporation and Harold Bevis (incorporated by reference to Exhibit 10.61 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.51	Release Agreement, dated December 31, 2004, between Pliant Corporation and Brian Johnson (incorporated by reference to Exhibit 10.62 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.52	Letter Agreement, dated January 26, 2005, between Pliant Corporation and James Ide (incorporated by reference to Exhibit 10.63 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.53	Severance and Release Agreement, dated as of March 18, 2005, between Pliant Corporation and Lori Roberts (incorporated by reference to Exhibit 10.64 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).

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10.54	Pliant Corporation 2004 Management Incentive Compensation Plan (incorporated by reference to Exhibit 10.65 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.55	Pliant Corporation 2004 MIP Long Term Incentive Plan (incorporated by reference to Exhibit 10.66 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.56	Pliant Corporation 2004 Restricted Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on September 30, 2004).
10.57	Pliant Corporation 2004 Restricted Stock Incentive Plan Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.68 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.58	Fourth Amendment to the Pliant Corporation Defined Benefit Pension Plan (incorporated by reference to Exhibit 10.69 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.59	Buy Out Agreement, dated January 5, 2005, among Pliant Corporation, Pliant Investment, Inc. and Supreme Plastics Group PLC (incorporated by reference to Exhibit 10.70 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.60	Assignment of Limited Liability Company Interests, dated January 5, 2005, between Pliant Investment, Inc. and Supreme Plastics Group PLC (incorporated by reference to Exhibit 10.71 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.61	Agreement for Purchase and Sale of Assets, dated July 12, 2004, among Pliant Corporation, Pliant Solutions Corporation and Kittrich Corporation (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on October 6, 2004).
10.62	Management Incentive Compensation Plan, effective as of January 1, 2005, between Pliant Corporation and certain eligible officers (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on June 9, 2005).
10.63	Severance and Release Agreement, effective as of March 18, 2005, between Pliant Corporation and Lori Roberts (incorporated by reference to Exhibit 10.64 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.64	Employment Agreement, dated June 10, 2005, between Pliant Corporation and R. David Corey (incorporated by reference to Exhibit 10.6 to Pliant Corporation’s Current Report on Form 8-K filed by on June 9, 2005).
10.65	Form of Support Agreement among the Company, Flexible Films, LLC, Flexible Films II, LLC, Southwest Industrial Films, LLC, Southwest Industrial Films II, LLC and certain holders of the Company’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on December 29, 2005).

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10.66	Senior Secured, Super Priority, Priming Debtor-in-Possession Credit Agreement, dated as of January 4, 2006, among the Debtors, as borrowers, General Electric Capital Corporation, as administrative agent, collateral agent and lender, Morgan Stanley Senior Funding, Inc., as syndication agent and lender, and the lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
10.67	Domestic Security Agreement, dated as of January 4, 2006, among the Company, the Domestic Subsidiary Borrowers, the other Subsidiary Loan Parties (other than the Canadian Guarantors (but including Pliant Packaging of Canada, LLC) and any other Loan Party that is a Foreign Subsidiary) and General Electric Capital Corporation (incorporated by reference to Exhibit 10.2 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
10.68	Canadian Security Agreement, dated as of January 4, 2006, among the Company, Uniplast Holdings Co., Pliant Corporation of Canada Ltd., Pliant Packaging of Canada, LLC, Pliant Solutions Corporation and General Electric Capital Corporation (incorporated by reference to Exhibit 10.3 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
10.69	Domestic Pledge Agreement, dated as of January 4, 2006, among the Company, the Domestic Subsidiary Borrowers, the other Subsidiary Loan Parties (other than the Canadian Guarantors (but including Pliant Packaging of Canada, LLC) and any other Loan Party that is a Foreign Subsidiary) and General Electric Capital Corporation (incorporated by reference to Exhibit 10.4 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
10.70	Canadian Pledge Agreement, dated as of January 4, 2006, among Uniplast Holdings Co., Pliant Corporation of Canada Ltd. and General Electric Capital Corporation (incorporated by reference to Exhibit 10.5 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
21.1*	Subsidiaries of Pliant Corporation.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Filed with this report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 30, 2006.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 30, 2006 by the following persons on behalf of the Registrant and in the capacities indicated.

By	/s/ HAROLD C. BEVIS
	Harold C. Bevis, Chief Executive Officer and Director (Principal Executive Officer)
By	/s/ JOSEPH J. KWEDERIS
	Joseph J. Kwederis Chief Financial Officer (Principal Financial and Accounting Officer)
By	/s/ JOHN D. BOWLIN
	John D. Bowlin, Director
By	/s/ EDWARD A. LAPEKAS
	Edward A. Lapekas, Director
By	/s/ ALBERT MACMILLAN
	Albert MacMillan, Director
By	/s/ JEFFREY C. WALKER
	Jeffrey C. Walker, Director
By	/s/ TIMOTHY J. WALSH
	Timothy J. Walsh, Director
By	/s/ STEPHEN V. MCKENNA
	Stephen V. McKenna, Director

77

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

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

78

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Pliant Corporation and Subsidiaries Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2005 and 2004	F-3
Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003	F-4
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2005, 2004 and 2003	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003	F-6
Notes to Consolidated Financial Statements	F-7
Financial Statement Schedule:
Schedule II—Valuation and Qualifying Accounts	S-1

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Pliant Corporation

We have audited the accompanying consolidated balance sheets of Pliant Corporation and Subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, cash flows and changes in stockholders’ deficit for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pliant Corporation and Subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming that Pliant Corporation and Subsidiaries will continue as a going concern. As more fully described in Note 22 to the consolidated financial statements, on January 3, 2006, Pliant Corporation and its subsidiaries in the U.S. and Canada filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. In addition, Pliant Corporation’s subsidiaries with operations in Canada received recognition of their Chapter 11 Cases under the Canada’s Companies’ Creditors Arrangement Act. Uncertainties inherent in the bankruptcy process raise substantial doubt about Pliant Corporation’s ability to continue as a going concern. Management’s intentions with respect to these matters are also described in Note 22. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

Chicago, Illinois
March 23, 2006

F-2

PLIANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2005 and 2004 (Dollars in Thousands, Except per Share Data)

	2005			2004
ASSETS
CURRENT ASSETS :
Cash and cash equivalents	$	12,802		$	5,580
Receivables:
Trade accounts, net of allowances of $5,672 and $4,489, respectively	133,278			117,087
Other	4,416			8,308
Inventories	106,826			94,300
Prepaid expenses and other	7,222			4,032
Income taxes receivable	1,074			361
Deferred income taxes	11,424			11,961
Total current assets	277,032			241,629
PLANT AND EQUIPMENT, net	294,993			297,145
GOODWILL	182,245			182,237
OTHER INTANGIBLE ASSETS, net	14,719			17,076
OTHER ASSETS	51,916			39,005
Total assets	$	820,905		$	777,092
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt and debt in default	$	973,244		$	1,994
Trade accounts payable	52,000			96,282
Accrued liabilities:
Interest payable	34,359			12,985
Customer rebates	9,538			8,391
Other	41,307			43,462
Total current liabilities	1,110,448			163,114
LONG-TERM DEBT, net of current portion	8,451			840,354
OTHER LIABILITIES	34,677			26,454
DEFERRED INCOME TAXES	31,575			31,433
SHARES SUBJECT TO MANDATORY REDEMPTION	270,689			229,910
Total liabilities	1,455,840			1,291,265
MINORITY INTEREST	—			33
REDEEMABLE PREFERRED STOCK:
Series B—720 shares authorized, no par value, 628 and 720 shares outstanding at December 31, 2005 and December 31, 2004	102			117
REDEEMABLE COMMON STOCK—no par value; 60,000 shares authorized; 10,873 shares outstanding as of December 31, 2005 and December 31, 2004, net of related stockholders’ notes receivable of $1,827 at December 31, 2005 and December 31, 2004	6,645			6,645
STOCKHOLDERS’ DEFICIT:
Common stock—no par value; 10,000,000 shares authorized, 542,638 shares outstanding as of December 31, 2005 and December 31, 2004	103,376			103,376
Warrants to purchase common stock	39,133			39,133
Accumulated deficit	(763,940		)	(650,974		)
Stockholders’ notes receivable	(660		)	(660		)
Accumulated other comprehensive loss	(19,591		)	(11,843		)
Total stockholders’ deficit	(641,682		)	(520,968		)
Total liabilities and stockholders’ deficit	$	820,905		$	777,092

See notes to consolidated financial statements.

F-3

PLIANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2005, 2004 and 2003 (Dollars in Thousands)

	2005			2004			2003
NET SALES	$	1,072,840		$	968,680		$	894,479
COST OF SALES	939,709			826,819			758,145
Gross profit	133,131			141,861			136,334
OPERATING EXPENSES:
Selling, general and administrative	77,051			81,058			77,976
Research and development	8,705			6,489			7,289
Impairment of goodwill and intangible assets	—			—			18,255
Impairment of fixed assets	—			359			4,844
Restructuring and other costs	2,436			2,108			12,607
Financial restructuring	3,802			—			—
Provision for litigation	—			—			7,200
Total operating expenses	91,994			90,014			128,171
OPERATING INCOME	41,137			51,847			8,163
INTEREST EXPENSE—Current and Long Term debt	(114,294		)	(110,353		)	(96,404		)
INTEREST EXPENSE—Dividends and accretion on Redeemable Preferred Stock	(40,778		)	(35,325		)	—
OTHER INCOME (EXPENSE), net	4,082			(737		)	472
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(109,853		)	(94,568		)	(87,769		)
INCOME TAX EXPENSE (BENEFIT):
Current	1,112			1,794			3,682
Deferred	905			(205		)	1,508
Total income tax expense (benefit)	2,017			1,589			5,190
LOSS FROM CONTINUING OPERATIONS	(111,870		)	(96,157		)	(92,959		)
DISCONTINUED OPERATIONS
Loss from discontinued operations	(1,096		)	(7,395		)	(21,343		)
Loss on sale of discontinued operations	—			(10,370		)	—
LOSS FROM DISCONTINUED OPERATIONS	(1,096		)	(17,765		)	(21,343		)
NET LOSS	$	(112,966	)	$	(113,922	)	$	(114,302	)

See notes to consolidated financial statements.

F-4

PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2005, 2004 and 2003 (In Thousands)

			Class A				Class B							Warrants to Purchase					Stockholders’			Accumulated Other
			Common Stock				Common Stock				Common Stock			Common		Accumulated			Notes			Comprehensive
	Total		Shares		Amount		Shares		Amount		Shares		Amount	Stock		Deficit			Receivable			Income/(Loss)
Balance, December 31, 2002	$ (270,872	)		—		—		—		—		543	$ 103,376		$ 38,676		$ (394,420	)		$ (660	)		$ (17,844	)
Comprehensive loss:
Net loss	(114,302	)															(114,302	)
Minimum pension liability adjustment, net of taxes	(527	)																					(527	)
Fair value change in interest rate derivatives classified as cash flow hedges, net of taxes	3,177																						3,177
Foreign currency translation adjustment	3,273																						3,273
Comprehensive loss	(108,379	)
Issuance of warrants	457														457
Preferred stock dividend and accretion	(28,330	)															(28,330	)
Balance, December 31, 2003	$ (407,124	)		—		—		—		—		543	$ 103,376		$ 39,133		$ (537,052	)		$ (660	)		$ (11,921	)
Comprehensive loss:
Net loss	(113,922	)															(113,922	)
Minimum pension liability adjustment, net of taxes	(3,888	)																					(3,888	)
Fair value change in interest rate derivatives classified as cash flow hedges, net of taxes	2,220																						2,220
Foreign currency translation adjustment	1,746																						1,746
Comprehensive loss	(113,844	)
Balance, December 31, 2004	$ (520,968	)		—		—		—		—		543	$ 103,376		$ 39,133		$ (650,974	)		$ (660	)		$ (11,843	)
Comprehensive loss:
Net loss	(112,966	)															(112,966	)
Minimum pension liability adjustment, net of taxes	(5,861	)																					(5,861	)
Foreign currency translation adjustment	(1,887	)																					(1,887	)
Comprehensive loss	(120,714	)
Balance, December 31, 2005	$ (641,682	)		—		—		—		—		543	$ 103,376		$ 39,133		$ (763,940	)		$ (660	)		$ (19,591	)

See notes to consolidated financial statements.

F-5

PLIANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2005, 2004 and 2003 (Dollars in Thousands)

	2005			2004			2003
Cash flows from operating activities:
Net loss	$	(112,966	)	$	(113,922	)	$	(114,302	)
Adjustments to reconcile net loss to net cash provided by (used in) continuing operating activities:
Depreciation and amortization	40,538			41,051			46,896
Impairment of fixed assets	—			359			4,844
Amortization and write-off of deferred financing costs and accretion of debt discount	34,922			35,072			9,862
Deferred dividends and accretion on preferred shares	40,778			35,325			—
Deferred income taxes	905			(205		)	1,508
Provision for losses on accounts receivable	2,608			1,600			1,667
Loss from discontinued operations	1,096			13,770			21,343
Write down of impaired assets of discontinued operations	—			3,995			—
Non-cash plant closing costs	—			1,443			3,260
Write down of impaired goodwill and intangibles	—			—			18,255
(Gain) or loss on disposal of assets	(4,452		)	546			1,452
Curtailment gain	—			1,562			—
Minority Interest	(33		)	(258		)	99
Changes in operating assets and liabilities:
Trade accounts receivable	(19,391		)	(22,110		)	1,307
Other receivables	3,658			3,957			2,656
Inventories	(12,406		)	(9,059		)	4,297
Prepaid expenses and other	(3,173		)	(202		)	191
Intangible assets and other assets	(5,683		)	2,443			(1,089		)
Trade accounts payable	(44,776		)	6,408			(23,316		)
Accrued liabilities	19,993			1,137			4,715
Income taxes payable/receivable	(1,376		)	1,258			932
Other liabilities	2,688			(5,614		)	1,203
Net cash used in continuing operating activities	(57,070		)	(1,444		)	(14,220		)
Cash flows from continuing investing activities:
Capital expenditures for plant and equipment	(33,502		)	(24,090		)	(17,039		)
Proceeds from sale of assets	5,190			6,450			—
Net cash used in continuing investing activities	(28,312		)	(17,640		)	(17,039		)
Cash flows from continuing financing activities:
Payment of capitalized loan fees	(12,130		)	(9,864		)	(10,801		)
Net proceeds (net of repurchases) from issuance of common stock, preferred stock and warrants	(12		)	117			9,532
Proceeds from issuance of senior discount notes and subordinated debt	—			225,299			250,000
Borrowings under revolver	106,924			24,000			49,776
Repayments of term debt and revolver due to refinancing	—			(214,085		)	(252,500		)
Payments of capital lease obligations	(2,048		)	—			—
Net cash provided by continuing financing activities	92,734			25,467			46,007
Discontinued Operations (Revised—see Note 1):
Cash used in operations	(195		)	(4,495		)	(12,424		)
Cash used in investing activities—capital expenditures	—			(348		)	(2,337		)
Total cash used in discontinued operations	(195		)	(4,843		)	(14,761		)
Effect of exchange rate changes on cash and cash equivalents	$	65		$	733		$	1,686
Net increase (decrease) in cash and cash equivalents	7,222			2,272			1,673
Cash and cash equivalents, beginning of the year	5,580			3,308			1,635
Cash and cash equivalents, end of the year	$	12,802		$	5,580		$	3,308
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	60,890		$	80,411		$	76,341
Income taxes	$	2,507		$	1,647		$	2,629

See notes to consolidated financial statements.

F-6

PLIANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Summary of Significant Accounting Policies

Nature of operations   Pliant Corporation and its subsidiaries (collectively “Pliant”) produce polymer-based (plastic), value-added films for flexible packaging, personal care, medical, agricultural and industrial applications. Our manufacturing facilities are located in the United States, Canada, Mexico, Germany and Australia.

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

Bankruptcy Filing   On January 3, 2006, Pliant Corporation and ten subsidiaries (collectively, the “Debtors”) filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) (the “Chapter 11 Cases”). The Chapter 11 Cases are being jointly administered under the caption “In re: Pliant Corporation, et al., Case No. 06-10001”. Three of our subsidiaries with Canadian operations commenced ancillary proceedings in a Canadian court to recognize the Chapter 11 proceedings as “foreign proceedings” pursuant to Canada’s Companies’ Creditors Arrangement Act (“CCAA”). The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. Pliant’s subsidiaries in Australia, Germany and Mexico were not included in the filings and will continue their business operations without supervision from the Bankruptcy Court and will not be subject to the chapter 11 requirements of the Bankruptcy Code. (See Note 22 Subsequent Events, for details on the chapter 11 cases.)

American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”), which is applicable to companies in chapter 11, generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the statements of operations beginning in the quarter ending March 31, 2006. The balance sheet must distinguish prepetition liabilities subject to compromise from both those prepetition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, cash provided by reorganization items must be disclosed separately in the statement of cash flows. Pliant adopted SOP 90-7 effective on January 3, 2006 and will segregate those items as outlined above for all reporting periods subsequent to such date.

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

Revenue Recognition   Sales revenue is recognized when title transfers, the risks and rewards of ownership have been transferred to the customer, the price is fixed and determinable and collection of the

F-7

related receivable is probable, which is generally at the time of shipment. Revenue is reduced by rebates made to customers based on an estimate of the amount of the rebate at the time the sale is recorded.

Accounts Receivable   Accounts receivable consist primarily of amounts due to us from our normal business activities. Accounts receivable amounts are determined to be past due when the amount is overdue based on contractual terms. We maintain an allowance for doubtful accounts to reflect the expected uncollectibility of accounts receivable based on past collection history and specific risks identified among uncollected amounts. Accounts receivable are charged off against the allowance for doubtful accounts when we have determined that the receivable will not be collected. Collateral is generally not required for accounts receivable. Two customers represented approximately 14% of consolidated receivables at December 31, 2005 and one customer represented approximately 6% of consolidated receivables at December 31, 2004.

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

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

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

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

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

Goodwill and Other Intangible Assets   Goodwill and intangible assets deemed to have indefinite lives are no longer amortized, but are subject to an annual impairment test based on the fair value of the assets. Amortization of other intangible assets is computed using the straight-line method over the estimated economic useful lives of 5-15 years. (See Note 6)

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

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

F-8

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

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

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

Foreign Currency Translation   The accounts of our foreign subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and an average exchange rate for each month for revenues, expenses, gains and losses. Transactions are translated using the exchange rate at each transaction date. Where the local currency is the functional currency, translation adjustments are recorded as a separate component of stockholders’ equity (deficit). Where the U.S. dollar is the functional currency, translation adjustments are recorded in other income within current operations.

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

Accounting For Stock-Based Compensation PlansWe apply Accounting Principles Board Opinion No. 25 and related interpretations in accounting for stock-based compensation plans as they relate to employees and directors. Had compensation cost for all the outstanding options been determined in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” our net loss for the years ended December 31, 2005, 2004 and 2003 would have been the following pro forma amounts (in thousands):

	2005			2004			2003
As reported	$	(112,966	)	$	(113,922	)	$	(114,302	)
Pro forma stock compensation expense	(47		)	(289		)	(1,077		)
Pro forma	$	(113,013	)	$	(114,211	)	$	(115,379	)

The fair market value of each option is estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions for 2005, 2004 and 2003 grants, respectively: risk free rate of return of 4.0% in 2005, 2004, and 2003; expected life of 4 years to 9 years; dividend yield of 0%; and volatility of 40%, The weighted average fair value of the options as determined by the minimum value option-pricing model was $146 per share for 2005 and 2004 and $103 per share for 2003.

EmployeesAs of December 31, 2005, we had approximately 2,940 employees, of which approximately 830 employees were subject to a total of 8 collective bargaining agreements that expire on various dates between, January 28, 2006 and February 28, 2009. The collective bargaining agreement covering our Mexico union facility expired January 28, 2006. The new bargaining agreement was agreed between the two parties on March 2, 2006. As of December 31, 2005, we had approximately 211 employees under a collective bargaining agreement in South Deerfield, which expires in October 2006.

F-9

ReclassificationsCertain reclassifications have been made to the consolidated financial statements for comparative purposes. In 2005, the Company has separately disclosed the operating, investing and financing portions of the cash flows attributable to its discontinued operations, which in prior periods were reported on a combined basis as a single amount.

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

In addition, as a result of adopting SFAS 150, the Company’s redeemable common shares that have been put for redemption by a shareholder were recorded as a liability at fair value. The fair value was computed using the agreed upon price of the redemption times the number of shares put by the shareholder. As required by SFAS 150, prior periods were not restated. The shares subject to mandatory redemption are as follow (in thousands):

	December 31, 2005			December 31, 2004
Redeemable Preferred Shares 167,000 shares authorized, 140,973 shares outstanding as of December 31, 2005 and December 31, 2004, designated as Series A, no par value with a redemption value of $1,000 per share plus accumulated dividends		$	264,327		$	223,548
18,200 Redeemable Common Shares that have been put for redemption by a shareholder, net of a shareholder note of $2,431		6,362			6,362
Total shares subject to mandatory redemption		$	270,689		$	229,910

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

New Accounting Pronouncements   In December 2004, the FASB issued SFAS 123(R) (revised December 2004), “Share-Based Payment”, which is a revision of SFAS 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” This statement requires that the fair value at the grant date resulting from all share-based payment transactions be recognized in the financial statements. Further, SFAS 123(R) requires entities to apply a fair-value based measurement method in accounting for these transactions. This value is recorded over the vesting period. This statement is effective for the first interim reporting period beginning after December 15, 2005. The impact of adoption of SFAS 123(R) cannot be predicted at this time because it will depend on the level of share based payments in the future. However, had the Company adopted SFAS 123(R) in prior periods, the impact of the standard would have been approximately the impact described in the disclosure of pro forma loss in Note 1 to the consolidated financial statements.

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2.Inventories

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

	2005		2004
Finished goods	$	46,179	$	47,259
Raw materials and other	50,560		37,595
Work-in-process	10,087		9,446
Total	$	106,826	$	94,300

3.Restructuring and Other Costs

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

	2005			2004		2003
Plant Closing Costs:
Severance	$	415		$	206	$	263
Relocation of production lines	—			36		1,452
Leases	1,869			—		1,903
Other plant closing costs	363			437		4,130
Office closing and workforce reduction costs
Severance	(84		)	—		660
Leases	—			—		1,357
Other office closure costs	(127		)	—		188
Total Plant/Office	2,436			679		9,953
Fixed asset impairments related to plant closures	—			1,429		2,654
Total Restructuring and other costs	$	2,436		$	2,108	$	12,607

Restructuring and other costs for the year ended December 31, 2005 included $1.9 million in lease termination costs associated with our Shelbyville, Indiana facility, $0.3 million in severance costs associated with the sale of our Alliant business and $0.2 million in severance and other current costs associated with our 2004 plant shutdown in Harrisville, Rhode Island.

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

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

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The following table summarizes the roll-forward of the reserve from December 31, 2004 to December 31, 2005 (dollars in thousands):

		Accruals for the Year Ended December 31, 2005
12/31/2004						Other			12/31/05
#				Relocated		Plant			#
Employees	Accrual	Additional		Production		Closure		Payments /	Employees	Accrual
Terminated	Balance	Employees	Severance	Lines	Leases	Costs	Total	Charges	Terminated	Balance

Plant Closing Costs:

Merced	54	$	1,000	—	$	—		$	—	$	—	$	—		$	—		$	—		54	$	1,000
Rhode Island	49	14		—	139			—		—		120			259			(268		)	49	5
Shelbyville	8	1,087		—	—			—		1,869		243			2,112			(1,456		)	8	1,743
Leases	—	1,614		—	—			—		—		—			—			(512		)	—	1,102
Alliant	—	—		19	276			—		—		—			276			(274		)	19	2
	111	$	3,715	19	$	415		$	—	$	1,869	$	363		$	2,647		$	(2,510	)	130	$	3,852
Office Closing and Workforce Reduction Costs:
Leases	—	$	610	—	$	—		$	—	$	—	$	—		$	—		$	(326	)	—	$	284
Severance	114	84		—	(84		)	—		—		—			(84		)	—			114	—
Singapore	—	127		—	—			—		—		(127		)	(127		)	—			—	—
	114	$	821	—	$	(84	)	$	—	$	—	$	(127	)	$	(211	)	$	(326	)	114	$	284
TOTAL	225	$	4,536	19	$	331		$	—	$	1,869	$	236		$	2,436		$	(2,836	)	244	$	4,136

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

		Accruals for the Year Ended December 31, 2004
12/31/2003						Other			12/31/04
#				Relocated		Plant			#
Employees	Accrual	Additional		Production		Closure		Payments /	Employees	Accrual
Terminated	Balance	Employees	Severance	Lines	Leases	Costs	Total	Charges	Terminated	Balance

Plant Closing Costs:

Merced	54	$	1,235	—	$	—	$	—	$	—	$	—	$	—	$	(235	)	54	$	1,000
Rhode Island	—	—		49	206		36		—		437		679		(665		)	49	14
Shelbyville	8	1,606		—	—		—		—		—		—		(519		)	8	1,087
Leases	—	2,004		—	—		—		—		—		—		(390		)	—	1,614
	62	$	4,845	49	$	206	$	36	$	—	$	437	$	679	$	(1,809	)	111	$	3,715
Office Closing and Workforce Reduction Costs:
Leases	—	$	1,129	—	$	—	$	—	$	—	$	—	$	—	$	(519	)	—	$	610
Severance	114	237		—	—		—		—		—		—		(153		)	114	84
Singapore	—	152		—	—		—		—		—		—		(25		)	—	127
	114	$	1,518	—	$	—	$	—	$	—	$	—	$	—	$	(697	)	114	$	821
Subtotal Plant/Office	176	$	6,363	49	$	206	$	36	$	—	$	437	$	679	$	(2,506	)	225	$	4,536
Fixed Asset Impairments related to Plant Closures:
Rhode Island	—	—		—	—		—		—		1,429		$	1,429	—			—	—
TOTAL	176	$	6,363	49	$	206	$	36	$	—	$	1,866	$	2,108	$	(2,506	)	225	$	4,536

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Plant Closing Costs:

2005—During 2005, we accrued $1.9 million for the net costs to terminate the remaining equipment lease agreements associated with our Shelbyville, Indiana facility, incurred $0.2 million of security, severance and other plant closure costs associated with our Harrisville, Rhode Island facility and incurred $0.3 million in severance costs associated with the sale of our Alliant business in the second quarter. The Shelbyville, Indiana and Alliant related restructuring costs are attributable to our Specialty Products Group and the Harrisville, Rhode Island costs are attributable to our Engineered Films segment.

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

2003—During 2003, we accrued the present value of future lease payments on three buildings we no longer occupied in an amount equal to $3.3 million. As of December 31, 2005 $1.4 million of these accruals are remaining.

2002—In September 2002, we approved a plan to close our production facility in Merced, California and relocate its production lines to our plants in Toronto, Canada and Danville, Kentucky. The cost of relocating the production lines are expensed to plant closing costs as incurred. The Merced closure was completed in the first quarter of 2003. As of December 31, 2005, the $1.0 million remaining reserves for Merced relate to environmental cleanup.

Office Closings and Workforce Reduction Costs

During the year ended December 31, 2002, 111 employees were terminated, resulting in an estimated annual cost saving, including benefits, of $10.1 million. Total severance cost, including benefits, for these terminations was $6.9 million. As of December 31, 2002, all of the expected employee terminations had been completed in connection with the workforce reduction, closure of the Salt Lake City and the closure of the Dallas offices. No accruals remain at December 31, 2005. The accruals remaining at December 31, 2004 and 2003 were $0.1 million and $0.2 million, respectively.

4.   Discontinued Operations

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

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

F-14

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

5.Plant and Equipment

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

	2005			2004
Land and improvements	$	7,470		$	7,729
Buildings and improvements	73,134			68,338
Machinery and equipment	447,410			414,695
Computer equipment and software	36,424			36,066
Furniture, fixtures and vehicles	5,878			6,369
Leasehold improvements	5,226			4,906
Construction in progress	6,754			5,586
	582,296			543,689
Less accumulated depreciation and amortization	(287,303		)	(246,544		)
Plant and equipment, net	$	294,993		$	297,145

The depreciation expense for the years ended December 2005, 2004 and 2003 was $38.0 million, $38.1 million and $43.7 million, respectively.

During the year ended December 31, 2004, we recorded impairment changes of $0.4 million to scrap fixed assets in our Engineered Films and Industrial Films segments.

6.   Goodwill and Intangible Assets

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (“SFAS”) No. 142 “Goodwill and Other Intangible Assets”. SFAS No. 142, which was effective for fiscal years beginning after December 15, 2001, requires that ratable amortization of goodwill be replaced with periodic tests of goodwill impairment and that intangible assets, other than goodwill, which have determinable useful lives, be amortized over their useful lives. As required by SFAS 142, the Company stopped amortizing goodwill effective January 1, 2002. The Company has evaluated goodwill for impairment under SFAS 142 guidelines. The Company’s annual impairment test is conducted on October 1 of each year based on a methodology including prices of comparable businesses and discounted cash flows. Based on the 2004 and 2005 annual impairment tests, no impairments were recorded. Based upon the 2003 annual impairment test, the Company determined that goodwill was impaired in various international operations in the Specialty Products Group, Industrial Films and Engineered Films segment, and a total of $18.2 million goodwill was written down. These impairments were a result of lower sales volumes and margins from these units.

F-15

We have four operating segments, all of which have goodwill. Our operating segments are consistent with our reporting units as defined in SFAS 142. Operating segments are components of our business for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. Goodwill is allocated to the segments based on fair value. The changes in the carrying value of goodwill for the year ended December 31, 2004 and 2005 were as follows (in thousands):

	Specialty Products Group		Industrial Films			Engineered Films			Performance Films			Corporate/ Other			Total
Balance as of December 31, 2003	$	131,579		$	2,367		$	33,220		$	14,996		$	—		$	182,162
Foreign exchange rate adjustment	—			75			—			—			—			75
Goodwill impaired	—			—			—			—			—			—
Balance as of December 31, 2004	$	131,579		$	2,442		$	33,220		$	14,996		$	—		$	182,237
Foreign exchange rate adjustment	—			8			—			—			—			8
Balance as of December 31, 2005	$	131,579		$	2,450		$	33,220		$	14,996		$	—		$	182,245

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

	2005						2004
	Gross Carrying Value		Accumulated Amortization				Gross Carrying Value		Accumulated Amortization
Other intangible assets:
Customer lists	$	23,162		$	(9,690	)	$	22,965		$	(8,587	)
Other	22,694			(21,447		)	22,741			(20,043		)
Total	$	45,856		$	(31,137	)	$	45,706		$	(28,630	)

The weighted average remaining amortization periods for customer lists is 7.1 and 8.1 years for 2005 and 2004, respectively. The weighted average remaining amortization periods for other intangibles is 1.7 and 2.6 years for 2005 and 2004, respectively.

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

Year Ending December 31
2006	$	2,405
2007	2,237
2008	1,376
2009	960
2010	960

Amortization expense for other intangible assets was approximately $2.5 million, $2.5 million, and $3.2 million, for the years ended December 31, 2005, 2004 and 2003, respectively.

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7.   Long-Term Debt

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

	2005			2004
Credit Facilities:
Revolver, variable interest, 9.29% and 6.75% as of December 31, 2005 and 2004, respectively	$	130,924		$	24,000
Senior secured discount notes at 111¤8%, net of unamortized issue discount of $767 and $58,359 respectively	7,033			247,641
Senior secured notes, interest at 111¤8%	250,000			250,000
Senior secured notes, interest at 115¤8%	269,755			—
Senior subordinated notes, interest at 13.0% (net of unamortized issue discount, premium and discount related to warrants of $5,859 and $6,786 at 2005 and 2004, respectively)	314,137			313,214
Obligations under capital leases	9,846			6,778
Insurance financing, interest at 3.03% as of December 31, 2004	—			715
Total	981,695			842,348
Less current portion	(973,244		)	(1,994		)
Long-term portion	$	8,451		$	840,354

The scheduled maturities of long-term debt by year, as of December 31, 2005 are as follows (in thousands):

Year Ending December 31,
2006	$	973,244
2007	1,081
2008	1,036
2009	2,336
2010	206
Thereafter	3,792
Total debt as of December 31, 2005	$	981,695

Revolving Credit Facility

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

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

On November 7, 2005, we amended this agreement, for the period from November 4, 2005 to November 21, 2005, to increase their aggregate maximum commitments to make loans and provide letters of credit from $100 million to $105 million and, for the period from September 30, 2005 to November 29, 2005, to waive the applicability of a fixed charge coverage ratio that could otherwise limit the aggregate

F-17

maximum amount of availability for loans and letters of credit. The amendment and waiver also provides that the aggregate maximum amount of availability during the period commencing upon the effectiveness of the amendment and waiver and ending November 29, 2005 shall not exceed the borrowing base minus $15 million.

On November 21, 2005, the Company amended its revolving credit facility to provide up to $140 million of total availability (the “Amended and Restated Credit Agreement”), subject to the borrowing base described below. The Amended and Restated Credit Agreement includes a $25 million letter of credit sub-facility, with letters of credit reducing availability under the Amended and Restated Credit Agreement.

Subject to the primary security interest under the DIP Credit Facility described in Note 22, the Amended and Restated Credit Agreement is secured by a first priority security interest in substantially all our inventory, receivables and deposit accounts, 100% of the capital stock of, or other equity interests in, our existing and future domestic subsidiaries, 65% of the capital stock of, or other equity interests in existing and future first-tier foreign subsidiaries, investment property and certain other assets of the Company and its subsidiaries and a second-priority security interest in our real property, fixtures, equipment, intellectual property and other assets.

The Amended and Restated Credit Agreement will mature on May 21, 2007. The interest rates are (i) on $20 million outstanding under the Amended and Restated Credit Agreement, LIBOR plus 6.50% or Alternate Base Rate (either prime rate or .50% over the Federal Funds Rate, if higher) plus 5.25% and (ii) on additional amounts outstanding, LIBOR plus 2.75% or Alternate Base Rate plus 1.50%. The commitment fee for the unused portion of the Amended and Restated Credit Agreement is 0.50% per annum.

The borrowing base under the Amended and Restated Credit Agreement is based on specified percentages of our eligible accounts receivable, finished goods inventory and raw material inventory minus $10 million and other reserves. The Amended and Restated Credit Agreement requires us to comply with a monthly minimum fixed charge coverage ratio.

As of December 31, 2005, our borrowing base under the Amended and Restated Credit Agreement was approximately $131.2 million and we had, approximately $130.9 million of outstanding borrowings and approximately $0.3 million remaining available for borrowing under the Amended and Restated Credit Agreement.

On December 31, 2005, an Event of Default occurred under the Amended and Restated Credit Agreement as a result of our failure to make the interest payments due on December 1, 2005 under the Subordinated Notes described below.

Upon the bankruptcy filing and execution of the DIP Credit Facility described in Note 22, the commitments under the Amended and Restated Credit Agreement were terminated. The $130.9 of borrowings as of December 31, 2005 remain outstanding and are expected to be refinanced upon emergence from bankruptcy through an exit credit facility.

Issuance of 111¤8% Senior Secured Discount Notes due 2009 (the “2004 Notes”)

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

F-18

The Senior Secured Discount Notes are secured (subject to the priority security interest under the DIP Credit Facility described in Note 22) by a first priority security interest in the First Priority Collateral and a second priority security interest in the Second Priority Collateral. The Senior Secured Discount Notes are guaranteed by our existing and future domestic restricted subsidiaries and certain foreign subsidiaries. On May 6, 2005 we completed a consent solicitation relating to our Senior Secured Discount Notes. Consents were delivered to amend $298.2 million aggregate principal amount at maturity of the Senior Secured Discount Notes. As a result, $7.8 million aggregate principal amount at maturity of Senior Secured Discount Notes remain outstanding.

Unless we elect to pay cash interest as described below, and except under certain limited circumstances, the notes will accrete from the date of issuance at the rate of 111¤8% until December 15, 2006, compounded semiannually on each June 15 and December 15 commencing June 15, 2004, to an aggregate principal amount of $1,000 per note ($37.8 million in the aggregate assuming no redemption or other repayments). Commencing on December 15, 2006, interest on the notes will accrue at the rate of 111¤8% per annum and will be payable in cash semiannually on June 15 and December 15, commencing on June 15, 2007.

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

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

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

The bankruptcy filing constituted an Event of Default under the 2004 Notes, which have been classified as current liabilities in the consolidated balance sheet, but the holders of the notes and the trustee under the indenture are prohibited from exercising remedies thereunder without prior approval by the bankruptcy court. Our proposed plan of reorganization provides for the 2004 Notes to be reinstated in accordance with their terms.

115¤8% Senior Secured Notes due 2009 (the “Amended 2004 Notes”)

On April 8, 2005, Pliant Corporation commenced a consent solicitation relating to its 111¤8% Senior Secured Discount Notes due 2009 seeking consents, among other things, to (i) eliminate the current requirement to pay cash interest on the notes beginning in 2007 and, in lieu thereof, pay non-cash interest in the form of additional notes through maturity; (ii) increase the interest rate of the notes for which consents are received; (iii) increase the redemption prices of the notes for which consents are received; and (iv) eliminate certain restrictive covenants as they apply to notes for which consents are not received. On May 6, 2005, Pliant consummated this solicitation as consents to the proposed amendments were delivered with respect to $298.2 million of the total $306.0 million aggregate principal amount at maturity of the 111¤8% Senior Secured Notes due 2009,all of which were accepted by Pliant. As a result, $250.6 million principal amount of 115¤8% Senior Secured Notes due 2009were outstanding as of May 6, 2005. On

F-19

June 15, 2005, we issued an additional $3.1 principal amount of the 115¤8% Senior Secured Notes due 2009as payment in kind interest pursuant to the amended and restated indenture 115¤8% Senior Secured Notes due 2009.

On or after June 15, 2007, we may redeem some or all of the notes at the following redemption prices (expressed as percentages of the sum of the principal amount, plus accrued and unpaid interest); 111.625% if redeemed prior to June 15, 2007; 108.719% if redeemed prior to December 15, 2007; 105.813% if redeemed prior to June 15, 2008; 102.906% if redeemed prior to December 15, 2008; and 100.000% if redeemed on or before June 15, 2009.

Prior to June 15, 2007, we may redeem up to a maximum of 35% of the principal amount of the Amended 2004 Notes with the net cash proceeds of certain equity offerings by us at a redemption price equal to 111.625% of the sum of the principal amount plus accrued and unpaid interest, provided that after giving effect to such redemption (i) at least 65% of the principal amount of the notes remain outstanding and (ii) any such redemption by us is made within 120 days after such equity offering.

The 115¤8% Senior Secured Notes due 2009 are secured (subject to the priority security interest in the DIP Credit Facility described in Note 22) on a first-priority basis by a security interest in our real property, fixtures, equipment, intellectual property and other assets other than the Second Priority Collateral (the “First-Priority Collateral”) and on a second-priority basis by a security interest in substantially all our inventory, receivables and deposit accounts, 100% of the capital stock of, or other equity interests in existing and future domestic subsidiaries and foreign subsidiaries that are note guarantors, 65% of the capital stock of, or other equity interests in existing and future first-tier foreign subsidiaries, investment property and certain other assets of the Company and the note guarantors (the “Second-Priority Collateral”).

The bankruptcy filing constituted an Event of Default under the Amended 2004 Notes, which have been classified as current liabilities in the consolidated balance sheet, but the holders of the notes and the trustee under the indenture are prohibited from exercising remedies thereunder without prior approval by the bankruptcy court. Our proposed plan of reorganization provides for the Amended 2004 Notes to be reinstated in accordance with their terms.

111¤8% Senior Secured Notes due 2009 (the “2003 Notes”)

On May 30, 2003, we completed the sale of $250 million aggregate principal amount of our 111¤8% Senior Secured Notes due 2009. The 111¤8% Senior Secured Notes due 2009 mature on September 1, 2009, and interest is payable on March 1 and September 1 of each year. The net proceeds from the sale of the 111¤8% Senior Secured Notes due 2009 were used to repay borrowings under our then existing credit facilities in accordance with an amendment to our existing credit facilities. The Senior Secured Notes due 2009 rank equally with our existing and future senior debt and rank senior to our existing and future subordinated indebtedness, including the 13% Senior Subordinated Notes due 2010. The 111¤8% Senior Secured Notes due 2009 are secured, on a second-priority lien basis (subject to the priority security interest in the DIP Credit Facility described in Note 22) by a substantial portion of our assets. Due to this second-priority status, the 111¤8% Senior Secured Notes due 2009 effectively rank junior to our obligations secured by a first-priority lien on the collateral securing the 111¤8% Senior Secured Notes due 2009 to the extent of the value of such collateral. In addition, the 111¤8% Senior Secured Notes due 2009 effectively rank junior to any of our obligations that are secured by a lien on assets that are not part of the collateral securing the 111¤8% Senior Secured Notes due 2009, to the extent of the value of such assets. The 111¤8% Senior Secured Notes due 2009 are guaranteed by some of our subsidiaries.

Prior to June 1, 2009, we may, on one or more occasions redeem up to a maximum of 35% of the original aggregate principal amount of the 111¤8% Senior Secured Notes due 2009 with the net cash

F-20

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

The bankruptcy filing constituted an Event of Default under the 2003 Notes, which have been classified as current liabilities in the consolidated balance sheet, but the holders of the notes and the trustee under the indenture are prohibited from exercising remedies thereunder without prior approval by the bankruptcy court. Our proposed plan of reorganization provides for the 2003 Notes to be reinstated in accordance with their terms.

13% Senior Subordinated Notes due 2010 (the “2000/2002 Notes”)

In 2000, we issued $220 million aggregate principal amount of 13% Senior Subordinated Notes due 2010. In 2002, we issued an additional $100 million of 13% Senior Subordinated Notes due 2010. The 13% Senior Subordinated Notes due 2010 mature on June 1, 2010, and interest on the 13% Senior Subordinated Notes due 2010 is payable on June 1 and December 1 of each year. The 13% Senior Subordinated Notes due 2010 are subordinated to all of our existing and future senior debt, rank equally with any future senior subordinated debt, and rank senior to any future subordinated debt. The 13% Senior Subordinated Notes due 2010 are guaranteed by some of our subsidiaries. The 13% Senior Subordinated Notes due 2010 are unsecured. We may not redeem the 13% Senior Subordinated Notes due 2010 prior to June 1, 2005. On or after that date, we may redeem the 13% Senior Subordinated Notes due 2010, in whole or in part, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest: 106.5% if redeemed prior to June 1, 2006; 104.333% if redeemed prior to June 1, 2007; 102.167% if redeemed prior to June 1, 2008; and 100% if redeemed on or after June 1, 2008.

On November 4, 2005, we entered into a First Supplemental Indenture with respect to each of the Indentures, dated May 31, 2000 and April 10, 2002, among Pliant Corporation, certain subsidiaries of Pliant Corporation and The Bank of New York, as trustee, governing Pliant Corporation’s 13% Senior Subordinated Notes. The Indentures were amended to increase the amount of indebtedness permitted to be incurred thereunder by $25 million, which additional indebtedness may be senior to the 13% Senior Subordinated Notes. On November 17, 2005, we further amended the Indentures to modify the anti-layering covenant and related definition of “senior indebtedness” and to increase the amount of senior indebtedness permitted to be incurred under the 2000 Indenture by an additional $20 million. Those amendments allowed us to enter into the Amended and Restated Credit Agreement, which designates a portion of the indebtedness incurred thereunder as junior in right of payment to the balance of such indebtedness, and permit us to utilize the maximum availability thereunder.

The Company did not make the $20.8 million interest payments that were due under the Subordinated Notes on December 1, 2005. As a result of the failure to make those interest payments by December 31, 2005, an Event of Default occurred under the Subordinated Notes on December 31, 2005. As a result, the Subordinated Notes have been classified as current liabilities in the consolidated balance sheet. The holders of the notes and the trustee under the indentures are prohibited from exercising remedies thereunder without prior approval by the bankruptcy court. Our proposed plan of reorganization provides for the 2000/2002 Notes to be exchanged for a combination of new debt, new preferred stock, new common stock and, in certain circumstances, cash.

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

Interest Rate Risk and Derivative Instruments

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

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

As of December 31, 2005 and 2004, we had no outstanding interest rate derivatives. The fair value of our interest rate derivative agreements reported on our consolidated balance sheet at December 31, 2003 in other liabilities is approximately $3.6 million. The effective portion of the changes in fair value of these instruments is reported in other comprehensive income. As the hedged contract matures, the gain or loss is recorded as interest expense in the consolidated statement of operations. Any changes in fair value of the ineffective portion of the instruments is reported as interest expense in the consolidated statement of operations. The ineffective portion for the years ended December 31, 2003 was not material.

The change in accumulated derivative loss included as a part of accumulated other comprehensive loss as of December 31, 2005 is as follows (in thousands):

	2005			2004			2003
Beginning accumulated derivative loss, net of taxes		$	—	$	2,220		$	5,397
Change associated with current period hedge transactions		—		—			(3,022		)
Amount reclassified into earnings		—		(2,220		)	(155		)
Ending accumulated derivative loss, net of taxes		$	—	$	—		$	2,220

Interest Expense

Interest expense—current and long-term debt in the statement of operations for 2005, 2004 and 2003 are as follows (in thousands):

	2005		2004		2003
Interest expense accrued, net	$	109,038	$	95,191	$	78,299
Recurring amortization of financing fees	5,256		4,510		5,282
Write-off of previously capitalized financing fees	—		7,897		5,294
Change in fair value and cash payment of interest rate derivatives	—		2,755		7,529
TOTAL	$	114,294	$	110,353	96,404
Cash interest payments	$	60,890	$	80,411	$	76,341

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8.Leases

Capital LeasesWe have acquired certain land, building, machinery and equipment under capital lease arrangements that expire at various dates through 2018. At December 31, the gross amounts of plant and equipment and related accumulated depreciation recorded under capital leases were as follows (in thousands):

	2005			2004
Land and building	$	4,639		$	247
Machinery and equipment	7,317			7,317
Total assets held under capital leases	11,956			7,564
Less: accumulated depreciation	(3,372		)	(436		)
	$	8,584		$	7,128

In December 2005, the Company recorded a capital lease of $4.3 million for the buildings at our Mexico facilities in our Specialty Products Group. In November 2004, the Company entered into a capital lease of $5.1 million for a production line in our Industrial segment. Amortization expense associated with capital leases is included in depreciation expense.

Operating Leases   We have non-cancelable operating leases, primarily for vehicles, equipment, warehouse, and office space that expire through 2014, as well as month-to-month leases. The total expense recorded under all operating lease agreements in the accompanying consolidated statements of operations is approximately $11 million, $11.2 million, and $12.6 million, for the years ended December 31, 2005, 2004 and 2003, respectively. Future minimum lease payments under operating leases and the present value of future minimum capital lease payments (with interest rates between 8.9% and 12.3%) as of December 31, 2005 are as follows (in thousands):

Year Ending December 31	Operating Leases			Capital Leases
2006		$	8,929	$	2,696
2007		7,131		2,099
2008		3,678		1,975
2009		3,483		3,168
2010		2,323		887
Thereafter		6,688		6,583
Total minimum lease payments		$	32,232	$	17,408
Amounts representing interest				(7,562		)
Present value of net minimum capital lease payments				$	9,846

9.Income Taxes

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

	2005			2004			2003
United States	$	(99,739	)	$	(82,859	)	$	(70,539	)
Foreign	(10,114		)	(11,709		)	(17,230		)
Total	$	(109,853	)	$	(94,568	)	$	(87,769	)

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

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

	2005			2004			2003
Current:
Federal	$	—		$	—		$	—
State	77			80			82
Foreign	1,035			1,714			3,600
Total current	1,112			1,794			3,682
Deferred:
Federal	(10		)	(1,048		)	216
State	(18		)	(346		)	169
Foreign	933			1,189			1,123
Total deferred	905			(205		)	1,508
Total income tax expense	$	2,017		$	1,589		$	5,190

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

	2005			2004			2003
Income (loss) from continuing operations before income taxes	$	(109,853	)	$	(94,568	)	$	(87,769	)
Expected income tax provision (benefit) at U.S. statutory rate of 35%	(38,448		)	(33,099		)	(30,719		)
Increase (decrease) resulting from:
Goodwill	—			3			3,075
Accrued dividends on preferred stock	14,272			12,364			—
State taxes	(2,307		)	(1,597		)	(2,304		)
Change in valuation allowance	22,857			15,074			20,594
Foreign rate difference	3,983			4,277			9,755
Other, net	1,660			4,567			4,789
Total income tax expense	$	2,017		$	1,589		$	5,190
Effective income tax rate	1.8		%	1.7		%	5.9		%

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

	2005			2004
Deferred income tax assets:
Net operating loss carry forwards	$	118,519		$	100,267
AMT and foreign tax credit carry forwards	4,755			4,755
Accrued pension costs	12,289			6,132
Accrued employee benefits	8,550			7,664
Accrued plant closing costs	1,080			1,929
Allowance for doubtful trade accounts receivable	1,890			1,129
Inventory related costs	806			973
Other	1,858			2,852
	149,747			125,701
Valuation Allowance	(84,978		)	(61,694		)
Total deferred income tax assets	64,769			64,007
Deferred income tax liabilities:
Tax depreciation in excess of book depreciation	(70,857		)	(71,090		)
Amortization of intangibles	(7,692		)	(7,329		)
Other	(6,371		)	(5,060		)
Total deferred income tax liabilities	(84,920		)	(83,479		)
Net deferred income tax liability	$	(20,151	)	$	(19,472	)
As reported on consolidated balance sheets:
Net current deferred income tax asset	$	11,424		$	11,961
Net non-current deferred income tax liability	(31,575		)	(31,433		)
Net deferred income tax liability	$	(20,151	)	$	(19,472	)

The net operating loss carry forwards for federal tax purposes are approximately $303.9 million. These losses expire in 2020 through 2025. Due to uncertainty regarding realization, valuation allowances of approximately $79.0 million and $55.7 million in 2005 and 2004 respectively have been recorded to offset the deferred tax asset related to the net operating losses.

The foreign tax credit carry forwards for federal tax purposes are approximately $3.6 million expiring in 2010 through 2011. Due to uncertainty regarding realization, valuation allowances of approximately $3.6 million for 2005 and 2004 has been recorded to offset the deferred tax asset related to the foreign tax credits.

Undistributed earnings of foreign subsidiaries amounted to approximately $19.3 million as of December 31, 2005. Approximately $10.5 million is considered to be permanently invested and $8.9 million may be distributed in future years. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes, subject to an adjustment for foreign tax credits, and withholding taxes payable to foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with the calculation.

10.   Employee Benefit Plans

Defined Contribution Plan   We sponsor a salary deferral plan covering substantially all of our non-union domestic employees. Plan participants may elect to make voluntary contributions to this plan up to 15% of their compensation. We contribute up to 1% of the participants’ compensation based on our profits and also match employee contributions up to 2% of the participants’ compensation. We expensed approximately $2.2 million, $1.7 million and $2.0 million as our contribution to this plan for the years ended December 31, 2005, 2004 and 2003, respectively.

F-25

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

The consolidated accrued net pension expense for the years ended December 31, 2005, 2004 and 2003 includes the following components (in thousands):

	2005			2004			2003
United States Plans
Service cost-benefits earned during the period	$	421		$	2,583		$	4,474
Interest cost on projected benefit obligation	4,837			4,970			5,157
Expected return on assets	(5,213		)	(4,560		)	(3,476		)
Curtailment gain	—			(1,562		)	—
Other	124			372			517
Total accrued pension expense	$	169		$	1,803		$	6,672
Germany Plan
Service cost-benefits earned during the period	$	127		$	112		$	98
Interest cost on projected benefit obligation	121			115			93
Total accrued pension expense	$	248		$	227		$	191

Employer Contributions
2006 Expected to plan trusts	$	5,420
Expected Benefit Payments
2006	$	2,953
2007	3,039
2008	3,158
2009	3,325
2010	3,502
2011-2015	21,514

	2005		2004		2003
Weighted-Average Assumptions Used to Determine Net Cost
Discounted rate	6.00	%	6.25	%	6.75	%
Expected return on plan assets	9.00	%	9.00	%	9.00	%
Rate of compensation increase (non-union plans)	4.0	%	4.0	%	4.0	%

Long-Term Rate Investment Return Assumption

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

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Investment Strategy

Our investment portfolio contains a diversified blend of equity and debt securities. Furthermore, equity investments are diversified across domestic and international stocks as well as large and small capitalizations. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews. The target allocation of equity securities is 70 percent of the plan assets. The target allocation of debt securities is 30 percent of the plan assets. As of December 31, 2005, the actual allocation was 69 percent equity securities. and 31 percent fixed income.

Measurement date

Pliant Corporation uses a measurement date of December 31 for its pension plans. The following tables set forth the funded status of the United States Plans and the Germany Plan as of December 31, 2005, 2004, and 2003 and the amounts recognized in the consolidated balance sheets at those dates (in thousands):

	2005			2004			2003
United States Plans
Change in benefit obligation:
Obligation at January 1	$	80,564		$	87,369		$	73,003
Service cost	421			2,583			4,474
Interest cost	4,837			4,970			5,157
Plan amendments	—			—			122
Curtailments	—			(14,875		)	—
Actuarial (gain) loss	4,300			3,247			7,112
Benefits paid	(2,949		)	(2,730		)	(2,499		)
Obligation at December 31	$	87,173		$	80,564		$	87,369
Change in plan assets:
Fair value of assets at January 1	$	58,373		$	48,838		$	37,071
Actual return on plan assets	3,262			5,004			7,146
Employer contributions	446			7,261			7,120
Benefit payments	(2,949		)	(2,730		)	(2,499		)
Fair value of plan assets at December 31	$	59,132		$	58,373		$	48,838
Underfunded status at December 31	$	28,040		$	22,191		$	38,531
Unrecognized net actuarial gain (loss)	(12,685		)	(6,506		)	(15,762		)
Unrecognized prior service cost	(736		)	(789		)	(2,415		)
Accrued long-term pension liability included in other liabilities	$	14,619		$	14,896		$	20,354

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

	2005			2004
Accrued benefit cost	$	14,619		$	14,896
Additional minimum liability in other liabilities	12,112			6,388
Intangible asset	(736		)	(789		)
Accumulated other comprehensive income	(11,376		)	(5,599		)
Accumulated pension liability	$	14,619		$	14,896

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

	2005			2004
Projected benefit obligation	$	87,173		$	80,564
Accumulated benefit obligation	85,863			79,657
Fair value of Assets	59,132			58,373
Weighted-Average Assumptions as of December 31
Discount rate	5.75		%	6.00		%
Rate of Compensation increase	4.00		%	4.00		%

	2005			2004
Germany Plan
Change in benefit obligation:
Obligation at January 1	$	2,315		$	1,967
Service cost	127			112
Interest cost	121			115
Benefits paid	(33		)	(34		)
Change due to exchange rate	(123		)	155
Obligation at December 31	$	2,407		$	2,315
Fair value of plan assets at December 31	None			None
Underfunded status at December 31	$	2,407		$	2,315
Unrecognized net actuarial gain (loss)	(61		)	139
Accrued long-term pension liability included in other liabilities	$	2,346		$	2,454

Assumptions used for future compensation was 1.75% for 2005, 2004 and 2003. Discount rates were 4.5% for 2005, 5.25% for 2004 and 5.75% for 2003. The cash surrender value of life insurance policies for Germany Plan participants included in other assets in the consolidated balance sheets is approximately $1.1 million and $1.3 million as of December 31, 2005 and 2004.

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

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

Other Plans   As part of the acquisition of Blessings Corporation in 1998, we assumed two supplemental retirement plans covering certain former employees of Blessings Corporation. The liability for these plans included in other liabilities and at December 31, 2005 was approximately $1.8 million. The liability for these plans was included in other liabilities at December 31, 2004 was approximately $1.9 million. This liability was frozen at the time of the acquisition.

11.   Redeemable Stock

Common StockOn May 31, 2000, we consummated a recapitalization pursuant to an agreement dated March 31, 2000 (“Recapitalization”) among us, our then existing stockholders and an affiliate of J. P. Morgan Partners, LLC, whereby J. P. Morgan Partners, LLC acquired majority control of our common stock. Prior to the Recapitalization, we sold 50,611 shares of Class C nonvoting common stock to employees. As consideration, we received cash of approximately $2.5 million and secured promissory notes for approximately $2.6 million. We redeemed 1,100 of these shares prior to the Recapitalization. An

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additional 17,967 shares were redeemed in connection with the Recapitalization, and the remaining 31,544 shares were exchanged for the same number of common shares.

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

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

In connection with the Recapitalization in May 2000, we sold an aggregate of 32,750 shares of additional restricted common stock to Messrs. Durham, Knott, Sorensen and Moffitt for $483.13 per share, the estimated fair market value. We received, as consideration, notes receivable totaling $15.8 million. Under the May 2000 restricted stock purchase agreements related to the restricted common stock, we have repurchase rights, which allow us to repurchase unvested shares from these individuals, if the individuals cease to be employees for any reason. The repurchase rights lapsed with respect to one-sixth of these shares on January 1, 2001. The repurchase rights lapsed with respect to an additional one-sixth of these shares in January 2002 based on the financial results for the year ended December 31, 2001. Vesting for the remainder of the shares is reviewed at the end of each calendar quarter as follows: (a) vesting in full if 100% or more of the applicable target market value of equity is achieved as of the end of the applicable calendar quarter and (b) partial vesting if more than 90% of the applicable target market of equity is achieved as of the end of the applicable calendar quarter. If the applicable targets are below 90% each year, vesting will automatically occur in full on December 31, 2009. The repurchase rights also terminate in the event of certain acceleration events as defined in the agreement. The repurchase price per share is the original price paid by the employee plus interest compounded annually at 7% commencing on the 181st day after the date of termination of the employee through the date on which the shares are actually repurchased. The foregoing repurchase rights with respect to the restricted stock apply only to unvested restricted shares. As discussed above, however, our employment agreements with Messrs. Durham, Knott, Sorensen and Moffitt established additional repurchase rights and put options applicable to all other shares held by these individuals.

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

On December 27, 2000, we entered into a severance agreement with Mr. Sorensen. Under the agreement, we cancelled approximately $133,000 of accrued interest on a note receivable. We repurchased 6,211 shares of restricted stock for $483.13 per share and offset the purchase price against $3.0 million of

F-29

note principal. In addition, we agreed on January 2, 2001, to repurchase an additional 539 shares of restricted stock for $483.13 per share and offset the purchase price against $260,000 of note principal. The Company’s repurchase rights were changed on the remaining 7,423 shares of common stock owned by Mr. Sorensen, whereby the Company agreed not to repurchase the shares until February 28, 2003 at a repurchase price of the greater of the fair market value or the balance on the note receivable. Interest ceased to accrue on the remaining $787,000 balance of the note related to Mr. Sorensen’s purchase of stock in 1999. Further, the put option was cancelled.

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

On February 1, 2001, we amended Mr. Durham’s promissory notes that were issued in connection with his purchases of stock in 1999 and 2000. Under the amended notes receivable, interest ceased to accrue, effective December 31, 2000, on one note with a principal balance of $1.6 million and another note with a principal balance of $7.0 million. Further, the notes were modified to remove the full recourse provisions and modify the related pledge agreement. As a result of these modifications, Mr. Durham’s purchase of stock for promissory notes will now be accounted for as stock options and will be subject to variable accounting. Accordingly, changes in the fair value of the common stock in excess of the note balance will be recorded as compensation expense until the note is paid in full. In addition, interest income will not be recorded on these notes.

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

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

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The separation agreement preserved the put option established by Mr. Durham’s employment agreement with respect to his shares. For purposes of this put option, the separation agreement provides that the price per share to be paid by us is $483.13 with respect to common stock, $483.13 less any exercise price with respect to warrants, and the liquidation preference with respect to preferred stock. On July 9, 2002, Mr. Durham exercised his put option with respect to 28,289 shares of common stock, 1,232 shares of preferred stock and warrants to purchase 1,250.48 shares of common stock. Mr. Durham’s put option is subject to any financing or other restrictive covenants to which we are subject at the time of the proposed repurchase. Restrictive covenants under our credit facilities limit the number of shares we can currently repurchase from Mr. Durham. On October 3, 2002, as permitted by the covenants contained in our credit facilities, we purchased 8,204 shares from Mr. Durham for a purchase price of $3,963,599 less the outstanding amount of the Additional Note, which was cancelled. In December 2002 we purchased an additional 1,885 shares of common stock from Mr. Durham for an aggregate purchase price of approximately $910,700. In the event we were required to repurchase Mr. Durham’s shares of common stock, preferred stock and warrants, our obligation to Mr. Durham would be approximately $10,623,097 as of December 31, 2005, excluding accrued preferred dividends and subject to any rights of setoff we may have.

As of December 31, 2005 and 2004, there were a total of 29,073 outstanding common shares subject to put options as described above, of which 12,765 shares were acquired by the employees for cash from 1997 through 1999. As a result of the put options, the carrying value of all shares subject to put options will be adjusted to fair value at each reporting period with a corresponding offset to shareholders’ equity for amounts related to the 12,765 shares and compensation expense for amounts related to the remaining shares until the notes receivable are paid in full.

Preferred Stock   We are authorized to issue up to 200,000 shares of preferred stock. As of December 31, 2005, 140,973 shares were issued and designated as Series A Cumulative Exchangeable Redeemable Preferred Stock (the “Preferred Stock”). This Preferred Stock has no voting rights. In connection with the Recapitalization, we sold 100,000 shares of Preferred Stock and detachable warrants to purchase 43,242 shares of common stock for net consideration of $98.5 million, net of issuance costs of $1.5 million. We allocated approximately $80.0 million to Preferred Stock and $18.5 million to the warrants based on the relative fair values of the instruments. In connection with the Uniplast acquisition we issued 30,983 shares of Preferred Stock (including 1,983 shares to employees) and detachable warrants to purchase shares of common stock for a consideration of $31.0 million, net of issue costs. We allocated $18.6 million to Preferred Stock, and $12.4 million to the warrants based on the relative fair values of the instruments. The common stock warrants have an exercise price of $0.01 per share and expire on May 31, 2011. In March 2003 we issued 10,000 shares of Preferred Stock and detachable warrants to purchase 43,962 shares of common stock. We allocated $9.5 million to Preferred Stock and $0.5 million to the warrants based on the relative fair values of the instrument. Direct issuance costs of $0.5 million were netted against the proceeds received.

Dividends on Preferred Stock accrued at an annual rate of 14% until September 30, 2005. Beginning October 1, 2005, the annual dividend rate increased to 16%.

The Preferred Stock is our most senior class of capital stock. We may, at our option, exchange the Preferred Stock for 14% senior subordinated exchange notes so long as such exchange and the associated debt incurrence is permitted by our existing debt instruments. We must redeem the Preferred Stock at a price equal to its liquidation preference of $1,000 per share, plus accumulated dividends, on May 31, 2011.

As a result of the mandatory redemption features, as of December 31, 2005, the carrying value of the Preferred Stock is net of $24.6 million unamortized discount due to detachable warrants to purchase common stock. This unamortized discount is being accreted towards the $141.0 million redemption value

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at May 31, 2011. In addition, the preferred stock balance as of December 31, 2005 includes $148.0 million for accrued dividends.

On September 24, 2004, we adopted a 2004 Restricted Stock Incentive Plan, pursuant to which we sold to our President and Chief Executive Officer and selected additional officers of the Company, 704 shares of a total of 720 shares of a newly-created, non-voting Series B Redeemable Preferred Stock for a cash purchase price of $162 per share. These shares were issued in private transactions with officers of the Company and therefore were exempt from the registration requirements of the Securities Act of 1933. On December 22, 2004, the remaining 16 authorized shares were issued to an officer for a cash purchase price of $162 per share. During 2005, 92 shares were repurchased by the Company at their original issuance price of $162 per share. The Series B Preferred Stock will be automatically converted into common equity of the Company upon the consummation of an underwritten public offering registered under the Securities Act of shares of capital stock of the Company resulting in aggregate proceeds (net of underwriters discounts and commissions) to the Company of not less than $100 million. This Preferred Stock has no voting rights.

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

12. Stock Option Plans

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

In August 2002, we adopted our 2002 Stock Incentive Plan. The 2002 plan authorizes grants of incentive stock options, nonqualified stock options and stock bonuses, as well as the sale of shares of common stock, to our employees, officers, directors and consultants of Pliant or any of its subsidiaries. A total of 4,793 shares are authorized for issuance under the 2002 plan. As of December 31, 2005, no options or shares had been granted or sold under the 2002 plan.

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

	Option Share		Weighted Average Exercise Price
Outstanding at December 31, 2002	51,342			416.70
Granted	250			483.13
Exercised	—			—
Forfeited or cancelled	(6,580	)		483.13
Outstanding at December 31, 2003	45,012			407.25
Granted	3,850			483.13
Exercised	—			—
Forfeited or cancelled	(17,394	)		483.13
Outstanding at December 31, 2004	31,468			396.74
Granted	—			—
Exercised	—			—
Forfeited or cancelled	(4,282	)		483.13
Outstanding at December 31, 2005	27,186			357.67
Exercisable at December 31, 2005	11,507			186.73

The weighted average remaining contractual life of the options is approximately four years at December 31, 2005. The options granted prior to January 1, 2001 pursuant to the 2000 plan, as amended, provide for vesting as follows: (1) one-sixth are “time-vested” options or shares, which vested on January 1, 2001, so long as the recipient was still our employee on such date, and (2) the remainder are “performance-vested” options or shares, which vest in increments upon the achievement of performance targets as follows: (a) vesting in full, if 100% or more of the applicable performance target is achieved as of the end of any calendar quarter during the option term and (b) partial vesting if more than 90% of the applicable performance target is achieved as of the end of any calendar quarter during the option term. Moreover, all performance-vested options or shares not previously vested in accordance with the preceding sentence will vest automatically in full on December 31, 2009 so long as the recipient is still our employee on such date. Options granted pursuant to the 2000 plan subsequent to January 1, 2001 vest similarly, except that all of the options are “performance-vested” options, which vest in increments upon the achievement of performance targets. As of December 31, 2005, 8,902 options are exercisable at $100 per share and 2,605 are exercisable at $483.13 per share.

13. Commitments and Contingencies

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

Royalty Agreements   We have entered into royalty agreements (the “Agreements”) for the right to use certain patents in the production of our Winwrap stretch film. The Agreements require us to pay the patent holder a fee of $.05 for each pound of Winwrap produced and $.10 per pound for each pound of coreless Winwrap produced. The Agreements terminate upon the expiration of the related patents in 2009. During the years ended December 31, 2005, 2004 and 2003, we paid and expensed royalties of $1.7 million, $1.6 million, and $2.0 million, respectively, under the Agreements.

Litigation   On January 3, 2006, Pliant Corporation and ten subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) (the

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“Chapter 11 Cases”). The Chapter 11 Cases are being jointly administered under the caption “In re: Pliant Corporation, et al., Case No. 06-10001”. Three of our subsidiaries with Canadian operations commenced ancillary proceedings in a Canadian court to recognize the Chapter 11 proceedings as “foreign proceedings” pursuant to Canada’s Companies’ Creditors Arrangement Act (“CCAA”). Our operations in Mexico, Germany, and Australia were not included in the Chapter 11 filing and are not subject to the reorganization proceedings.

As a consequence of our commencement of these Chapter 11 Cases, all pending claims and litigation against us in the United States have been automatically stayed pursuant to Section 362 of the Bankruptcy Code. In addition, as a consequence of the commencement of the proceedings in Canada recognizing the Chapter 11 proceedings as “foreign proceedings” pursuant to the CCAA, all pending claims and litigation against our subsidiaries operating in Canada also have been stayed by order of the Canadian court. During the pendency of the Chapter 11 Cases, we are operating our business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

On the same day as we filed our voluntary petitions, we also filed a motion seeking procedural consolidation of these Chapter 11 Cases for ease of administration, which order was granted by the Bankruptcy Court on January 4, 2006. The Bankruptcy Court also granted certain other motions in substantially the manner requested seeking typical “first day” relief to ensure that we were able to transition into the Chapter 11 process with as little disruption to our business as possible and to enable our business to function smoothly while the Chapter 11 Cases were pending. The most significant of these granted “first day” motions authorized us to (i) pay prepetition wages and other benefits to our employees, (ii) honor prepetition customer obligations and continue customer programs, (iii) pay certain prepetition claims of shippers, warehouseman and other lien claimants, (iv) make payments to certain prepetition creditors that were vital to our uninterrupted operations, (v) continue use of our existing cash management system and bank accounts and (vi) obtain postpetition financing and use cash collateral. In addition, the Bankruptcy Court authorized us to enter into a postpetition debtor-in-possession financing facility on an interim basis on January 4, 2006 and on a final basis on February 2, 2006 (as amended on March 13, 2006).

The United States Trustee for the District of Delaware appointed an official committee of unsecured creditors on January 13, 2006. In addition, three unofficial ad hoc committees of note holders are represented in the Chapter 11 Cases. On March 17, 2006, we filed a proposed plan of reorganization with the Bankruptcy Court, which plan has not yet been voted on by the holders of impaired claims or interests or confirmed by the Bankruptcy Court.

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

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

14. Operating Segments

Operating segments are components of our business for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. This information is reported on the basis that it is used internally for evaluating segment performance.

We have four operating segments; Specialty Products Group, which manufactures personal care, medical and agricultural films in it’s Specialty Films division and printed rollstock, bags and sheets used to

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package food and consumer goods in the Printed Products division; Industrial Films segment which manufactures stretch film used to bundle, unitize and protect palletized loads during shipping and storage and PVC films used by supermarkets, delicatessens and restaurants to wrap meat, cheese and produce; Engineered Films segment which manufactures film for sale to converters of flexible packaging; and Performance Films segment which manufactures a variety of barrier and custom film for smaller niche flexible packaging and industrial markets.

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

Segment profit and segment assets as of and for the years ended December 31, 2005, 2004 and 2003 are presented in the following table (in thousands). Certain reclassifications have been made to the prior year amounts to be consistent with the 2005 presentation.

	Specialty Products Group		Industrial Films		Engineered Films			Performance Films			Corporate/ Other			Total
2005
Net sales to customers	$	410,233	$	306,984		$	241,802		$	106,109	$	7,712		$	1,072,840
Intersegment sales	6,655		15,707			6,251			1,592		(30,205		)	—
Total net sales	416,888		322,691			248,053			107,701		(22,493		)	1,072,840
Depreciation and amortization	18,688		6,740			7,067			3,522		4,521			40,538
Interest expense	7,555		391			831			36		146,259			155,072
Segment profit (loss)	51,720		26,608			29,132			13,790		(29,255		)	91,995
Segment total assets	388,760		107,528			155,218			73,398		96,001			820,905
Capital expenditures	17,737		3,397			2,845			4,627		4,896			33,502
2004
Net sales to customers	$	390,733	$	254,104		$	218,963		$	98,148	$	6,732		$	968,680
Intersegment sales	14,030		7,170			6,146			1,936		(29,282		)	—
Total net sales	404,763		261,274			225,109			100,084		(22,550		)	968,680
Depreciation and amortization	18,932		5,589			7,090			3,447		6,352			41,410
Interest expense	4,467		29			646			13		140,523			145,678
Segment profit (loss)	48,956		26,245			33,419			15,585		(29,577		)	94,628
Segment total assets	375,033		105,543			140,799			68,190		87,527			777,092
Capital expenditures	10,452		8,113			2,011			1,140		2,374			24,090
2003
Net sales to customers	$	367,707	$	219,617		$	196,066		$	105,233	$	5,856		$	894,479
Intersegment sales	16,974		1,792			5,043			475		(24,284		)	—
Total net sales	384,681		221,409			201,109			105,708		(18,428		)	894,479
Depreciation and amortization	21,970		7,316			6,486			3,486		12,482			51,740
Interest expense	1,974		6			603			18		93,803			96,404
Segment profit (loss)	50,409		27,182			35,224			20,482		(42,061		)	91,236
Segment total assets	376,686		94,633			140,206			68,314		106,947			786,786
Capital expenditures	6,254		4,213			1,746			3,821		1,005			17,039

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

	2005			2004			2003
Profit or Loss
Total segment profit	$	91,995		$	94,628		$	91,236
Depreciation and amortization	(40,538		)	(41,410		)	(51,739		)
Impairment of Goodwill and Intangible assets	—			—			(18,255		)
Restructuring and other costs	(6,238		)	(2,108		)	(12,607		)
Interest expense	(155,072		)	(145,678		)	(96,404		)
Other expenses and adjustments for non-cash charges and certain adjustments defined by our credit agreement				—			—
Loss from continuing operations before income taxes	$	(109,853	)	$	(94,568	)	$	(87,769	)
Assets
Total assets for reportable segments	$	724,904		$	689,565		$	679,839
Assets of discontinued operations	—			—			20,708
Other unallocated assets	96,001			87,527			86,239
Total consolidated assets	$	820,905		$	777,092		$	786,786

There were no sales to a single customer in 2005, 2004 or 2003 that was more than 10% of consolidated net sales.

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

	2005		2004		2003
Net Sales
United States	$	868,875	$	779,966	$	724,048
Foreign countries (1)	203,965		188,714		170,431
Total	$	1,072,840	$	968,680	$	894,479
Long-lived assets
United States	434,725		434,645
Foreign countries	57,232		61,813
Total	$	491,957	$	496,458
Total Assets
United States	700,529		655,885
Foreign countries	120,376		121,207
Total	$	820,905	$	777,092

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

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15.   Warrants Outstanding

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

	2005	2004
Issued with the senior subordinated notes	18,532	18,532
Issued in connection with recapitalization transaction	43,242	43,242
Issued in connection with Uniplast acquisition	31,003	31,003
Issued in connection with the March 2003 Preferred Stock issuance	43,962	43,962
Total outstanding	136,739	136,739

As of December 31, 2005, 136,739 warrants were exercisable at an exercise price of $0.01 per share. The Company has reserved up to 136,739 shares of common stock for issuance upon the exercise of issued and outstanding warrants.

16.   Estimated Fair Value of Financial Instruments

The estimated fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. In the case of cash and cash equivalents, accounts receivable and accounts payable, the carrying amount is considered a reasonable estimate of fair value. The fair value of fixed debt in 2005 and 2004 was obtained from market quotes. Fair value estimates are made at a specific point in time. Because no market exists for a significant portion of our financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments, interest rate levels, and other factors. These estimates are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined or relied on with any degree of certainty. Changes in assumptions could significantly affect the estimates. See Note 7 for interest rate derivative information.

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

	2005					2004
	Carrying Amount			Estimated Fair Value		Carrying Amount			Estimated Fair Value
Financial assets:
Cash and cash equivalents		$	12,802	$	12,802		$	5,580	$	5,580
Accounts receivable		132,640		132,640			117,087		117,087
Total financial assets		$	145,442	$	145,442		$	122,667	$	122,667
Financial liabilities:
Floating rate debt		$	130,924	$	130,924		$	24,000	$	24,000
Fixed rate debt		850,771		710,335			818,348		865,583
Accounts payable		52,000		52,000			96,282		96,282
Total financial liabilities		$	1,033,695	$	893,259		$	938,630	$	985,865

17.   Related-Party Transactions

J.P. Morgan Partner and Affiliates   JPMorgan Chase Bank was the syndication agent, and its affiliate, J.P. Morgan Chase & Co., was a lender under our 2004 Credit Facility. Both JPMorgan Chase Bank and J.P. Morgan Chase & Co. received customary fees under the 2004 Credit Facility for acting in such capacities including approximately $0.9 million in 2003, $3.4 million in 2004 and $2.4 million in 2005. JPMorgan Chase Bank was also a lender under our prior credit facility, and as a result, received a portion

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of the proceeds from the financing for the Recapitalization and related transactions. Chase Securities Inc. was one of the initial purchasers in the offering of the $220.0 million aggregate principal amount of 13% senior subordinated notes due 2010, and was also the dealer manager for the debt tender offer and consent solicitation relating to our 91¤8% senior subordinated notes due 2007 and received customary fees for acting in such capacities. Each of JPMorgan Chase Bank, J.P. Morgan Chase & Co. and Chase Securities Inc. are affiliates of Southwest Industrial Films, LLC, which owns approximately 55% of our outstanding common stock and currently has the right under the stockholders’ agreement to appoint five of our directors, and of Flexible Films, LLC, which, together with affiliates, owns approximately 59% of our Preferred Stock.

18. Accumulated Other Comprehensive Income/(Loss)

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

	2005			2004
Minimum pension liability, net of taxes of $575 and $575	$	(11,213	)	$	(5,352	)
Foreign currency translation adjustments	(8,378		)	(6,491		)
Accumulated other comprehensive income/(loss)	$	(19,591	)	$	(11,843	)

19.   Condensed Consolidating Financial Statements

The following condensed consolidating financial statements present, in separate columns, financial information for (i) Pliant Corporation (on a parent only basis) with its investment in its subsidiaries recorded under the equity method, (ii) guarantor subsidiaries (as specified in the Indenture dated May 31, 2000 (the “2000 Indenture”) relating to Pliant Corporation’s $220 million senior subordinated notes due 2010 (the “2000 Notes”) and the Indenture, dated April 10, 2002 (the “2002 Indenture” and, together with the 2000 Indenture, the “Indentures”), relating to Pliant’s $100 million senior subordinated notes due 2010 (the “2002 Notes” and, together with the 2000 Notes, the “Notes”) on a combined basis, with any investments in non-guarantor subsidiaries specified in the Indentures recorded under the equity method, (iii) direct and indirect non-guarantor subsidiaries on a combined basis, (iv) the eliminations necessary to arrive at the information for Pliant Corporation and its subsidiaries on a consolidated basis, and (v) Pliant Corporation on a consolidated basis, in each case as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003. The Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary and each guarantor subsidiary is 100% owned, directly or indirectly, by Pliant Corporation within the meaning of Rule 3-10(h)(1) of Regulation S-X. There are no contractual restrictions limiting transfers of cash from guarantor and non-guarantor subsidiaries to Pliant Corporation. The condensed consolidating financial statements are presented herein, rather than separate financial statements for each of the guarantor subsidiaries, because management believes that separate financial statements relating to the guarantor subsidiaries are not material to investors.

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Condensed Consolidating Balance Sheet
As of December 31, 2005 (In Thousands)

	Pliant Corporation Parent Only			Combined Guarantors				Combined Non-Guarantors				Eliminations				Consolidated Pliant Corporation
ASSETS
Current assets:
Cash and cash equivalents	$	4,860			$	1,152			$	6,790			$	—			$	12,802
Receivables	106,735				10,137				20,812				—				137,684
Inventories	88,950				8,025				9,851				—				106,826
Prepaid expenses and other	4,903				892				1,427				—				7,222
Income taxes receivable	(701		)		1,365				410				—				1,074
Deferred income taxes	12,360				—				(936		)		—				11,424
Total current assets	217,107				21,571				38,354				—				277,032
Plant and equipment, net	243,968				15,421				35,604				—				294,993
Goodwill	167,583				13,331				1,331				—				182,245
Intangible assets, net	3,829				10,853				37				—				14,719
Investment in subsidiaries	(41,415		)		—				—				41,415				—
Other assets	49,251				—				2,665				—				51,916
Total assets	$	640,323			$	61,176			$	77,991			$	41,415			$	820,905
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt and debt in default	$	933,795			$	39,400			$	49			$	—			$	973,244
Trade accounts payable	37,826				2,909				11,265				—				52,000
Accrued liabilities	78,100				3,267				3,837				—				85,204
Due to (from) affiliates	(105,150		)		44,571				60,579				—				—
Total current liabilities	944,571				90,147				75,730				—				1,110,448
Long-term debt, net of current portion	4,100				—				4,351				—				8,451
Other liabilities	31,953				—				2,724				—				34,677
Deferred income taxes	23,945				4,503				3,127				—				31,575
Shares subject to mandatory redemption	270,689				—				—				—				270,689
Total liabilities	1,275,258				94,650				85,932				—				1,455,840
Minority interest	—				—				—				—				—
Redeemable stock:
Preferred stock	102				—				—				—				102
Common stock	6,645				—				—				—				6,645
Total redeemable stock	6,747				—				—				—				6,747
Stockholders’ (deficit):
Common stock	103,376				14,020				29,302				(43,322		)		103,376
Warrants to purchase common stock	39,133				—				—				—				39,133
Retained earnings (deficit)	(763,940		)		(49,184		)		(29,596		)		78,780				(763,940		)
Stockholders’ notes receivable	(660		)		—				—				—				(660		)
Accumulated other comprehensive loss	(19,591		)		1,690				(7,647		)		5,957				(19,591		)
Total stockholders’ (deficit)	(641,682		)		(33,474		)		(7,941		)		41,415				(641,682		)
Total liabilities and stockholders’ (deficit)	$	640,323			$	61,176			$	77,991			$	41,415			$	820,905

F-39

Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2005 (In Thousands)

	Pliant Corporation Parent Only				Combined Guarantors				Combined Non-Guarantors				Eliminations				Consolidated Pliant Corporation
Net sales		$	898,682			$	70,118			$	134,553			$	(30,513	)		$	1,072,840
Cost of sales		780,857				64,662				124,703				(30,513		)		939,709
Gross profit		117,825				5,456				9,850				—				133,131
Total operating expenses		78,711				4,451				8,832				—				91,994
Operating income (loss)		39,114				1,005				1,018				—				41,137
Interest expense		(146,638		)		(831		)		(7,603		)		—				(155,072		)
Equity in earnings of subsidiaries		(10,339		)		—				—				10,339				—
Other income (expense), net		7,171				(4,127		)		1,038				—				4,082
Income (loss) from continuing operations before income taxes		(110,692		)		(3,953		)		(5,547		)		10,339				(109,853		)
Income tax (benefit) expense		1,178				(6		)		845				—				2,017
Loss from continuing operations		(111,870		)		(3,947		)		(6,392		)		10,339				(111,870		)
Loss from discontinued operations		(1,096		)		—				—				—				(1,096		)
Net income (loss)		$	(112,966	)		$	(3,947	)		$	(6,392	)		$	10,339			$	(112,966	)

F-40

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2005 (In Thousands)

	Pliant Corporation Parent Only				Combined Guarantors				Combined Non-Guarantors				Eliminations			Consolidated Pliant Corporation
Cash flows from continuing operating activities:		$	(18,436	)		$	(36,425	)		$	(2,209	)		$	—		$	(57,070	)
Cash flows from continuing investing activities:
Capital expenditures for plant and equipment		(30,298		)		(1,020		)		(2,184		)		—			(33,502		)
Proceeds from sale of assets		58				605				4,527				—			5,190
Net cash used in investing activities		(30,240		)		(415		)		2,343				—			(28,312		)
Cash flows from continuing financing activities:
Payment of capitalized fees		(12,130		)		—				—				—			(12,130		)
Repurchase of preferred stock		(12		)		—				—				—			(12		)
Borrowing under revolver		67,524				39,400				—				—			106,924
Payments of capital lease obligations		(2,048		)		—				—				—			(2,048		)
Net cash provided by (used) in continuing financing activities		53,334				39,400				—				—			92,734
Cash used in discontinued operations		(195		)		—				—				—			(195		)
Effect of exchange rate changes on cash and cash equivalents		396				(2,111		)		1,780				—			65
Net (decrease)/increase in cash and cash equivalents		4,859				449				1,914				—			7,222
Cash and cash equivalents at beginning of the year		—				704				4,876				—			5,580
Cash and cash equivalents at end of the year		$	4,859			$	1,153			$	6,790			$	—		$	12,802

F-41

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

	Pliant Corporation Parent Only			Combined Guarantors				Combined Non-Guarantors				Eliminations				Consolidated Pliant Corporation
ASSETS
Current assets:
Cash and cash equivalents	$	—			$	704			$	4,876			$	—			$	5,580
Receivables	95,439				7,861				22,095				—				125,395
Inventories	74,672				7,411				12,217				—				94,300
Prepaid expenses and other	2,764				370				898				—				4,032
Income taxes receivable	138				223				—				—				361
Deferred income taxes	12,741				—				(780		)		—				11,961
Total current assets	185,754				16,569				39,306				—				241,629
Plant and equipment, net	240,599				17,127				39,419				—				297,145
Goodwill	167,583				13,331				1,323				—				182,237
Intangible assets, net	5,328				11,692				56				—				17,076
Investment in subsidiaries	(28,793		)		—				—				28,793				—
Other assets	35,588				—				3,417				—				39,005
Total assets	$	606,059			$	58,719			$	83,521			$	28,793			$	777,092
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable	$	76,515			$	5,848			$	13,919			$	—			$	96,282
Accrued liabilities	56,639				3,554				4,645				—				64,838
Current portion of long-term debt	1,994				—				—				—				1,994
Due to (from) affiliates	(133,109		)		75,190				57,919				—				—
Total current liabilities	2,039				84,592				76,483				—				163,114
Long-term debt, net of current portion	840,354				—				—				—				840,354
Other liabilities	23,608				—				2,846				—				26,454
Deferred income taxes	24,354				3,938				3,141				—				31,433
Shares subject to mandatory redemption	229,910				—				—				—				229,910
Total liabilities	1,120,265				88,530				82,470				—				1,291,265
Minority interest	—				—				33				—				33
Redeemable stock:
Preferred stock	117				—				—				—				117
Common stock	6,645				—				—				—				6,645
Total redeemable stock	6,762				—				—				—				6,762
Stockholders’ (deficit):
Common stock	103,376				14,020				29,302				(43,322		)		103,376
Warrants to purchase common stock	39,133				—				—				—				39,133
Retained earnings (deficit)	(650,974		)		(45,237		)		(22,767		)		68,004				(650,974		)
Stockholders’ notes receivable	(660		)		—				—				—				(660		)
Accumulated other comprehensive loss	(11,843		)		1,406				(5,517		)		4,111				(11,843		)
Total stockholders’ (deficit)	(520,968		)		(29,811		)		1,018				28,793				(520,968		)
Total liabilities and stockholders’ (deficit)	$	606,059			$	58,719			$	83,521			$	28,793			$	777,092

F-42

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

	Pliant Corporation Parent Only				Combined Guarantors				Combined Non-Guarantors				Eliminations				Consolidated Pliant Corporation
Net sales		$	796,794			$	75,931			$	125,335			$	(29,380	)		$	968,680
Cost of sales		671,297				66,431				118,471				(29,380		)		826,819
Gross profit		125,497				9,500				6,864				—				141,861
Total operating expenses		76,869				4,026				9,119				—				90,014
Operating income (loss)		48,628				5,474				(2,255		)		—				51,847
Interest expense		(140,566		)		(646		)		(4,466		)		—				(145,678		)
Equity in earnings of subsidiaries		(30,004		)		—				—				30,004				—
Other income (expense), net		8,139				(3,278		)		(5,598		)		—				(737		)
Income (loss) from continuing operations before income taxes		(113,803		)		1,550				(12,319		)		30,004				(94,568		)
Income tax (benefit) expense		119				867				603				—				1,589
Loss from continuing operations		(113,922		)		683				(12,922		)		30,004				(96,157		)
Loss from discontinued operations		—				(17,765		)		—				—				(17,765		)
Net income (loss)		$	(113,922	)		$	(17,082	)		$	(12,922	)		$	30,004			$	(113,922	)

F-43

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

	Pliant Corporation Parent Only				Combined Guarantors				Combined Non-Guarantors				Eliminations			Consolidated Pliant Corporation
Cash flows from continuing operating activities:		$	(35,311	)		$	3,305			$	30,562			$	—		$	(1,444	)
Cash flows from continuing investing activities:
Capital expenditures for plant and equipment		(17,086		)		(517		)		(6,487		)		—			(24,090		)
Proceeds from sale of assets		6,450				—				—				—			6,450
Net cash used in investing activities		(10,636		)		(517		)		(6,487		)		—			(17,640		)
Cash flows from continuing financing activities:
Payment of capitalized fees		(9,864		)		—				—				—			(9,864		)
Net proceeds from issuance of preferred stock		117				—				—				—			117
Proceeds from issuance of senior discount notes		225,299				—				—				—			225,299
Borrowings/(payments) on long-term debt		(165,922		)		—				(24,163		)		—			(190,085		)
Net cash provided by (used) in continuing financing activities		49,630				—				(24,163		)		—			25,467
Cash used in discontinued operations		(3,952		)		(892		)		—				—			(4,843		)
Effect of exchange rate changes on cash and cash equivalents		269				(2,384		)		2,848				—			733
Net (decrease)/increase in cash and cash equivalents		—				(488		)		2,760				—			2,272
Cash and cash equivalents at beginning of the year		—				1,192				2,116				—			3,308
Cash and cash equivalents at end of the year		$	—			$	704			$	4,876			$	—		$	5,580

F-44

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

	Pliant Corporation Parent Only				Combined Guarantors				Combined Non-Guarantors				Eliminations				Consolidated Pliant Corporation
Net sales		$	729,528			$	75,767			$	113,839			$	(24,655	)		$	894,479
Cost of sales		609,085				67,677				106,038				(24,655		)		758,145
Gross profit		120,443				8,090				7,801				—				136,334
Total operating expenses		94,853				10,907				22,411				—				128,171
Operating income (loss)		25,590				(2,817		)		(14,610		)		—				8,163
Interest expense		(93,821		)		(603		)		(1,980		)		—				(96,404		)
Equity in earnings of subsidiaries		(55,057		)		—				—				55,057				—
Other income (expense), net		7,238				(5,214		)		(1,552		)		—				472
Income (loss) before income taxes		(116,050		)		(8,634		)		(18,142		)		55,057				(87,769		)
Income tax (benefit) expense		(1,953		)		5,159				1,984				—				5,190
Loss from continuing operations		(114,097		)		(13,793		)		(20,126		)		55,057				(92,959		)
Loss from discontinued operations		156				(21,499		)		—				—				(21,343		)
Net income (loss)		$	(113,941	)		$	(35,292	)		$	(20,126	)		$	55,057			$	(114,302	)

F-45

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

	Pliant Corporation Parent Only				Combined Guarantors				Combined Non-Guarantors				Eliminations			Consolidated Pliant Corporation
Cash flows from continuing operating activities:		$	(14,405	)		$	(9,262	)		$	9,447			$	—		$	(14,220	)
Cash flows from continuing investing activities:
Capital expenditures for plant and equipment		(10,288		)		(1,335		)		(5,416		)		—			(17,039		)
Net cash used in continuing investing activities		(10,288		)		(1,335		)		(5,416		)		—			(17,039		)
Cash flows from financing activities:
Payment of capitalized fees		(10,801		)		—				—				—			(10,801		)
Net proceeds from issuance of common and preferred stock		9,532				—				—				—			9,532
Payment/receipt of dividend		2,499				—				(2,499		)		—			—
Borrowings/(payments) on long-term debt		47,905				—				(629		)		—			47,276
Net cash provided by (used) in continuing financing activities		49,135				—				(3,128		)		—			46,007
Cash provided by (used) in discontinuedoperations		(24,485		)		9,724				—				—			(14,761		)
Effect of exchange rate changes on cash and cash equivalents		747				1382				(443		)		—			1,686
Net (decrease)/increase in cash and cash equivalents		704				509				460				—			1,673
Cash and cash equivalents at beginning of the year		(184		)		163				1,656				—			1,635
Cash and cash equivalents at end of the year		$	520			$	672			$	2,116			$	—		$	3,308

20. OTHER INCOME (EXPENSE)

Other income for the year ended December 31, 2005 includes a $4.1 million gain in sale of our Alliant business. Other expense for the year ended December 31, 2004 includes $1.3 million loss on the sale of real property, $0.1 million currency gain, and $0.5 million other less significant items. Other income for the year ended December 31, 2003 includes $1.4 million loss on disposal of real property, $0.2 million currency gain, $0.1 million royalty income, $0.2 million rental income, and $1.4 million other less significant items.

F-46

21. SELECTED QUARTERLY INFORMATION-UNAUDITED

Selected quarterly financial information for the years ended December 31, 2005 and 2004 are as follows (in thousands):

	Quarter Ended
	December 31, 2005				September 30, 2005				June 30, 2005				March 31, 2005
Net Sales		$	288,733			$	261,973			$	259,246			$	262,888
Gross profit		33,774				32,472				32,935				33,950
Net income/(loss)		(35,986		)		(25,421		)		(26,131		)		(25,428		)

	Quarter Ended
	December 31, 2004				September 30, 2004				June 30, 2004				March 31, 2004
Net sales		$	253,536			$	243,160			$	235,185			$	236,799
Gross profit		29,982				36,219				37,327				38,333
Net income/(loss)		(29,638		)		(32,156		)		(21,369		)		(30,759		)

The quarter ended December 31, 2004 includes $4.5 million expense for an error related to accrued vacation not previously recorded. The amount does not affect historical or future cash flows and its effect on operations and financial position is immaterial.

22. SUBSEQUENT EVENTS

On January 3, 2006, Pliant Corporation and ten subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) (the “Chapter 11 Cases”). The Chapter 11 Cases are being jointly administered under the caption “In re: Pliant Corporation, et al., Case No. 06-10001”. Three of our subsidiaries with Canadian operations commenced ancillary proceedings in a Canadian court to recognize the Chapter 11 proceedings as “foreign proceedings” pursuant to Canada’s Companies’ Creditors Arrangement Act (“CCAA”). Our operations in Mexico, Germany, and Australia were not included in the Chapter 11 filing and are not subject to the reorganization proceedings.

On the same day as we filed our voluntary petitions, we also filed a motion seeking procedural consolidation of these Chapter 11 Cases for ease of administration, which order was granted by the Bankruptcy Court on January 4, 2006. The Bankruptcy Court also granted certain other motions in substantially the manner requested seeking typical “first day” relief to ensure that we were able to transition into the Chapter 11 process with as little disruption to our business as possible and to enable our business to function smoothly while the Chapter 11 Cases were pending. The most significant of these granted “first day” motions authorized us to (i) pay prepetition wages and other benefits to our employees, (ii) honor prepetition customer obligations and continue customer programs, (iii) pay certain prepetition claims of shippers, warehouseman and other lien claimants, (iv) make payments to certain prepetition creditors that were vital to our uninterrupted operations, (v) continue use of our existing cash management system and bank accounts and (vi) obtain postpetition financing and use cash collateral.

On January 3, 2006 we sought the Bankruptcy Court’s authority to enter into a postpetition financing facility to fund our operations during the pendency of the Chapter 11 Cases. We also sought the Bankruptcy Court’s authority to use the cash generated in the ordinary course of our business, which constituted “cash collateral” securing our obligations to our prepetition secured lenders and prepetition secured note holders. As adequate protection for the use of our cash collateral, we agreed to provide the prepetition secured lenders and prepetition secured note holders with replacement liens, administrative claims and, in some cases, payment of certain interest, fees and expenses. The Bankruptcy Court authorized us to enter into the postpetition financing facility on an interim basis on January 4, 2006 and on

F-47

a final basis on February 2, 2006 (as amended on March 13, 2006). Accordingly, on January 4, 2006, we entered into the Senior Secured, Super-Priority Primary Debtor-In-Possession Credit Agreement (the “DIP Credit Facility”) with certain lenders led by General Electric Capital Corporation. Although the DIP Credit Facility is nominally in the amount of $200 million, the availability is reduced by the aggregate borrowing base under our prepetition revolving credit facility agreement, and therefore the DIP Credit Facility provides for a maximum of approximately $68.8 million of additional postpetition financing subject to borrowing base availability. Our obligations under the DIP Credit Facility are secured by valid, binding, enforceable, first priority (i.e., priming) perfected security interests and liens in substantially all of our assets, as well as super-priority administrative expense claims having priority over all our unencumbered prepetition or postpetition property.

The United States Trustee for the District of Delaware appointed an official committee of unsecured creditors on January 13, 2006. In addition, three unofficial ad hoc committees of note holders are represented in the Chapter 11 Cases. On March 17, 2006, we filed a proposed plan of reorganization with the Bankruptcy Court, which plan has not yet been voted on by the holders of impaired claims or interests or confirmed by the Bankruptcy Court.

Total operating expenses include financial restructuring costs of $3.8 million for the year ended December 31, 2005 for legal, financial advisory, tax, and other professional fees.

F-48

PLIANT CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2005, 2004 and 2003
(In Thousands)

Description	Balance at Beginning of Year			Additions Charged to Profit & Loss			Write-offs				Foreign Currency Impact				Balance at End of Year
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
2005		$	4,489		$	2,608		$	(1,413)			$	(12	)	$	5,672
2004		$	4,736		$	1,600		$	(1,878	)		$	31		$	4,489
2003		$	4,627		$	1,667		$	(1,700	)		$	142		$	4,736

	Balance at Beginning of Year			Additions Charged to Continuing Operations			Additions Charged to Discontinued Operations			Balance at End of Year
INCOME TAX VALUATION ALLOWANCE:
2005		$	61,694		$	22,857		$	427	$	84,978
2004		$	39,693		$	15,074		$	6,927	$	61,694
2003		$	10,775		$	20,594		$	8,324	$	39,693

S-1

INDEX TO EXHIBITS

Exhibit  Number
2.1	Recapitalization Agreement, dated as of March 31, 2000 (the “Recapitalization Agreement”), among Pliant Corporation, Chase Domestic Investments, L.L.C., Richard P. Durham as Representative, and the shareholders of Pliant Corporation signatory thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Pliant Corporation on April 12, 2000).
2.2	Amendment No. 1, dated as of April 3, 2000, to the Recapitalization Agreement (incorporated by reference to Exhibit 2.2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
2.3	Amendment No. 2, dated as of May 31, 2000, to the Recapitalization Agreement (incorporated by reference to Exhibit 2.3 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
2.4	Debtors’ Joint Plan of Reorganization (incorporated by reference to Exhibit 2 to the Current Report on Form 8-K filed by Pliant Corporation on March 20, 2006).
3.1	Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
3.2	Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.2 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
3.3	Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.3 to Pliant Corporation’s Registration Statement on Form S 1 (File No. 333-65754)).
3.4	Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.4 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
3.5	Articles of Amendment of Third Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.5 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
3.6	Fourth Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation’s Current Report on Form 8-K filed on September 30, 2004).
3.7	Second Amended and Restated Bylaws of Pliant Corporation (incorporated by reference to Exhibit 3.6 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
4.1	Indenture, dated as of May 31, 2000, among Pliant Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).

S-2

4.2	First Supplemental Indenture, dated as of July 16, 2001, among Pliant Corporation, the New Note Guarantors party thereto, the existing Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.3 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-65754)).
4.3	Form of Second Supplemental Indenture, dated as of April 30, 2004, among Pliant Corporation, the New Note Guarantor party thereto, the existing Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.3 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.4	First Supplemental Indenture, dated as of November 4, 2005, among Pliant Corporation, as issuer, certain subsidiaries of Pliant Corporation, as guarantors, and The Bank of New York, as trustee, amending the Indenture, dated May 31, 2000, among such parties with respect to Pliant Corporation’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 4.1 to Pliant Corporation’s Current Report on Form 8-K filed on November 10, 2005).
4.5	Second Supplemental Indenture, dated as of November 17, 2005, among Pliant Corporation, as issuer, certain subsidiaries of Pliant Corporation, as guarantors, and The Bank of New York, as trustee, amending the Indenture, dated May 31, 2000 and thereafter amended, among such parties with respect to Pliant Corporation’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 4.1 to Pliant Corporation’s Current Report on Form 8-K filed on November 23, 2005).
4.6	Form of 2000 Notes (incorporated by reference to Exhibit B to Exhibit 4.1).
4.7	Indenture, dated as of April 10, 2002, among Pliant Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.4 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-86532)).
4.8	Form of First Supplemental Indenture, dated as of April 30, 2004, among Pliant Corporation, the New Note Guarantor party thereto, the existing Note Guarantors party thereto and Bank of New York, as trustee (incorporated by reference to Exhibit 4.6 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.9	First Supplemental Indenture, dated as of November 4, 2005, among Pliant Corporation, as issuer, certain subsidiaries of Pliant Corporation, as guarantors, and The Bank of New York, as trustee, amending the Indenture, dated April 10, 2002, among such parties with respect to Pliant Corporation’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 4.2 to Pliant Corporation’s Current Report on Form 8-K filed on November 10, 2005).
4.10	Second Supplemental Indenture, dated as of November 17, 2005, among Pliant Corporation, as issuer, certain subsidiaries of Pliant Corporation, as guarantors, and The Bank of New York, as trustee, amending the Indenture, dated April 10, 2002 and thereafter amended, among such parties with respect to Pliant Corporation’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 4.2 to Pliant Corporation’s Current Report on Form 8-K filed on November 23, 2005).
4.11	Form of 2002 Note (incorporated by reference to Exhibit B to Exhibit 4.4).
4.12	Indenture, dated as of May 30, 2003, among Pliant Corporation, the Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.6 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).

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4.13	Form of First Supplemental Indenture, dated as of April 30, 2004, among Pliant Corporation, the New Note Guarantor party thereto, the existing Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.9 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.14	Form of Senior Secured Note (incorporated by reference to Exhibit 4.6 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).
4.15	Form of Indenture, dated as of February 17, 2004, among Pliant Corporation, the Note Guarantors party thereto and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.8 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.16	Form of Senior Secured Discount Note (incorporated by reference to Exhibit B to Exhibit 4.8 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.17	Second Priority Security Agreement, dated as of May 30, 2003, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.8 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).
4.18	Form of Supplement No. 1 to Second Priority Security Agreement, dated as of April 30, 2004, among Uniplast Industries Co. and Wilmington Trust Company, as collateral agent (incorporated by reference to Exhibit 4.14 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.19	Form of Security Agreement dated as of February 17, 2004, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.11 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.20	Form of Canadian Security Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the guarantors party thereto, and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.12 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.21	Second Priority Pledge Agreement, dated as of May 30, 2003, among Pliant Corporation, the subsidiary guarantors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.9 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).
4.22	Form of Supplement No. 1 to Second Priority Pledge Agreement, dated as of April 30, 2004, among Uniplast Industries Co. and Wilmington Trust Company, as collateral agent (incorporated by reference to Exhibit 4.18 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-115114)).
4.23	Form of Pledge Agreement dated as of February 17, 2004, among Pliant Corporation, the subsidiary pledgors party thereto and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.14 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).

S-4

4.24	Form of Canadian Pledge Agreement, dated as of February 17, 2004, among Uniplast Industries Co., the pledgors party thereto, and Wilmington Trust Company, as Collateral Agent (incorporated by reference to Exhibit 4.15 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.25	Exchange and Registration Rights Agreement, dated as of May 31, 2000, among Pliant Corporation, the Note Guarantors party thereto, and Chase Securities, Inc. and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.3 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
4.26	Exchange and Registration Rights Agreement, dated as of April 10, 2002, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities, Inc. and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.7 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-86532)).
4.27	Exchange and Registration Rights Agreement, dated as of May 30, 2003, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities Inc., Deutsche Bank Securities, Inc. and Credit Suisse First Boston LLC, as Initial Purchasers (incorporated by reference to Exhibit 4.12 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-106432)).
4.28	Form of Exchange and Registration Rights Agreement, dated as of February 17, 2004, among Pliant Corporation, the Note Guarantors party thereto, and J.P. Morgan Securities Inc., Credit Suisse First Boston LLC and Deutsche Bank Securities Inc., as Initial Purchasers (incorporated by reference to Exhibit 4.19 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
4.29	Amended and Restated Indenture, dated as of February 17, 2004 (as amended and restated as of May 6, 2005) (incorporated by reference to Exhibit 4.26 to Post-Effective Amendment No. 2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-114608)).
4.30	Exchange and Registration Rights Agreement, dated as of May 6, 2005 (incorporated by reference to Exhibit 4.26 to Post-Effective Amendment No. 2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-114608)).
4.31	Fourth Amended and Restated Articles of Incorporation of Pliant Corporation (incorporated by reference to Exhibit 3.1 to Pliant Corporation’s Current Report on Form 8-K filed on September 30, 2004).
10.1	Note Warrant Agreement, dated as of May 31, 2000, among Pliant Corporation and The Bank of New York, as Warrant Agent, relating to the 220,000 Note Warrants (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.2	Stockholders’ Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrant holders listed on the signature pages thereto (incorporated by reference to Exhibit 10.2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.3	Amendment No. 1 and Waiver, dated as of July 16, 2001, to the Stockholder’s Agreement, dated as of May 31, 2000, among Pliant Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.3 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-65754)).

S-5

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

S-6

10.14	Amendment No. 2, dated as of March 25, 2003, to the Warrant Agreement dated as of May 31, 2000 among Pliant Corporation and the initial warrantholders listed in Schedule I thereto (incorporated by reference to Exhibit 10.13 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
10.15	Securities Purchase Agreement, dated as of July 16, 2001, among Pliant Corporation and the purchasers of Pliant Corporation’s preferred stock listed on the schedules thereto (incorporated by reference to Exhibit 10.10 to Pliant Corporation’s Registration Statement on Form S-1 (File No. 333-65754)).
10.16	Securities Purchase Agreement, dated as of March 25, 2003, among Pliant Corporation and the Purchasers named therein (incorporated by reference to Exhibit 10.15 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
10.17	Securities Purchase Agreement, dated as of March 25, 2003, between Pliant Corporation and J.P. Morgan Partners (BHCA), L.P. (incorporated by reference to Exhibit 10.16 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
10.18	Form of Purchase Agreement, dated as of February 6, 2004, among Pliant Corporation, J.P. Morgan Securities Inc., Credit Suisse First Boston LLC and Deutsche Bank Securities Inc. (incorporated by reference to Exhibit 10.18 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
10.19*	Amended and Restated Credit Agreement, dated as of November 21, 2005, by and among Pliant Corporation and certain of its subsidiaries, as borrowers, General Electric Capital Corporation, as Domestic A Agent, Administrative Agent, Collateral Agent and Lender, and Morgan Stanley Senior Funding, Inc., as Domestic B Agent and Lender.
10.20*	Reaffirmation Agreement, dated as of November 21, 2005, among Pliant Corporation and General Electric Capital Corporation, as Collateral Agent.
10.21*	Amended and Restated Guarantee Agreement, dated as of November 21, 2005, among the subsidiaries guarantors party thereto and General Electric Capital Corporation, as Administrative Agent.
10.22*	Amended and Restated Domestic Security Agreement, dated as of November 21, 2005, among the grantors party thereto and General Electric Capital Corporation, as Collateral Agent.
10.23*	Amended and Restated Canadian Security Agreement, dated as of November 21, 2005, among the grantors party thereto and General Electric Capital Corporation,  as Collateral Agent.
10.24*	Amended and Restated Domestic Pledge Agreement, dated as of November 21, 2005, among the pledgors party thereto and General Electric Capital Corporation, as Collateral Agent.
10.25*	Amended and Restated Canadian Pledge Agreement, dated as of November 21, 2005, among the pledgors party thereto and General Electric Capital Corporation, as Collateral Agent.
10.26	Form of Amended and Restated Intercreditor Agreement, dated as of February 17, 2004, among Deutsche Bank Trust Company Americas, as Credit Agent, Wilmington Trust Company, as Second Priority Noteholder Agent and as 2004 Noteholder Agent, and Pliant Corporation (incorporated by reference to Exhibit 10.21 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).

S-7

10.27	Form of Indemnity, Subrogation and Contribution Agreement, dated as of February 17, 2004, among Pliant Corporation, Uniplast Industries Co., the subsidiary guarantors party thereto and Credit Suisse First Boston, as Administrative Agent (incorporated by reference to Exhibit 10.27 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
10.28	Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.16 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.29	Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.17 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.30	Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.18 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.31	Stock Redemption Agreement, dated as of December 27, 2000, between Pliant Corporation and Scott K. Sorensen (incorporated by reference to Exhibit 10.23 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
10.32	Restricted Stock Agreement, dated as of May 31, 2000, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.19 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.33	Stock Redemption Agreement, dated as of February 1, 2001, between Pliant Corporation and Ronald G. Moffitt (incorporated by reference to Exhibit 10.25 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2000 filed on April 2, 2001).
10.34	Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Richard P. Durham (incorporated by reference to Exhibit 10.20 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.35	Amendment No. 1, dated as of March 1, 2001, to the Pledge Agreement dated as of May 31, 2000, among Pliant Corporation and Richard P. Durham (incorporated by reference to Exhibit 10.35 to Post-Effective Amendment No. 2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.36	Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Jack E. Knott (incorporated by reference to Exhibit 10.21 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.37	Amendment No. 1, dated as of April 1, 2001, to the Pledge Agreement dated as of May 31, 2000, among Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.36 to Post-Effective Amendment No. 2 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.38	Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Scott K. Sorensen (incorporated by reference to Exhibit 10.22 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.39	Pledge Agreement, dated as of May 31, 2000, in favor of Pliant Corporation made by Ronald G. Moffitt (incorporated by reference to Exhibit 10.23 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).

S-8

10.40	1998 Pliant Corporation Stock Option Plan (incorporated by reference to Exhibit 10.10 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 1998).
10.41	Pliant Corporation Management Incentive Plan for Senior Divisional Management (1999) (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
10.42	Pliant Corporation 2000 Stock Incentive Plan (as amended and restated through April 17, 2002) (incorporated by reference to Exhibit 10.54 to Pliant Corporation’s Annual report on Form 10-K for the year ended December 31, 2002 filed on March 28, 2003).
10.43	Second Amended and Restated Stock Option Agreement, dated as of May 31, 2000 between Pliant Corporation and Jack E. Knott (incorporated by reference to Exhibit 10.27 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-42008)).
10.44	Pliant Corporation Management Incentive Plan (2000) (incorporated by reference to Exhibit 10.2 to Pliant Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
10.45	Pliant Corporation Management Incentive Plan (2001) (incorporated by reference to Exhibit 10.48 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001).
10.46	Pliant Corporation Management Incentive Plan (2002) (incorporated by reference to Exhibit 10.49 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001).
10.47	Pliant Corporation Management Incentive Plan (2003) (incorporated by reference to Exhibit 10.56 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 26, 2004).
10.48	Pliant Corporation 2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).
10.49	Consulting Agreement dated as of August 24, 2003, between Pliant corporation and Edward A. Lapekas (incorporated by reference to Exhibit 10.63 to Post-Effective Amendment No. 1 to Pliant Corporation’s Registration Statement on Form S-4 (File No. 333-107843).
10.50	Employment Agreement, dated January 1, 2004, between Pliant Corporation and Harold Bevis (incorporated by reference to Exhibit 10.61 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.51	Release Agreement, dated December 31, 2004, between Pliant Corporation and Brian Johnson (incorporated by reference to Exhibit 10.62 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.52	Letter Agreement, dated January 26, 2005, between Pliant Corporation and James Ide (incorporated by reference to Exhibit 10.63 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.53	Severance and Release Agreement, dated as of March 18, 2005, between Pliant Corporation and Lori Roberts (incorporated by reference to Exhibit 10.64 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).

S-9

10.54	Pliant Corporation 2004 Management Incentive Compensation Plan (incorporated by reference to Exhibit 10.65 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.55	Pliant Corporation 2004 MIP Long Term Incentive Plan (incorporated by reference to Exhibit 10.66 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.56	Pliant Corporation 2004 Restricted Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on September 30, 2004).
10.57	Pliant Corporation 2004 Restricted Stock Incentive Plan Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.68 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.58	Fourth Amendment to the Pliant Corporation Defined Benefit Pension Plan (incorporated by reference to Exhibit 10.69 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.59	Buy Out Agreement, dated January 5, 2005, among Pliant Corporation, Pliant Investment, Inc. and Supreme Plastics Group PLC (incorporated by reference to Exhibit 10.70 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.60	Assignment of Limited Liability Company Interests, dated January 5, 2005, between Pliant Investment, Inc. and Supreme Plastics Group PLC (incorporated by reference to Exhibit 10.71 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.61	Agreement for Purchase and Sale of Assets, dated July 12, 2004, among Pliant Corporation, Pliant Solutions Corporation and Kittrich Corporation (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on October 6, 2004).
10.62	Management Incentive Compensation Plan, effective as of January 1, 2005, between Pliant Corporation and certain eligible officers (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on June 9, 2005).
10.63	Severance and Release Agreement, effective as of March 18, 2005, between Pliant Corporation and Lori Roberts (incorporated by reference to Exhibit 10.64 to Pliant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 31, 2005).
10.64	Employment Agreement, dated June 10, 2005, between Pliant Corporation and R. David Corey (incorporated by reference to Exhibit 10.6 to Pliant Corporation’s Current Report on Form 8-K filed by on June 9, 2005).
10.65	Form of Support Agreement among the Company, Flexible Films, LLC, Flexible Films II, LLC, Southwest Industrial Films, LLC, Southwest Industrial Films II, LLC and certain holders of the Company’s 13% Senior Subordinated Notes (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on December 29, 2005).

S-10

10.66	Senior Secured, Super Priority, Priming Debtor-in-Possession Credit Agreement, dated as of January 4, 2006, among the Debtors, as borrowers, General Electric Capital Corporation, as administrative agent, collateral agent and lender, Morgan Stanley Senior Funding, Inc., as syndication agent and lender, and the lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
10.67	Domestic Security Agreement, dated as of January 4, 2006, among the Company, the Domestic Subsidiary Borrowers, the other Subsidiary Loan Parties (other than the Canadian Guarantors (but including Pliant Packaging of Canada, LLC) and any other Loan Party that is a Foreign Subsidiary) and General Electric Capital Corporation (incorporated by reference to Exhibit 10.2 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
10.68	Canadian Security Agreement, dated as of January 4, 2006, among the Company, Uniplast Holdings Co., Pliant Corporation of Canada Ltd., Pliant Packaging of Canada, LLC, Pliant Solutions Corporation and General Electric Capital Corporation (incorporated by reference to Exhibit 10.3 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
10.69	Domestic Pledge Agreement, dated as of January 4, 2006, among the Company, the Domestic Subsidiary Borrowers, the other Subsidiary Loan Parties (other than the Canadian Guarantors (but including Pliant Packaging of Canada, LLC) and any other Loan Party that is a Foreign Subsidiary) and General Electric Capital Corporation (incorporated by reference to Exhibit 10.4 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
10.70	Canadian Pledge Agreement, dated as of January 4, 2006, among Uniplast Holdings Co., Pliant Corporation of Canada Ltd. and General Electric Capital Corporation (incorporated by reference to Exhibit 10.5 to Pliant Corporation’s Current Report on Form 8-K filed on January 6, 2006).
21.1*	Subsidiaries of Pliant Corporation.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Filed with this report.

S-11

EX-10.19

Exhibit 10.19

AMENDED AND RESTATED CREDIT AGREEMENT

dated as of

November 21, 2005

among

PLIANT CORPORATION,

as Parent Borrower,

UNIPLAST INDUSTRIES CO.,

as Canadian Subsidiary Borrower,

The Domestic Subsidiary Borrowers Party Hereto,

The Lenders Party Hereto,

GENERAL ELECTRIC CAPITAL CORPORATION,

as Domestic A Agent, Administrative Agent, Collateral Agent and Lender,

MORGAN STANLEY SENIOR FUNDING, INC.,

as Domestic B Agent and a Lender

MORGAN STANLEY SENIOR FUNDING, INC.,

as Domestic B Revolving Loan
Lead Arranger and Book Runner

and

GE CAPITAL MARKETS, INC.,

as Domestic A Revolving Loan and Canadian Revolving Loan
Lead Arranger and Book Runner

TABLE OF CONTENTS

			Page
ARTICLE I	Definitions		2
SECTION 1.01.		Defined Terms	2
SECTION 1.02.		Classification of Loans and Borrowings	41
SECTION 1.03.		Terms Generally	41
SECTION 1.04.		Accounting Terms; GAAP	41
ARTICLE II	The Credits		42
SECTION 2.01.		Commitments; Loans Outstanding on Effective Date	42
SECTION 2.02.		Loans and Borrowings	43
SECTION 2.03.		Requests for Borrowings	44
SECTION 2.04.		Swingline Loans	45
SECTION 2.05.		Letters of Credit	46
SECTION 2.06.		Funding of Borrowings	51
SECTION 2.07.		Interest Elections	51
SECTION 2.08.		Termination and Reduction of Commitments	52
SECTION 2.09.		Repayment of Loans; Evidence of Debt	53
SECTION 2.10.		Prepayment of Loans	54
SECTION 2.11.		Fees	56
SECTION 2.12.		Interest	57
SECTION 2.13.		Alternate Rate of Interest	59
SECTION 2.14.		Increased Costs	59
SECTION 2.15.		Break Funding Payments	60
SECTION 2.16.		Taxes	61
SECTION 2.17.		Payments Generally; Pro Rata Treatment; Sharing of Setoffs	62
SECTION 2.18.		Mitigation Obligations; Replacement of Lenders	66
SECTION 2.19.		Protective Advances	67
ARTICLE III	Representations and Warranties		68
SECTION 3.01.		Organization; Powers	68
SECTION 3.02.		Authorization; Enforceability	68
SECTION 3.03.		Governmental Approvals; No Conflicts	68
SECTION 3.04.		Financial Condition; No Material Adverse Change	68

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SECTION 3.05.		Properties	69
SECTION 3.06.		Litigation and Environmental Matters	70
SECTION 3.07.		Compliance with Laws and Agreements	70
SECTION 3.08.		Investment Company Status	70
SECTION 3.09.		Taxes	70
SECTION 3.10.		ERISA	70
SECTION 3.11.		Disclosure	71
SECTION 3.12.		Subsidiaries	71
SECTION 3.13.		Insurance	71
SECTION 3.14.		Labor Matters	71
SECTION 3.15.		Solvency	71
SECTION 3.16.		Security Documents	72
SECTION 3.17.		Federal Reserve Regulations	73
SECTION 3.18.		Senior Secured Obligations	73
SECTION 3.19.		Related Names	73
SECTION 3.20.		Permanent Establishment in Canada	73
ARTICLE IV	Conditions		74
SECTION 4.01.		Effective Date	74
SECTION 4.02.		Subsequent to the Effective Date	77
SECTION 4.03.		Each Credit Event	79
ARTICLE V	Affirmative Covenants		80
SECTION 5.01.		Financial Statements and Other Information	80
SECTION 5.02.		Notices of Material Events	83
SECTION 5.03.		Information Regarding Collateral	83
SECTION 5.04.		Existence; Conduct of Business	84
SECTION 5.05.		Payment of Obligations; Compliance with Leases	84
SECTION 5.06.		Maintenance of Properties	85
SECTION 5.07.		Insurance	85
SECTION 5.08.		Casualty and Condemnation	85
SECTION 5.09.		Books and Records; Inspection and Audit Rights	86
SECTION 5.10.		Compliance with Laws	87
SECTION 5.11.		Use of Proceeds and Letters of Credit	87
SECTION 5.12.		Additional Subsidiaries	87

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SECTION 5.13.		Further Assurances	88
SECTION 5.14.		Supplemental Disclosure	89
SECTION 5.15.		Intellectual Property	89
SECTION 5.16.		Landlord Lien Waivers, Mortgagee Agreements and Bailee Letters	89
SECTION 5.17.		Depository Banks	89
SECTION 5.18.		ERISA	89
ARTICLE VI	Negative Covenants		90
SECTION 6.01.		Indebtedness	90
SECTION 6.02.		Certain Equity Securities	92
SECTION 6.03.		Liens	92
SECTION 6.04.		Fundamental Changes	94
SECTION 6.05.		Investments, Loans, Advances, Guarantees and Acquisitions	94
SECTION 6.06.		Asset Sales	96
SECTION 6.07.		Sale and Lease-Back Transactions	97
SECTION 6.08.		Swap Agreements	97
SECTION 6.09.		Restricted Payments; Certain Payments of Indebtedness	98
SECTION 6.10.		Transactions with Affiliates	99
SECTION 6.11.		Restrictive Agreements	99
SECTION 6.12.		Amendment of Material Documents	100
SECTION 6.13.		Designated Senior Debt	101
SECTION 6.14.		Cash Held by Foreign Subsidiaries	101
SECTION 6.15.		ERISA	101
SECTION 6.16.		Cancellation of Indebtedness	101
SECTION 6.17.		Change in Fiscal Year; Accounting Policies	101
SECTION 6.18.		Financial Covenants	101
SECTION 6.19.		No Additional Deposit Accounts	103
SECTION 6.20.		Pliant Investment, Inc. and Alliant Company LLC	103
ARTICLE VII	Events of Default		103
ARTICLE VIII	The Agents		106
ARTICLE IX	Collection Allocation Mechanism		108
SECTION 9.01.		Implementation of CAM	108
SECTION 9.02.		Letters of Credit	109

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ARTICLE X	Miscellaneous		111
SECTION 10.01.		Notices	111
SECTION 10.02.		Waivers; Amendments	112
SECTION 10.03.		Expenses; Indemnity; Damage Waiver; Joint and Several Obligations	114
SECTION 10.04.		Successors and Assigns	116
SECTION 10.05.		Survival	120
SECTION 10.06.		Counterparts; Integration; Effectiveness	120
SECTION 10.07.		Severability	120
SECTION 10.08.		Right of Setoff	120
SECTION 10.09.		Governing Law; Jurisdiction; Consent to Service of Process	121
SECTION 10.10.		WAIVER OF JURY TRIAL	121
SECTION 10.11.		Headings	122
SECTION 10.12.		Confidentiality	122
SECTION 10.13.		Conversion of Currencies	123
SECTION 10.14.		Interest Rate Limitation	123
SECTION 10.15.		Reaffirmation	123
ARTICLE XI	Cross-Guaranty, Subrogation, Contribution and Subordination		124
SECTION 11.01.		Cross-Guaranty	124
SECTION 11.02.		Waivers by the Borrowers	124
SECTION 11.03.		Benefit of Guaranty	125
SECTION 11.04.		Waiver of Subrogation, Etc	125
SECTION 11.05.		Election of Remedies	125
SECTION 11.06.		Limitation	126
SECTION 11.07.		Contribution with Respect to Guaranty Obligations	126
SECTION 11.08.		Liability Cumulative	127
SECTION 11.09.		Subordination	127
ARTICLE XII	Purchase Right and Certain Intercreditor and Agency Matters		128
SECTION 12.01.		Delay of Acceleration and Enforcement	128
SECTION 12.02.		Purchase Election of Domestic B Lenders	128
SECTION 12.03.		Rights After Purchase or Standstill	129
SECTION 12.04.		Non-Discrimination by Agent	130
SECTION 12.05.		Intercreditor Agreement	130

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SECTION 12.06. Further Assurances 130

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SCHEDULES:
Schedule 1.01(a)	Mortgaged Properties
Schedule 1.01(b)	Existing Letters of Credit
Schedule 1.01(c)	Domestic Subsidiary Borrowers
Schedule 1.01(d)	Excluded Subsidiaries
Schedule 2.01(a)(i)	Domestic A Commitments
Schedule 2.01(a)(ii)	Domestic B Commitments
Schedule 2.01(b)	Canadian Commitments
Schedule 3.05	Owned or Leased Property
Schedule 3.12	Subsidiaries
Schedule 3.13	Insurance
Schedule 3.16(d)	Mortgage Filing Offices
Schedule 4.01(f)	Intercompany Indebtedness
Schedule 4.01(g)	Lien Search Jurisdictions
Schedule 4.02	Foreign Jurisdictions
Schedule 5.07	Insurance Levels
Schedule 6.01	Existing Indebtedness
Schedule 6.03	Existing Liens
Schedule 6.05	Existing Investments
Schedule 6.05(h)	Existing Joint Ventures
Schedule 6.06	Asset Sales
Schedule 6.10	Affiliate Transactions
Schedule 6.11	Existing Restrictions
Schedule 6.19	Deposit Accounts
EXHIBITS:
Exhibit A	Form of Assignment and Assumption
Exhibit B	Form of Guarantee Agreement
Exhibit C-1	Form of Domestic Pledge Agreement
Exhibit C-2	Form of Canadian Pledge Agreement
Exhibit D-1	Form of Domestic Security Agreement
Exhibit D-2	Form of Canadian Security Agreement
Exhibit E	Form of Borrowing Base Certificate

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AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 21, 2005, among PLIANT CORPORATION, a Utah corporation, UNIPLAST INDUSTRIES CO., a Nova Scotia corporation, the Domestic Subsidiary Borrowers party hereto, the Lenders party hereto, MORGAN STANLEY SENIOR FUNDING, INC., as Domestic B Agent, and, GENERAL ELECTRIC CAPITAL CORPORATION, as Domestic A Agent, Administrative Agent and Collateral Agent.

RECITALS

WHEREAS, a credit facility was extended to Parent Borrower, Uniplast Industries Co., and certain other subsidiaries of the Parent Borrower pursuant to the terms and conditions of that certain Credit Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Existing Credit Agreement”), among the Parent Borrower, Uniplast Industries Co., as Canadian Subsidiary Borrower, the other subsidiaries of the Parent Borrower party thereto as borrowers, as Borrowers, the lenders party thereto (the “Existing Lenders”), Credit Suisse First Boston, acting through its Cayman Islands Branch, as Administrative Agent and Documentation Agent (the “Prior Administrative Agent”), Deutsche Bank Trust Company Americas, as Collateral Agent (the “Prior Collateral Agent”), General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase Bank), as Syndication Agent;

WHEREAS, in connection with the Existing Credit Agreement, the Loan Parties (as defined in the Existing Credit Agreement) executed and delivered the Security Documents (as defined in the Existing Credit Agreement, the “Existing Security Documents”) in favor of the Prior Collateral Agent to secure the payment and performance of the Obligations (as defined under the Existing Security Documents);

WHEREAS, prior to the execution of this Agreement, the Prior Collateral Agent resigned as “Collateral Agent” under the Existing Credit Agreement, the Existing Security Documents and the other Loan Documents (as defined in the Existing Credit Agreement) and the Collateral Agent succeeded the Prior Collateral Agent as the “Collateral Agent” thereunder, all pursuant to that certain Consent and Amendment dated as of March 8, 2004 by and among the Prior Administrative Agent, the Prior Collateral Agent, the Collateral Agent, Deutsche Bank Trust Company Americas, as replaced Issuing Bank, LaSalle Business Credit, LLC, as replacement Issuing Bank, the Borrowers and the Existing Lenders;

WHEREAS, the Borrowers have requested that the Existing Credit Agreement be amended, modified and restated, pursuant to the terms and conditions set forth herein;

WHEREAS, the Borrowers each acknowledge and agree that the security interests granted to the Prior Collateral Agent, on behalf of the Loan Parties (as defined in the Existing Credit Agreement), pursuant to the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement), shall remain outstanding and in full force and effect, without interruption or impairment of any kind, in accordance with the Existing Credit Agreement and shall continue to secure the Obligations;

WHEREAS, the Borrowers each acknowledge and agree that such Liens and security interests granted pursuant to the Existing Security Documents shall remain outstanding and in full force and effect, without interruption or impairment of any kind, in accordance with their terms, and such Liens shall continue to secure the Obligations in favor of the Collateral Agent;

WHEREAS, the Borrowers each acknowledge and agree that (a) the Obligations represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the Obligations (as defined in the Existing Security Documents) arising in connection with the Existing Credit Agreement and other Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith; (b) the Borrowers intend that the Existing Credit Agreement and the other Credit Documents (as defined in the Existing Credit Agreement) executed in connection therewith and the collateral pledged thereunder shall secure, without interruption or impairment of any kind, all existing Indebtedness (as defined in the Existing Credit Agreement) under the Existing Credit Agreement and the other Credit Documents (as defined in the Existing Credit Agreement) executed in connection therewith, as they may be amended, restated, renewed, extended, consolidated and modified hereunder, together with all other obligations hereunder; (c) all Liens (as defined in the Existing Credit Agreement) evidenced by the Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith are hereby ratified, confirmed and continued; and (d) the Loan Documents (as defined herein) are intended to restate, renew, extend, consolidate, amend and modify the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith; and

WHEREAS, the Borrowers each intend that (a) the provisions of the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) executed in connection therewith, to the extent restated, renewed, extended, consolidated, amended and modified hereby, be hereby superseded and replaced by the provisions hereof and of the other Loan Documents (as defined herein); and (b) by entering into and performing their respective obligations hereunder, this transaction shall not constitute a novation.

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Existing Credit Agreement is hereby amended and restated as follows:

ARTICLE I

Definitions

SECTION 1.01.  Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

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“Account” shall have the meaning assigned to such term in the New York Uniform Commercial Code and shall also include any right to payment for goods sold or leased, or for services rendered, whether or not earned by performance.

“Account Debtor” means any Person who is, or may be, obligated to any Loan Party under, with respect to or on account of an Account.

“Accumulated Investment Balance” means, at any time, the aggregate amount of investments, loans, advances and Indebtedness required to be added to the “Accumulated Investment Balance” pursuant to Sections 6.05(c)(ii), (d)(ii), (e)(iii) and (l)(ii) that remain outstanding at such time.

“Adjusted Eligible Accounts Receivable” means, on any date, the amount of Eligible Accounts Receivable on such date, minus the Dilution Reserve on such date.

“Adjusted Eligible Finished Goods” means, on any date, the amount of Eligible Finished Goods on such date, minus the Inventory Reserves with respect to such Eligible Finished Goods on such date.

“Adjusted Eligible Raw Materials” means, on any date, the amount of Eligible Raw Materials on such date, minus the Inventory Reserves with respect to such Eligible Raw Materials on such date.

“Administrative Agent” means General Electric Capital Corporation, in its capacity as administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agents” means, collectively, the Administrative Agent, the Collateral Agent, the Domestic A Agent, the Domestic B Agent or, as the context may require, any such Agent.

“Aggregate Borrowing Base” means, at any time of determination, an amount equal to the sum of the Borrowing Base A plus the Borrowing Base B.

“Allocable Amount” has the meaning assigned to such term in Section 11.07(b).

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

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“Amended 2004 Notes” has the meaning assigned to such term in the definition of “2004 Notes Restatement”.

“Applicable Percentage” means, (a) with respect to any Domestic A Lender, the percentage of the total amount of the Domestic A Commitments represented by such Domestic A Lender’s Domestic A Commitment, (b) with respect to any Domestic B Lender, the percentage of the total amount of the Domestic B Commitments represented by such Domestic B Lender’s Domestic B Commitment and (c) with respect to any Canadian Lender, the percentage of the total amount of the Canadian Commitments represented by such Canadian Lender’s Canadian Commitment. If the Commitments of any Class have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments of such Class most recently in effect, giving effect to any assignments.

“Approved Fund” has the meaning assigned to such term in Section 10.04.

“Arranger A” means GE Capital Markets, Inc., as arranger and book runner for the Domestic A Revolving Loans and the Canadian Revolving Loans.

“Arranger B” means Morgan Stanley Senior Funding, Inc., as arranger and book runner for the Domestic B Revolving Loans.

“Arrangers” means the Arranger A and the Arranger B.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by (i) the Administrative Agent, in the case of any assignment of any Domestic A Commitment, Domestic A Revolving Loan, Canadian Commitment or Canadian Revolving Loan or (ii) the Domestic B Agent, in the case of any assignment of any Domestic B Commitment or Domestic A Revolving Loan.

“Availability Amount” means, at any time, an amount equal to (a) the lesser of (i) the total amount of the Commitments at such time and (ii) the Aggregate Borrowing Base in effect at such time minus (b) the total Revolving Exposures at such time.

“Bailee Letter” means a written agreement reasonably acceptable to the Collateral Agent, pursuant to which a bailee of Inventory of any Loan Party agrees to hold such Inventory for the benefit of the Collateral Agent, to waive or subordinate its rights and claims as bailee in such Inventory, including warehouseman’s liens, processor’s liens, rights of levy and distraint for rent, grant access to the Collateral Agent for the repossession and sale of such Inventory and make other agreements relative thereto.

“Bankruptcy Code” means Chapter 11 of Title 11 of the United States Code, 11 U.S.C. 101 et seq.

“Banking Services” means overdrafts and related liabilities owed to any of the Lenders (or any Affiliates thereof) or Wachovia Bank, National Association (or any Affiliates

4

thereof) arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds.

“Banking Services Obligations” of any Loan Party means all monetary obligations of such Loan Party in respect of Banking Services.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“BONS” has the meaning assigned to such term in Section 4.01(s).

“BONS Reserve” means (a) at any time prior to the receipt by the Collateral Agent of fully executed copy of an amended and restated deposit account control agreement between the applicable Loan Parties, BONS and the Collateral Agent pursuant to Section 4.02(c), an amount equal to the amount on deposit in account number 92312-0001414 in the name of the Canadian Borrower at BONS and (b) at any time after receipt by the Collateral Agent of fully executed copy of an amended and restated deposit account control agreement between the applicable Loan Parties, BONS and the Collateral Agent pursuant to Section 4.02(c), $0.

“Borrower” means the Parent Borrower, any Domestic Subsidiary Borrower or the Canadian Subsidiary Borrower.

“Borrowing” means (a) Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, (b) a Swingline Loan and (c) a Protective Advance.

“Borrowing Base A” means, at any time of determination, an amount equal to the sum, without duplication, of (a) 85% of Adjusted Eligible Accounts Receivable, plus (b) the lesser of (i) 65% of Adjusted Eligible Finished Goods and (ii) the product of (A) 85% of the Adjusted Eligible Finished Goods multiplied by (B) the Recovery Rate with respect to Adjusted Eligible Finished Goods, plus (c) the lesser of (i) 35% of Adjusted Eligible Raw Materials valued at the lower of cost (determined on a first-in, first-out basis) or market value and (ii) the product of (A) 85% of the Adjusted Eligible Raw Materials multiplied by (B) the Recovery Rate with respect to Adjusted Eligible Raw Materials, minus (d) the Minimum Availability Reserve, minus (e) the Rent Reserve, minus (f) the Priority Payables Reserve, minus (g) the Secured Obligations Reserve minus (h) the Domestic B Availability Reserve minus (i) the BONS Reserve minus (j) any Reserves, in each case of the Borrowers.  The Borrowing Base A at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the Agents pursuant to this Agreement.  Standards of eligibility and reserves and advance rates of the Borrowing Base A may be revised and adjusted from time to time solely at the discretion of the Administrative Agent (subject to the consent of the Domestic B Agent if the effect of such revision or adjustment would be to increase the Borrowing Base A or the Availability Amount), with any changes in such standards to be effective immediately after delivery of notice thereof to the Parent Borrower.  For purposes of calculating the Borrowing Base A on any date, all amounts reflected or outstanding in Canadian Dollars shall be translated into dollars at the exchange rate in effect on such date, as determined in good faith by the Parent Borrower.

5

“Borrowing Base B” means, at any time of determination, an amount equal to the sum, without duplication, of (a) an incremental 10% of the Adjusted Eligible Accounts Receivable in excess of the Adjusted Eligible Accounts Receivable included in the calculation of the Borrowing Base A pursuant to clause (a) of the definition thereof, in an aggregate amount not to exceed 95% of the Adjusted Eligible Accounts Receivable, plus (b)(i) if the Borrowing Base A is calculated pursuant to clause (b)(i) of the definition thereof, then an incremental 20% of the Adjusted Eligible Finished Goods in excess of the Adjusted Eligible Finished Goods included in the calculation of the Borrowing Base A pursuant to clause (b)(i) of the definition thereof, in an aggregate amount not to exceed 85% of the Adjusted Eligible Finished Goods and (ii) if the Borrowing Base A is calculated pursuant to clause (b)(ii) of the definition thereof, then, the product of (A) an incremental 10% of the Adjusted Eligible Finished Goods in excess of the Adjusted Eligible Finished Goods included in the calculation of the Borrowing Base A pursuant to clause (b)(ii) of the definition thereof, in an aggregate amount not to exceed 95% of the Adjusted Eligible Finished Goods multiplied by (B) the Recovery Rate with respect to Adjusted Eligible Finished Goods, plus (c)(i) if the Borrowing Base A is calculated pursuant to clause (c)(i) of the definition thereof, then an incremental 20% of the Adjusted Eligible Raw Materials in excess of the Adjusted Eligible Raw Materials included in the calculation of the Borrowing Base A pursuant to clause (c)(i) of the definition thereof, in an aggregate amount not to exceed 55% of the Adjusted Eligible Raw Materials and (ii) if the Borrowing Base A is calculated pursuant to clause (c)(ii) of the definition thereof, then, the product of (A) an incremental 10% of the Adjusted Eligible Raw Materials in excess of the Adjusted Eligible Raw Materials included in the calculation of the Borrowing Base A pursuant to clause (c)(ii) of the definition thereof, in an aggregate amount not to exceed 95% of the Adjusted Eligible Raw Materials multiplied by (B) the Recovery Rate with respect to Adjusted Eligible Raw Materials, minus (d) any Reserves applied in the calculation of the Borrowing Base A, in each case of the Borrowers.  The Borrowing Base B at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the Agents pursuant to this Agreement.  Standards of eligibility and reserves and advance rates of the Borrowing Base B may be revised and adjusted from time to time solely at the discretion of the Administrative Agent (subject to the consent of the Domestic B Agent if the effect of such revision or adjustment would be to increase the Borrowing Base B or the Availability Amount), or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, at the sole discretion of the Domestic B Agent, with any changes in such standards to be effective immediately after delivery of notice thereof to the Parent Borrower.  For purposes of calculating the Borrowing Base B on any date, all amounts reflected or outstanding in Canadian Dollars shall be translated into dollars at the exchange rate in effect on such date, as determined in good faith by the Parent Borrower.

“Borrowing Base Certificate” means a certificate substantially in the form of Exhibit E (with such changes therein as may be required by either Agent, to reflect the components of, and reserves against, the Borrowing Bases as provided for hereunder from time to time), executed and certified as accurate and complete by a Financial Officer of the Parent Borrower, which certificate shall include appropriate exhibits, schedules, supporting documentation and reports as reasonably requested by either Agent.

“Borrowing Bases” means the Borrowing Base A and the Borrowing Base B.

6

“Borrowing Request” means a request by a Borrower for a Borrowing in accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, (a) when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks generally are not open for dealings in dollar deposits in the London interbank market and (b) when used in connection with any Canadian Revolving Loan, the term “Business Day” shall also exclude any day on which banks are not open for deposits in Toronto.

“CAM” means the mechanism established under Article IX for the allocation and exchange of the Lenders’ interests in, and collections under, the Loan Documents.

“CAM Exchange” means the exchange of the Lenders’ interests provided for in Section 9.01.

“CAM Exchange Date” means the first date on which (a) any event referred to in clause (h)or (i) of Article VII shall occur in respect of any Loan Party or (b) any acceleration of the maturity of any Loans occurs under Article VII.

“CAM Percentage” means, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the sum of (i) the aggregate principal and interest on the Loans owed to such Lender, (ii) the LC Exposure of such Lender, (iii) the Swingline Exposure of such Lender and (iv) the aggregate amount of any other Obligations otherwise owed to such Lender, in each case immediately prior to the CAM Exchange Date, and (b) the denominator shall be the sum of (i) the aggregate principal and interest on the Loans owed to all the Lenders, (ii) the aggregate LC Exposure of all the Lenders, (iii) the aggregate Swingline Exposure of all the Lenders and (iv) the aggregate amount of any other Obligations owed to any of the Lenders, in each case immediately prior to such CAM Exchange Date.

“Canadian Commitment” means, with respect to each Canadian Lender, the commitment of such Canadian Lender to make Canadian Revolving Loans, expressed as an amount representing the maximum aggregate amount of such Canadian Lender’s Canadian Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Canadian Lender pursuant to Section 10.04, together with the commitment of such Lender to acquire participations in Protective Advances hereunder.  The initial amount of each Canadian Lender’s Canadian Commitment is set forth on Schedule 2.01(b), or in the Assignment and Assumption pursuant to which such Canadian Lender shall have assumed its Canadian Commitment, as applicable.  The initial aggregate amount of the Canadian Lenders’ Canadian Commitments is $30,000,000.

“Canadian Dollars” or “Cdn$” refers to lawful money of Canada.

“Canadian Filings Certificate” means that certain certificate delivered by the applicable Loan Parties in connection with this Agreement setting forth information with respect

7

to certain PPSA filings in Canada which have collateral descriptions which are unacceptable to the Collateral Agent in its sole discretion.

“Canadian Lender” means the Persons listed on Schedule 2.01(b) and any other Person that shall have become a party hereto as a Canadian Lender pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“Canadian Lending Office” means, as to any Canadian Lender, the applicable branch, office or Affiliate of such Canadian Lender located in Canada designated by such Canadian Lender to make Canadian Revolving Loans to the Canadian Subsidiary Borrower.

“Canadian Perfection Certificate” has the meaning assigned to the term “Perfection Certificate” in the Canadian Security Agreement.

“Canadian Pledge Agreement” means the Canadian Pledge Agreement, substantially in the form of Exhibit C-2, among the Canadian Subsidiary Borrower, each other Loan Party organized under the laws of Canada or any province thereof and the Collateral Agent.

“Canadian Revolving Exposure” means, with respect to any Canadian Lender at any time, the sum of the outstanding principal amount of such Canadian Lender’s Canadian Revolving Loans.

“Canadian Revolving Loan” means a Loan made by a Canadian Lender pursuant to Section 2.01(b).  Each Canadian Revolving Loan shall be a Eurodollar Loan or an ABR Loan.

“Canadian Security Agreement” means the Canadian Security Agreement, substantially in the form of Exhibit D-2, among the Parent Borrower, the Canadian Subsidiary Borrower, Pliant Solutions Corporation, Pliant Packaging of Canada, LLC, each other Loan Party organized under the laws of Canada or any province thereof and the Collateral Agent.

“Canadian Subsidiary Borrower” means Uniplast Industries Co., a Nova Scotia corporation.

“Capital Expenditures” means, for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of the Parent Borrower and the Subsidiaries that are (or would be) set forth in a consolidated statement of cash flows of the Parent Borrower and the Subsidiaries for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by the Parent Borrower and the Subsidiaries during such period.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

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“Cash Amount” has the meaning assigned to such term in Section 2.10(f).

“Cash Interest Expense” means, for any period, Consolidated Interest Expense for such period excluding any portion thereof in respect of interest not required to be paid in cash during such period or within one year thereafter.

“Cash Management Arrangement” means any arrangement pursuant to which any financial institution provides any Loan Party with treasury, depositary or cash management services or automated clearinghouse transfers of funds.

“Cash Management Obligations” has the meaning assigned to the term “Senior Lender Cash Management Obligations” in the Intercreditor Agreement.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.

“Change in Control” means, at any time, (a) prior to an IPO, the failure by the Control Group to own, directly or indirectly, beneficially and of record, Equity Interests in the Parent Borrower representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in the Parent Borrower; (b) after an IPO, the failure by the Control Group to own, directly or indirectly, beneficially and of record, Equity Interests in the Parent Borrower representing 25% of the aggregate voting power represented by the issued and outstanding Equity Interests in the Parent Borrower; (c) after an IPO, the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the Effective Date) other than the Control Group, of Equity Interests in the Parent Borrower representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in the Parent Borrower; provided that the Control Group owns beneficially and of record, in the aggregate, a lesser percentage of such voting power; (d) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Parent Borrower by Persons who were neither (i) nominated by members of the Control Group or the board of directors of the Parent Borrower nor (ii) appointed by directors so nominated; (e) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person other than the Parent Borrower (or a Wholly Owned Subsidiary of the Parent Borrower that is a Loan Party) of any Equity Interests in any Domestic Subsidiary Borrower or the Canadian Subsidiary Borrower; (e) the occurrence of a “Change of Control” as defined under the Senior First Lien Note Documents, the Senior Second Lien Note Documents, the Senior Subordinated Note Documents or the terms of the Existing Preferred Stock.  If, at any time, any of the members of the board of directors of the Parent Borrower shall have more than one vote per Person, then any determination of a majority of the board of directors shall be based on a majority of the voting power of the members thereof rather than a majority of the members or seats.

“Change in Law” means (a) the adoption of any law, rule or regulation after the Effective Date, (b) any change in any law, rule or regulation or in the interpreta­tion or application thereof by any Governmental Authority after the Effective Date or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.14(b), by any lending office of

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such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Effective Date.

“Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Domestic A Revolving Loans, Domestic B Revolving Loans, Domestic Revolving Loans, Canadian Revolving Loans, Swingline Loans or Protective Advances.  “Class”, when used in reference to any Lender, refers to whether such Lender has a Loan or Commitment with respect to a particular Class.

“Class of Eligible Inventory” means each of Eligible Finished Goods and Eligible Raw Materials.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means any and all “Collateral”, as defined in any applicable Security Document.

“Collateral Agent” means General Electric Capital Corporation, in its capacity as Collateral Agent for the Secured Parties under the Security Documents.

“Commitment” means a Domestic Commitment or a Canadian Commitment.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period, plus, without duplication and to the extent deducted from revenues in determining Consolidated Net Income, the sum of (a) the aggregate amount of Consolidated Interest Expense for such period, (b) the aggregate amount of income tax expense for such period, (c) all amounts attributable to depreciation, amortization and other non-cash charges or losses for such period (but excluding any such charge that requires an accrual of, or a cash reserve for, anticipated cash charges for any future period); provided that any non-cash charges or losses that are added-back to Consolidated Net Income pursuant to this clause (c) shall be treated as cash charges or losses in any subsequent period during which cash disbursements attributable thereto are made; (d) non-cash expenses resulting from the grant of stock options or other equity-related incentives to any director, officer or employee of the Parent Borrower or any Subsidiary pursuant to a written plan or agreement, (e) all non-recurring transaction and financing expenses resulting from the Transactions, (f) all losses during such period resulting from the sale or other disposition of any asset of the Parent Borrower or any Subsidiary outside the ordinary course of business and (g) any Excluded Charges during such period, and minus, without duplication and to the extent added to revenues in determining Consolidated Net Income for such period, (a) all extraordinary gains during such period and (b) all gains during such period resulting from the sale or other disposition of any asset of the Parent Borrower or any Subsidiary outside the ordinary course of business, all as determined on a consolidated basis with respect to the Parent Borrower and the Subsidiaries in accordance with GAAP.  If the Parent Borrower or any Subsidiary has made any sale, transfer, lease or other disposition of assets outside of the ordinary course of business permitted by Section 6.06 during the relevant period for determining Consolidated EBITDA, Consolidated EBITDA for the relevant period shall be calculated after giving pro forma effect thereto, as if such sale, transfer, lease or other disposition of assets (and

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any related incurrence, repayment or assumption of Indebtedness, with any new Indebtedness being deemed to be amortized over the relevant period in accordance with its terms, and assuming that any Loans borrowed in connection with such acquisition are repaid with excess cash balances when available) had occurred on the first day of the relevant period for determining Consolidated EBITDA.

“Consolidated Interest Expense” means, for any period, the interest expense, both expensed and capitalized (including the interest component in respect of Capital Lease Obligations), accrued by the Parent Borrower and the Subsidiaries during such period (net of payments made or received under interest rate protection agreements and net of interest income), determined on a consolidated basis in accordance with GAAP; provided that “Consolidated Interest Expense” shall not include non-cash interest expense in respect of the Senior Subordinated Notes arising because (i) the Senior Subordinated Notes and the Warrants were issued at a discount to their face value or (ii) a portion of the issue price of the Senior Subordinated Notes and the Warrants was allocated to the Warrants.

“Consolidated Net Income” means, for any period, net income or loss of the Parent Borrower and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any unconsolidated Subsidiary and any Person in which any other Person (other than the Parent Borrower or any of the Subsidiaries or any director holding qualifying shares in compliance with applicable law or any other third party holding a de minimus number of shares in order to comply with other similar requirements) has an Equity Interest, except to the extent of the amount of dividends or other distributions actually paid by such Subsidiary or other Person during such period to the Parent Borrower or any other Subsidiary that is not subject to the restrictions set forth in clause (a) or (b) hereof (provided that the Parent Borrower’s or any other Subsidiary’s equity in the net loss of any such Subsidiary or Person for such period shall be included in determining Consolidated Net Income), (b) the income (but not the loss) of any Subsidiary to the extent that such Subsidiary is contractually or legally prohibited from paying dividends, except to the extent of the amount of dividends or other distributions actually paid by such Subsidiary during such period to the Parent Borrower or any other Subsidiary that is not subject to the restrictions set forth in clause (a) or (b) hereof and (c) the income (or loss) of any Person accrued prior to the date it becomes (or, for pro forma purposes, is deemed to have become) a Subsidiary or is merged into or consolidated with the Parent Borrower or any of the Subsidiaries or the date that Person’s assets are acquired by the Parent Borrower or any of the Subsidiaries.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

“Control Group” means collectively the Sponsor and all Persons Controlled by the Sponsor (other than any operating company Controlled by the Sponsor).

“Credit Exposure” means, as to any Lender at any time, the sum of (a) such Lender’s Revolving Exposure at such time, plus (b) an amount equal to its Applicable

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Percentage, if any, of the aggregate principal amount of Protective Advances outstanding at such time.

“Default” means any event or condition that constitutes an Event of Default or that upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Depository Banks” has the meaning assigned to such term in Section 4.01(s).

“Dilution Factors” means, without duplication, with respect to any period, the aggregate amount of all deductions, credit memos, returns, adjustments, allowances, bad debt write-offs and other non-cash credits that are recorded to reduce accounts receivable of the Loan Parties in a manner consistent with current and historical accounting practices of the Parent Borrower or the Canadian Subsidiary Borrower, as applicable.

“Dilution Ratio” means, at any date, (a) the amount (expressed as a percentage) equal to (i) the aggregate amount of the applicable Dilution Factors for the 12 most recently ended fiscal months of the Parent Borrower divided by (ii) total gross sales of the Loan Parties for the 12 most recently ended fiscal months of the Parent Borrower, minus (b) 5%; provided that the Dilution Ratio shall not be less than zero.

“Dilution Reserve”means, at any date, the Dilution Ratio on such date multiplied by the amount of Eligible Accounts Receivable on such date.

“dollars” or “$” refers to lawful money of the United States of America.

“Domestic A Agent” means General Electric Capital Corporation, in its capacity as agent for the Domestic A Lenders and Canadian Lenders hereunder.

“Domestic A Commitment” means, with respect to each Domestic A Lender, the commitment of such Domestic A Lender to make Domestic A Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Domestic A Lender’s Domestic A Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Domestic A Lender pursuant to Section 10.04, together with the commitment of such Lender to acquire participations in Protective Advances hereunder.  The initial amount of each Domestic A Lender’s Domestic A Commitment is set forth on Schedule 2.01(a) (i), or in the Assignment and Assumption pursuant to which such Domestic A Lender shall have assumed its Domestic A Commitment, as applicable.  The initial aggregate amount of the Domestic A Lenders’ Domestic A Commitments is $90,000,000.

“Domestic A Lender” means the Persons listed on Schedule 2.01(a)(i) and any other Person that shall have become a party hereto as a Domestic A Lender pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.  Unless the context otherwise requires, the term “Domestic A Lenders” includes the Swingline Lender.

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“Domestic A Revolving Exposure” means, with respect to any Domestic A Lender at any time, the sum of the outstanding principal amount of such Domestic A Lender’s Domestic A Revolving Loans and its LC Exposure and Swingline Exposure at such time.

“Domestic A Revolving Loan” means a Loan made by a Domestic A Lender pursuant to Section 2.01(a)(i).  Each Domestic A Revolving Loan shall be a Eurodollar Loan or an ABR Loan.

“Domestic B Agent” means Morgan Stanley Senior Funding, Inc., in its capacity as agent for the Domestic B Lenders hereunder.

“Domestic B Availability Reserve” means, as of any date of determination, to the extent positive, an amount equal to the aggregate Domestic B Revolving Exposure of all Domestic B Lenders minus the Borrowing Base B as of such date of determination.  For the avoidance of doubt, no amendment or other modification to the definition of the “Domestic B Availability Reserve” (including adjustments or new criteria or changes in advance rates in the calculation of Domestic B Borrowing Base B) which has the effect of eliminating or decreasing the amount of the Domestic B Availability Reserve shall be effective without the prior written consent of the Required B Lenders.

“Domestic B Commitment” means, with respect to each Domestic B Lender, the commitment of such Domestic B Lender to make Domestic B Revolving Loans, expressed as an amount representing the maximum aggregate amount of such Domestic B Lender’s Domestic B Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Domestic B Lender pursuant to Section 10.04, together with the commitment of such Lender to acquire participations in Protective Advances hereunder.  The initial amount of each Domestic B Lender’s Domestic B Commitment is set forth on Schedule 2.01(a)(ii), or in the Assignment and Assumption pursuant to which such Domestic B Lender shall have assumed its Domestic B Commitment, as applicable.  The initial aggregate amount of the Domestic B Lenders’ Domestic B Commitments is $20,000,000.

“Domestic B Lender” means the Persons listed on Schedule 2.01(a)(ii) and any other Person that shall have become a party hereto as a Domestic B Lender pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“Domestic B Revolving Exposure” means, with respect to any Domestic B Lender at any time, the sum of the outstanding principal amount of such Domestic B Lender’s Domestic B Revolving Loans.

“Domestic B Revolving Loan” means a Loan made by a Domestic B Lender pursuant to Section 2.01(a)(ii).  Each Domestic B Revolving Loan shall be a Eurodollar Loan or an ABR Loan.

“Domestic Commitment” means a Domestic A Commitment or a Domestic B Commitment.

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“Domestic Perfection Certificate” has the meaning assigned to the term “Perfection Certificate” in the Domestic Security Agreement.

“Domestic Pledge Agreement” means the Domestic Pledge Agreement, substantially in the form of Exhibit C-1, among each Loan Party (other than the Canadian Subsidiary Borrower and any other Loan Party that is a Foreign Subsidiary) and the Collateral Agent.

“Domestic Revolving Exposure” means Domestic A Revolving Exposure and Domestic B Revolving Exposure.

“Domestic Security Agreement” means the Domestic Security Agreement, substantially in the form of Exhibit D-1, among each Loan Party (other than the Canadian Subsidiary Borrower and any other Loan Party that is a Foreign Subsidiary) and the Collateral Agent.

“Domestic Subsidiary Borrower” means each Subsidiary of the Parent Borrower listed on Schedule 1.01(c).

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 10.02).

“Eligible Accounts Receivable” means, at any time of determination, the aggregate of the amounts (determined as provided in the second succeeding sentence) for each Account of the Borrowers that satisfies the following criteria at the time of creation and continues to meet the same at such time of determination:  such Account (i) has been invoiced to, and represents the bona fide amounts due to any Borrower from, the purchaser of goods or services, in each case originated in the ordinary course of business of such Borrower, and (ii) is not ineligible for inclusion in the calculation of the Borrowing Bases pursuant to any of clauses (a) through (t) below or otherwise deemed, solely at the discretion of the Administrative Agent, or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, solely at the discretion of the Domestic B Agent, to be ineligible for inclusion in the calculation of the Borrowing Bases.  Without limiting the foregoing, to qualify as Eligible Accounts Receivable, an Account shall indicate no Person other than a Borrower as payee or remittance party.  The amount to be so included in Eligible Accounts Receivable at any time with respect to Accounts shall be the face amount of Accounts, reduced by, without duplication and to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, debit memos, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that the applicable Borrower may be obligated to rebate to a customer pursuant to the terms of any agreement or understanding (written or oral)), (ii) the aggregate amount of all limits and deductions provided for in this definition and elsewhere in this Agreement, (iii) the aggregate amount of all cash received in respect of such Account but not yet applied by the applicable Borrower to reduce the amount of such Account and (iv) with respect to an Account of the Canadian Subsidiary Borrower or any Subsidiary of the Canadian Subsidiary Borrower that is a Borrower, the amount of all goods and services taxes, harmonized taxes and sales taxes payable in respect of such

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Account.  Standards of eligibility may be fixed from time to time solely at the discretion of the Administrative Agent, or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, the Domestic B Agent, with any changes in such standards to be effective immediately after delivery of notice thereof to the Parent Borrower.  Unless otherwise approved from time to time in writing by the Administrative Agent or the Domestic B Agent, as applicable, no Account shall be an Eligible Account Receivable if:

(a) the applicable Borrower does not have sole lawful and absolute title to such Account; or

(b) such Account (i) is unpaid more than 90 days from the original date of invoice or 60 days from the original due date or (ii) has been written off the books of the applicable Borrower or has been otherwise designated on such books as uncollectible; or

(c) more than 50% in face amount of all Accounts of the Account Debtor with respect to such Account are ineligible pursuant to clause (b) above; or

(d) the Account Debtor with respect to such Account is insolvent or the subject of any bankruptcy case or insolvency proceeding of any kind; or

(e) such Account is not payable in dollars or the applicable Account Debtor is either not organized under the laws of the United States of America or any State thereof or the District of Columbia or is located or has its principal place of business or substantially all its assets outside the United States; provided that, with respect to an Account of the Canadian Subsidiary Borrower or any Subsidiary of the Canadian Subsidiary Borrower that is a Borrower, such Account may be payable in Canadian Dollars and the applicable Account Debtor may be organized under the laws of Canada or any province thereof and be located or have its principal place of business or substantially all its assets in Canada; or

(f) the applicable Account Debtor is the United States of America or Canada or any department, agency or instrumentality thereof, unless the relevant Borrower duly assigns its rights to payment of such Account to the Administrative Agent pursuant to the Assignment of Claims Act of 1940, as amended, or the Financial Administration Act (Canada), as amended, as applicable, which assignment and related documents and filings shall be in form and substance satisfactory to the Collateral Agent; or

(g) such Account is subject to any adverse security deposit, progress payment, retainage or other similar advance made by or for the benefit of the applicable Account Debtor, in each case to the extent thereof; or

(h) such Account is not subject to a valid and perfected first-priority Lien in favor of the Collateral Agent for the benefit of the Secured Parties to secure the Obligations, subject to no other Liens, other than Liens described under clauses (a) and (e) of the definition of “Permitted Encumbrances”; or

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(i) (A) such Account was invoiced (1) in advance of goods or services provided or (2) twice or more or (B) income associated with such Account has not been earned; or

(j) such Account is a non-trade Account, or relates to payments for interest; or

(k) the sale to the applicable Account Debtor in respect of such Account is on a bill-and-hold, guarantee sale, sale-and-return, ship-and-return, sale on approval, extended terms or consignment or other similar basis or made pursuant to any other agreement providing for repurchase or return of any merchandise that has been claimed to be defective or otherwise unsatisfactory; or

(l) the goods giving rise to such Account have not been shipped or title has not been transferred to the applicable Account Debtor, or such Account represents a progress-billing or otherwise does not represent a complete sale; provided that, for purposes hereof, “progress-billing” means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which such Account Debtor’s obligation to pay such invoice is conditioned upon the applicable Borrower’s completion of any further performance under the contract or agreement; or

(m) such Account arises out of a sale made by the applicable Borrower to an employee, officer, agent, director, stockholder, subsidiary or Affiliate of any Borrower; or

(n) such Account was created as a new receivable for the unpaid portion of an outstanding Account (including chargebacks, debit memos or other adjustments for unauthorized deductions); or

(o) the applicable Account Debtor (i) is a creditor of any Borrower, (ii) has, or has asserted, a right of set-off against any Borrower (unless such Account Debtor has entered into a written agreement reasonably acceptable to the Collateral Agent to waive such set-off rights) or (iii) has disputed its liability (whether by chargeback or otherwise) or made any asserted or unasserted claim with respect to such Account or any other Account of any Borrower that has not been resolved, in each case, without duplication, to the extent of (A) the amount owed by such Borrower to such Account Debtor, (B) the amount of such actual or asserted right of set-off or (C) the amount of such dispute or claim, as the case may be; or

(p) such Account does not comply in all material respects with the requirements of all applicable laws and regulations, whether Federal, state, local or foreign, including the Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and Regulation Z of the Board; or

(q) as to all or any part of such Account, a check, promissory note, draft, trade acceptance or other Instrument for the payment of money has been received, presented for payment and returned uncollected for any reason; or

(r) such Account is for goods that have been sold under a purchase order or pursuant to the terms of a contract or other agreement or understanding (written or oral)

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that indicates that any Person other than the applicable Borrower has or has had or has purported to have or have had an ownership interest in such goods; or

(s) such Account is an extended terms account that is due and payable more than 60 days from the original date of invoice; or

(t) such Account is created on cash in advance terms.

Notwithstanding the forgoing, all Accounts of any single Account Debtor and its Affiliates that, in the aggregate, exceed (i) 20% in respect of an Account Debtor whose securities are rated Investment Grade or (ii) 10% in respect of all other Account Debtors, in either case of the total amount of all Accounts of the Borrowers at any time of determination, shall be deemed not to be Eligible Accounts Receivable to the extent of such excess.

“Eligible Finished Goods”means, on any date, the amount of Eligible Inventory defined as Finished Goods by each Borrower on such date as shown on its perpetual inventory records in accordance with its current and historical accounting practices.

“Eligible Inventory”means, at any time of determination, without duplication, the Inventory Value of the Inventory of the Borrowers at such time that is not ineligible for inclusion in the calculation of the Borrowing Bases pursuant to any of clauses (a) through (o) below or otherwise deemed, at the sole discretion of the Administrative Agent, to be ineligible for inclusion in the calculation of the Borrowing Bases.  Without limiting the foregoing, to qualify as “Eligible Inventory”, no Person other than a Borrower shall have any direct or indirect ownership, interest or title to such Inventory and no Person other than a Borrower shall be indicated on any purchase order or invoice with respect to such Inventory as having or purporting to have an interest therein.  Standards of eligibility may be fixed from time to time solely at the discretion of the Administrative Agent, or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, solely at the discretion of the Domestic B Agent, with any changes in such standards to be effective immediately after delivery of notice thereof to the Parent Borrower.  Unless otherwise approved from time to time in writing by the Administrative Agent or the Domestic B Agent, as applicable, no Inventory shall be deemed Eligible Inventory if:

(a) such Inventory is not owned solely by a Borrower or a Borrower does not have sole and good, valid and unencumbered title thereto; or

(b) such Inventory is not located in the United States or Canada; or

(c) such Inventory is not either (i) located in a third party warehouse or in another location not owned by a Borrower and either (A) covered by a Landlord Lien Waiver or Bailee Letter, as applicable, in each case in form and substance acceptable to the Collateral Agent, or (B) a Rent Reserve has been taken with respect to such Inventory or (ii) located on property owned by a Borrower; or

(d) such Inventory constitutes goods returned or rejected due to quality issues by a customer of the applicable Borrower, or constitutes goods in transit to third parties; or

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(e) such Inventory constitutes operating supplies, packaging or shipping materials, cartons, repair parts, labels or miscellaneous spare parts or other such materials not considered for sale in the ordinary course of business; or

(f) such Inventory is not subject to a valid and perfected first-priority Lien in favor of the Collateral Agent, subject to no other Liens, other than Liens described under clauses (a), (b) and (e) of the definition of “Permitted Encumbrances”; or

(g) such Inventory is consigned or at a customer location but still accounted for in the perpetual inventory balance of the Parent Borrower or the Canadian Subsidiary Borrower, as applicable; or

(h) such Inventory is being processed offsite at a third party location or outside processor, or is in transit to or from the such third party location or outside processor, or is located at a closed facility; or

(i) such Inventory is seconds or thirds or stale or is scrap, obsolete or slow moving or unmerchantable or is identified as overstock or excess by the Parent Borrower or the Canadian Subsidiary Borrower, as applicable; or

(j) such Inventory is used as a sample or prototype, displays or display items, not first-quality or non-saleable in the ordinary course of business or has been returned by a customer; or

(k) such Inventory is a discontinued product or component thereof; or

(l) any portion of the Inventory Value of such Inventory is attributable to intercompany profit between any Borrower and any of its Affiliates; or

(m) such Inventory is damaged, returned or marked for return to vendor; or

(n) such Inventory is not in good condition, does not meet all material standards imposed by any Governmental Authority having regulatory authority over it, is repair or replacement parts for machinery and equipment, is rejected, defective or undergoing quality review.

“Eligible Raw Materials”means, on any date, the amount of Eligible Inventory defined as Raw Materials by each Borrower on such date as shown on its perpetual inventory records in accordance with its current and historical accounting practices.

“Environmental Laws” means all laws (including common law), rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, handling, treatment, storage, disposal, Release or threatened Release of any Hazardous Material or to health and safety matters.

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“Environmental Liability” means any liability, obligation, claim, action, suit, judgment or order, contingent or otherwise (including, but not limited to, any liability for damages, natural resource damage, costs of environmental remediation, administrative oversight costs, fines, penalties or indemnities), of the Parent Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Parent Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Parent Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Parent Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Parent Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Parent Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Parent Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

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“Excluded Charges” means non-recurring charges incurred in respect of restructurings, plant closings, headcount reductions or other similar actions, including severance charges in respect of employee terminations; provided that the aggregate amount of Excluded Charges shall not exceed (a) $15,000,000 during the term of this Agreement and (b) $7,500,000 during any one fiscal year.

“Excluded Subsidiaries” means the Subsidiaries of the Canadian Subsidiary Borrower set forth on Schedule 1.01(d); provided, however, that any Subsidiary shall cease to be a Excluded Subsidiary at such time as such Subsidiary (a) engages in any business or business activity, other than activities incidental to the liquidation or dissolution of such Subsidiary in accordance with applicable law or (b) has total assets with an aggregate book value or fair market value in excess of $100,000.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of any Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender with respect to any Borrower (other than an assignee pursuant to a request by the Parent Borrower under Section 2.18(b) or by operation of the CAM), any withholding tax that is imposed on amounts payable by such Borrower to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.16(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from such Borrower with respect to such withholding tax pursuant to Section 2.16(a).

“Existing Credit Agreement” has the meaning assigned to such term in the recitals hereto.

“Existing Letters of Credit” means the letters of credit issued under the Existing Credit Agreement and outstanding as of the Effective Date, which are listed on Schedule 1.01(b).

“Existing Mortgage” means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document, including any amendment thereto, granting a Lien on any Mortgaged Property to secure the Obligations executed in connection with the Existing Credit Agreement.

“Existing Preferred Stock” means the Series A Cumulative Exchangeable Redeemable Preferred Stock of the Parent Borrower having the terms specified in the form of the Parent Borrower’s Fourth Amended and Restated Articles of Incorporation attached as Exhibit A to the Amendment and Waiver dated as of August 13, 2004, among the Parent Borrower and the Lenders party thereto, as such terms may be amended or modified from time to time pursuant to Section 6.12(a).

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“Existing Security Documents” has the meaning assigned to such term in the recitals hereto.

“Federal Funds Effective Rate” means, for any day, a floating rate equal to the weighted average of the rates on overnight Federal funds transactions among members of the Federal Reserve System, as determined by the Administrative Agent in its sole discretion, which determination shall be final, binding and conclusive (absent manifest error).

“Fee Letter” means that certain Fee Letter dated November 14, 2005 between the Parent Borrower and the Administrative Agent, in form and substance satisfactory to the Agents.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of the Parent Borrower.

“Finished Goods”means completed goods that require no additional processing or manufacturing to be sold to customers (other than customers that are Affiliates of any Borrower) by a Borrower in the ordinary course of business.

“First-Priority Assets” means (a) at all times prior to the 2004 Notes First Lien Transition Date (as defined in the Intercreditor Agreement), the assets referred to in clauses (a)(i) through (xi) of the definition of “Senior Lender First Lien Collateral” in the Intercreditor Agreement, and (b) at all times on and after the 2004 Notes First Lien Termination Date, any assets.

“First-Priority Collateral” has the meaning assigned to the term “Senior Lender First Lien Collateral” in the Intercreditor Agreement.

“Fixed Charge Coverage Ratio” means, as of the end of any period of twelve consecutive fiscal months of the Parent Borrower, the ratio of (a) Consolidated EBITDA for such period to (b) the sum of (i) the aggregate amount of scheduled principal or similar payments made during such period in respect of Long-Term Indebtedness of the Parent Borrower and the Subsidiaries (other than (A) payments made by the Parent Borrower or any Subsidiary to the Parent Borrower or a Subsidiary, (B) payments made by the Parent Borrower or a Subsidiary in respect of loans under the Existing Credit Agreement and (C) payments made by the Parent Borrower or a Subsidiary in respect of any of the Loans) plus (ii) the aggregate amount of payments made during such period in respect of Long-Term Indebtedness of the Parent Borrower and the Subsidiaries, to the extent that such payments reduced any scheduled principal or similar payments referred to in clause (i) above that would have become due within one year after the date of the applicable payment, plus (iii) Cash Interest Expense during such period plus (iv) cash dividends or other distributions paid by the Parent Borrower in respect of its Equity Interests during such period, plus (v) the aggregate amount of Taxes paid in cash during such period, plus (vi) Capital Expenditures made during such period (excluding Capital Expenditures funded with the Net Proceeds from any sale, transfer or disposition of assets pursuant to Section 6.06(a), (d), (e), (f) or (g) (other than a sale, transfer or disposition of inventory pursuant to Section 6.06(a)), all as determined on a consolidated basis with respect to the Parent Borrower and the Subsidiaries in accordance with GAAP.  For purposes of calculating the Fixed Charge Coverage Ratio for any period, if the Parent Borrower has made an election to make cash interest payments

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in respect of the Senior First Lien Notes on or prior to June 15, 2007, the Fixed Charge Coverage Ratio as of the last day of such period shall be calculated on a pro forma basis as if all interest accruing in respect of the Senior First Lien Notes since the beginning of such period, to the extent not already accrued as cash interest, had instead been paid in cash.

“Foreign Assets” means the assets of or shares or other ownership interests in the Foreign Subsidiaries (other than any Foreign Subsidiary that is a Loan Party).

“Foreign Lender” means, (a) with respect to the Parent Borrower or any Domestic Subsidiary Borrower, any Lender that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia and (b) with respect to the Canadian Subsidiary Borrower, any Lender that is a non-resident of Canada for Canadian tax purposes and not an “authorized foreign bank” under Section 2 of the Bank Act (Canada).

“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia.

“GAAP” means, subject to Section 1.04, generally accepted accounting principles in the United States of America.

“GECC-Led DIP Agreement” has the meaning assigned to such term in Section 2.08(b).

“Governmental Authority” means the government of the United States of America or Canada, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

“Guarantee Agreement” means the Guarantee Agreement, substantially in the form of Exhibit B, among each Loan Party (other than a Foreign Subsidiary that is not organized under the laws of Canada or any province thereof) and the Collateral Agent.

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“Guarantor Payment” has the meaning assigned to such term in Section 11.07(a).

“Hazardous Materials” means all explosive, radioactive, hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes, and all other substances or wastes of any nature regulated pursuant to any Environmental Law, including any material listed as a hazardous substance under Section 101(14) of CERCLA.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable incurred in the ordinary course of business that are not overdue by more than 90 days, unless the payment thereof is being contested in good faith) (it being understood that “deferred purchase price” in connection with any purchase of property or assets shall include only that portion of the purchase price that shall be deferred beyond the date on which the purchase is actually consummated), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances.  The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.  Notwithstanding the foregoing, “Indebtedness” shall not include (i) deferred taxes or (ii) unsecured indebtedness of the Parent Borrower or any Subsidiary to finance insurance premiums in a principal amount not in excess of the casualty and other insurance premiums to be paid by the Parent Borrower or any Subsidiary for a three-year period beginning on the date of any incurrence of such indebtedness.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Instrument” has the meaning assigned to such term in the New York Uniform Commercial Code.

“Intercompany Obligations” has the meaning assigned to such term in Section 11.09(a).

“Intercreditor Agreement” means the intercreditor agreement entered into among the Parent Borrower, the Collateral Agent, the Senior First Lien Note Trustee and the Senior Second Lien Note Trustee (or any other trustee or agent to which Liens are granted under the Senior First Lien Security Documents or the Senior Second Lien Security Documents), providing for, among other things, (a) the relative priorities of the Liens granted pursuant to the Security

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Documents, the Senior First Lien Security Documents and the Senior Second Lien Security Documents and (b) restrictions on the exercise of remedies under the Security Documents, the Senior First Lien Security Documents and the Senior Second Lien Security Documents.

“Interest Election Request” means a request by a Borrower to convert or continue a Revolving Loan in accordance with Section 2.07.

“Interest Payment Date” means (a) with respect to any ABR Loan (including any Swingline Loan), the first Business Day of each month and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Loan with an Interest Period of more than one month’s duration, each day prior to the last day of such Interest Period that occurs at intervals of one month’s duration after the first day of such Interest Period.

“Interest Period” means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is, (a) on or before December 31, 2005, seven days thereafter or (b) at any time thereafter, one, two or three months thereafter, as the applicable Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.  For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“Inventory” has the meaning assigned to such term in Article 9 of the New York Uniform Commercial Code.

“Inventory Reserves”means reserves against Inventory equal to the sum of the following (with each reserve (other than the reserve described in clause (h) below) determined by the Parent Borrower but subject to adjustment solely at the discretion of the Administrative Agent (subject to the consent of the Domestic B Agent if the effect of such adjustment would be to increase the Borrowing Bases or the Availability Amount), or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, solely at the discretion of the Domestic B Agent:

(a)  a reserve for shrink that arises from discrepancies between the perpetual accounting system of the Parent Borrower or the Canadian Subsidiary Borrower, as applicable, and physical counts of the Inventory pertaining to inventory quantities on hand; and

(b)  a reserve for royalties; and

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(c)  a reserve for Inventory that is designated to be returned to vendors or that is recognized as damaged, off-quality or not to customer specifications by the applicable Borrower; and

(d)  to the extent not included in the calculation of Inventory Value, a revaluation reserve whereby capitalized favorable variances shall be deducted from Eligible Inventory and unfavorable variances shall not be added to Eligible Inventory; and

(e)  a lower of the cost or market reserve for any differences between the applicable Borrower’s actual cost to produce versus its selling price to third parties determined on a product line basis; and

(f)  a reserve for prepaid freight; and

(g)  a reserve for vendor rebates; and

(h)  any other reserve as deemed appropriate from time to time.

“Inventory Value” means, with respect to any Inventory of any Borrower at any time of determination, the lesser of (a) the standard cost of such Inventory as shown on the perpetual inventory records of each Borrower stated on a basis consistent with its current and historical accounting practices, in dollars, determined in accordance with the standard cost method of accounting, less (i) any markup on such Inventory from an Affiliate and (ii) in the event variances under the standard cost method (A) are capitalized, favorable variances shall be deducted from Eligible Inventory, and unfavorable variances shall not be added to Eligible Inventory, and (B) are expensed, a reserve shall be established by the Parent Borrower (but shall be subject to adjustment at the sole discretion of the Administrative Agent (subject to the consent of the Domestic B Agent if the effect of such adjustment would be to increase the Borrowing Bases or the Availability Amount), or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, at the sole discretion of the Domestic B Agent) as appropriate in order to adjust the standard cost of Eligible Inventory to approximate actual cost and (b) the market value of such Inventory.

“Investment Grade” means, in the case of S&P, a rating of BBB- or better and, in the case of Moody’s, a rating of Baa3 or better.

“IPO” means the issuance by the Parent Borrower of shares of its common stock to the public pursuant to a bona fide underwritten public offering.

“Issuing Bank” means General Electric Capital Corporation, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i) and such other financial institutions as may become Issuing Banks as provided in Section 2.05(i).  The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank or a bank or other legally authorized Person selected by or acceptable to the Administrative Agent in its sole discretion, in each case subject to the consent of the Parent Borrower which shall not be unreasonably withheld or delayed, in which case the term “Issuing Bank” shall include any such Affiliate or bank or Person with

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respect to Letters of Credit issued by such Affiliate or bank or Person.  In the event that there is more than one Issuing Bank at any time, references herein and in the other Loan Documents to the Issuing Bank shall be deemed to refer to the Issuing Bank in respect of the applicable Letter of Credit or to all Issuing Banks, as the context requires.

“Joint Venture” means, as to a Person, any corporation, partnership or other legal entity or arrangement in which such Person has any direct or indirect equity interest and that is not a subsidiary of such Person.

“Landlord Lien Waiver” means a written agreement reasonably acceptable to the Collateral Agent, pursuant to which a Person shall waive or subordinate its rights and claims as landlord in any Inventory of the applicable Loan Party for unpaid rents, grant access to the Collateral Agent for the repossession and sale of such Inventory and make other agreements relative thereto.

“LaSalle” has the meaning assigned to such term in Section 4.01(s).

“LC Availability Period” means the period from and including the Effective Date to but excluding the earlier of (a) the date that is five Business Days prior to the Maturity Date and (b) the date of termination of the Domestic A Commitments.

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Parent Borrower at such time.  The LC Exposure of any Domestic A Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.

“Lenders” means the Domestic A Lenders, the Domestic B Lenders and the Canadian Lenders.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent equal to:

(a)the offered rate for deposits in dollars for the applicable Interest Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time), on the second full Business Day next preceding the first day of such Interest Period; divided by

(b)a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day that is 2 Business Days prior to the beginning of such Interest Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurodollar funding (currently referred to as “Eurocurrency Liabilities” in

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Regulation D of the Federal Reserve Board that are required to be maintained by a member bank of the Federal Reserve System.

If such interest rates shall cease to be available from Telerate News Service (or its successor satisfactory to the Administrative Agent), the LIBO Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to the Administrative Agent and the Parent Borrower.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Loan Documents” means this Agreement, the Fee Letter, the Work Fee Letter, the Guarantee Agreement, the Intercreditor Agreement and the Security Documents.

“Loan Parties” means the Parent Borrower, the Domestic Subsidiary Borrowers, the Canadian Subsidiary Borrower and the other Subsidiary Loan Parties.

“Loans” means the loans made by the Lenders to the Borrowers pursuant to this Agreement, including Swingline Loans and Protective Advances.

“Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability; provided, however, that all Obligations hereunder shall be for purposes of this Agreement at all times constitute Long-Term Indebtedness.

“Margin Stock” has the meaning assigned to such term in Regulation U.

“Mark-to-Market Value” has the meaning assigned to such term in the Intercreditor Agreement.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, properties, assets, prospects or condition (financial or otherwise) or contingent or other liabilities of the Parent Borrower and the Subsidiaries, taken as a whole, (b) the ability of the Loan Parties to perform any material obligations under any Loan Document or (c) the rights of or benefits available to the Lenders under any Loan Document.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Parent Borrower and the Subsidiaries in an aggregate principal or similar amount exceeding $10,000,000.  For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Parent Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Parent Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

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“Maturity Date” means May 21, 2007.

“Minimum Availability Reserve” means at all times $10,000,000.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document, including any amendment thereto, granting a Lien on any Mortgaged Property to secure the Obligations.

“Mortgaged Property” means, initially, each parcel of real property and the improvements thereto owned by a Loan Party and identified on Schedule 1.01(a), and includes each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.12 or 5.13.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Proceeds” means, with respect to any event (a) the cash proceeds received by the Parent Borrower and the Subsidiaries in respect of such event including (i) any cash received in respect of any non-cash proceeds (excluding interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds, and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid by the Parent Borrower and the Subsidiaries to third parties (other than to the Parent Borrower or a Subsidiary) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or other insured damage or condemnation or similar proceeding), the amount of all payments required to be made by the Parent Borrower and the Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event (including in order to obtain any consent required therefor), (iii) the amount of all taxes paid (or reasonably estimated to be payable) by the Parent Borrower and the Subsidiaries, and the amount of any reserves established by the Parent Borrower and the Subsidiaries to fund contingent liabilities reasonably estimated to be payable, and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer of the Parent Borrower) and (iv) all distribu­tions and other payments required to be made to minority interest holders in Subsidiaries or Joint Ventures as a result of such event (provided that such distribution or payment is proportionate to such minority interest holders’ share of net income (or dividends and distribution made in respect of the capital stock or other equity interests) of such Subsidiary or Joint Venture as provided in the certificate of incorporation or other governing documents of such Subsidiary or Joint Venture).  In the case of Net Proceeds denominated in a currency other than dollars, the amount of such Net Proceeds shall be the dollar equivalent thereof based upon the exchange rates prevailing at the time of the transaction giving rise to such Net Proceeds.

“Non-Consenting Lender” has the meaning assigned to such term in Section 10.02(c).

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“Obligations” means (a) all principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment, or otherwise, (b) each payment required to be made by the Borrowers under this Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (c) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of each Loan Party to the Secured Parties under this Agreement and the other Loan Documents, (d) all covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to this Agreement and the other Loan Documents, (e) all Swap Obligations and (f) the due and punctual payment and performance of all Banking Services Obligations.

“Other Taxes” means any and all current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“Parent Borrower” means Pliant Corporation, a Utah corporation.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Perfection Certificate” means the Domestic Perfection Certificate or the Canadian Perfection Certificate.

“Permitted Encumbrances” means:

(a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 5.05;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, processors’, landlords’, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 60 days or are being contested in compliance with Section 5.05;

(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

(d) (i) Liens incurred on assets of any Foreign Subsidiary that is not a Loan Party to secure the obligations of the Parent Borrower or any of its Subsidiaries under trade contracts in the ordinary course of business; provided that the aggregate amount of such obligations (other than obligations constituting Indebtedness incurred pursuant to clauses (v), (viii) or (ix) of Section 6.01) that may be secured pursuant to this subclause (i) and

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outstanding at any time shall not exceed $35,000,000 minus the aggregate amount of Indebtedness that has been incurred pursuant to clauses (v), (viii) and (ix) of Section 6.01 and that is outstanding at such time, or (ii) deposits made to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII;

(f) Liens of a collection bank arising in the ordinary course of business under § 4-208 of the Uniform Commercial Code in effect in the relevant jurisdiction;

(g) Liens disclosed on title policies delivered to the Administrative Agent prior to the Effective Date in respect of any Mortgaged Property and easements, zoning restrictions, rights-of-way and similar restrictions and encumbrances (including minor title and survey defects) on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Parent Borrower or any Subsidiary; and

(h) Liens in respect of real property that become Mortgaged Property after the Effective Date pursuant to Section 5.13 to the extent such Lien is permitted by the applicable Mortgage and reasonably acceptable to the Collateral Agent;

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

“Permitted Investments” means: (i) a marketable obligation, maturing within two years after issuance thereof, issued or guaranteed by the United States of America or an instrumentality or agency thereof, (ii) a certificate of deposit or banker’s acceptance, maturing within one year after issuance thereof, issued by any Lender, or a national or state bank or trust company or a European, Canadian or Japanese bank in each case having capital, surplus and undivided profits of at least $100,000,000 and whose long-term unsecured debt has a rating of “A” or better by S&P or A2 or better by Moody’s or the equivalent rating by any other nationally recognized rating agency (provided that the aggregate face amount of all investments in certificates of deposit or banker’s acceptances issued by the principal offices of or branches of such European or Japanese banks located outside the United States shall not at any time exceed 33-1/3% of all investments described in this definition), (iii) open market commercial paper, maturing within 270 days after issuance thereof, which has a rating of A1 or better by S&P or P1 or better by Moody’s, or the equivalent rating by any other nationally recognized rating agency, (iv) repurchase agreements and reverse repurchase agreements with a term not in excess of one year with any financial institution that has been elected a primary government securities dealer by the Federal Reserve Board or whose securities are rated AA-or better by S&P or Aa3 or better by Moody’s or the equivalent rating by any other nationally recognized rating agency relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or instrumentality thereof and backed by the full faith and credit of the

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United States of America, (v) “money market” preferred stock maturing within six months after issuance thereof or municipal bonds issued by a corporation organized under the laws of any state of the United States, which has a rating of “A” or better by S&P or Moody’s or the equivalent rating by any other nationally recognized rating agency, (vi) tax exempt floating rate option tender bonds backed by letters of credit issued by a national or state bank whose long-term unsecured debt has a rating of AA or better by S&P or Aa2 or better by Moody’s or the equivalent rating by any other nationally recognized rating agency, (vii) ”money market” funds that invest in the investments specified in clauses (i) through (vi) above and (viii) demand deposit accounts with commercial banks.

“Permitted Notes Refinancing Indebtedness” means the 2004 Notes (after giving effect to the 2004 Notes Restatement) and any Indebtedness of the Parent Borrower issued to refinance, redeem, repurchase or otherwise replace (collectively with the amendment and restatement expressly contemplated by the 2004 Notes Restatement, “refinance”) all or any portion of any of the Senior First Lien Notes, Senior Second Lien Notes or Senior Subordinated Notes (or previous refinancings, redemptions, repurchases or replacements thereof constituting Permitted Notes Refinancing Indebtedness); provided that (a) except as otherwise expressly contemplated by the 2004 Notes Restatement, the aggregate principal amount at maturity of such Permitted Notes Refinancing Indebtedness does not exceed the aggregate principal amount at maturity of the Indebtedness being refinanced (plus unpaid accrued interest and premium thereon), (b) if the aggregate principal amount at maturity of the Indebtedness being refinanced exceeds the accreted value of such Indebtedness, the accreted value of such Permitted Notes Refinancing Indebtedness does not exceed the accreted value of the Indebtedness being refinanced (plus unpaid accrued interest (not included in the accreted value) and premium thereon), (c) such Permitted Notes Refinancing Indebtedness has a rate of interest at a market rate determined at the time of pricing, but in any event, except as otherwise expressly contemplated by the 2004 Notes Restatement, at no time greater than the rate of interest of any of the Indebtedness being refinanced, (d) except as otherwise expressly contemplated by the 2004 Notes Restatement, the stated maturity of such Permitted Notes Refinancing Indebtedness is no earlier than the later of (i) 180 days after the Maturity Date and (ii) the date on which the Indebtedness being refinanced would otherwise come due in accordance with its terms, (e) except as otherwise expressly contemplated by the 2004 Notes Restatement, such Permitted Notes Refinancing Indebtedness does not require any scheduled amortization, principal or sinking fund payments earlier than the later of (i) 180 days after the Maturity Date and (ii) the date on which the Indebtedness being refinanced would otherwise come due in accordance with its terms, (i) with respect to any refinancing of the Senior Subordinated Notes, such Permitted Notes Refinancing Indebtedness is unsecured and subordinated in right of payment to the Obligations on terms no less favorable to the Lenders than those contained in the Senior Subordinated Note Documents, (g) such Permitted Notes Refinancing Indebtedness does not have different obligors or guarantors than those with respect to the Senior First Lien Notes, Senior Second Lien Notes or Senior Subordinated Notes, as applicable, being refinanced and (h) all other terms and conditions (including, as applicable, any collateral and intercreditor provisions) of such Permitted Notes Refinancing Indebtedness are not less favorable to the Lenders or the Parent Borrower and its subsidiaries in any material respect than those contained in (i) except in the case of Permitted Notes Refinancing Indebtedness referred to in clause (ii) below, the Senior First Lien Notes, Senior Second Lien Notes or Senior Subordinated Notes, as applicable, being refinanced or (ii) if such Permitted Notes Refinancing Indebtedness is

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refinancing any 2004 Notes (other than the Amended 2004 Notes), the 2004 Notes outstanding immediately prior to the 2004 Notes Restatement Date.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA, and in respect of which the Parent Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledge Agreements” means the Domestic Pledge Agreement and the Canadian Pledge Agreement.

“Prepayment Fee” means a fee payable to the Administrative Agent, for the benefit of the Lenders, in connection with reduction in all or a portion of the Commitment or termination of all or a portion of the Commitment in an amount equal to the Commitment so reduced or terminated so prepaid multiplied by 1.00%.

“Prime Rate” means the rate publicly quoted from time to time by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases quoting a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent); each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Priority Payables Reserve” means, with respect to any Person at any time, any amount payable by such Person that is secured by a Lien in favor of a Governmental Authority that ranks or is capable of ranking prior to or pari passu with the Liens created by the Security Documents in respect of any Eligible Accounts Receivable or Eligible Inventory, including, if applicable, amounts owing for wages, vacation pay, severance pay, employee deductions, sales tax, excise tax, Taxes payable pursuant to Part IX of the Excise Tax Act (Canada) (net of GST input credits), income tax, workers compensation, government royalties, pension fund obligations, overdue rents or Taxes, and other statutory or other claims.

“Pro Forma Opening Borrowing Base” means the Borrowing Bases, calculated as of October 31, 2005.

“Projections” has the meaning assigned to such term in Section 4.01(j).

“Protective Advances” has the meaning assigned to such term in Section 2.19(a).

“Purchase Notice” has the meaning assigned to such term in Section 12.02(a).

“Purchase Price” has the meaning assigned to such term in Section 12.02(b)(i).

“Purchased Interests” has the meaning assigned to such term in Section 12.02(a).

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“Purchasers” has the meaning assigned to such term in Section 12.02(a).

“Qualified Preferred Stock” means, with respect to any Person, any preferred Equity Interest that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event does not (a) (i) mature or becomes mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (ii) become convertible or exchangeable at the option of the holder thereof for Indebtedness or preferred stock that is not Qualified Preferred Stock; or (iii) become redeemable at the option of the holder thereof (other than as a result of a change of control event), in whole or in part, in each case on or prior to the first anniversary of the Maturity Date and (b) provide holders thereunder with rights upon the occurrence of a “change of control” event or have other terms relating to “change of control” events that are less favorable to the Lenders than the applicable terms set forth in the Existing Preferred Stock.  Notwithstanding anything to the contrary, the Existing Preferred Stock shall be deemed to be Qualified Preferred Stock.

“Qualifying Foreign Subsidiary” means any Foreign Subsidiary other than (a) a Foreign Subsidiary that is treated as a corporation for U.S. federal income tax purposes or (b) any direct or indirect subsidiary of a Foreign Subsidiary described in clause (a).  The Canadian Subsidiary Borrower is a Qualifying Foreign Subsidiary.

“Raw Materials”means items or materials used or consumed in the manufacturing of goods to be sold by the applicable Borrower in the ordinary course of business.

“Real Estate” has the meaning assigned to such term in Section 3.05.

“Recovery Rate” means, with respect to any Class of Eligible Inventory, (a) the estimated net recovery of all Eligible Inventory of the Borrowers of such Class of Eligible Inventory stated in dollars as determined on a net orderly liquidation basis by the most recent analysis conducted by outside inventory consultants/appraisers retained or approved by the Agents and disclosed to the Parent Borrower divided by (b) the Inventory Value of all Eligible Inventory of the Borrowers of such Class of Eligible Inventory, as of the date of such most recent analysis.

“Register” has the meaning assigned to such term in Section 10.04.

“Regulation U” means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Regulation X” means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Regulation Z” means Regulation Z of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

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“Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment.

“Rent Reserve” means, with respect to any location that is not owned by a Loan Party where any Inventory (to the extent subject to Liens arising by operation of law or otherwise to secure rent, warehousing fees or similar payment obligations payable by any Loan Party in respect of such location) is located and with respect to which no Landlord Lien Waiver or Bailee Letter, as applicable, is in effect, a reserve equal to three months’ rent, warehousing fees or similar payment obligations at such location.

 “Required Canadian Lenders” means, at any time, Canadian Lenders having Canadian Revolving Exposures and unused Canadian Commitments representing more than 50% of the sum of the total Canadian Revolving Exposures and unused Canadian Commitments at such time.

“Required Domestic A Lenders” means, at any time, Domestic A Lenders having Domestic A Revolving Exposures and unused Domestic A Commitments representing more than 50% of the sum of the total Domestic A Revolving Exposures and unused Domestic A Commitments at such time.

“Required Domestic B Lenders” means, at any time, Domestic B Lenders having Domestic Revolving B Exposures and unused Domestic B Commitments representing more than 50% of the sum of the total Domestic Revolving B Exposures and unused Domestic B Commitments at such time.

“Required Lenders” means, at any time, Lenders having Credit Exposure and unused Commitments representing more than 50% of the sum of the total Credit Exposure and unused Commitments at such time.

“Reserves” means any reserves against Eligible Accounts Receivable, Eligible Finished Goods or Eligible Raw Materials of any Borrower or the Availability Amount that the Administrative Agent may, or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, the Domestic B Agent may, in its reasonable credit judgment, establish from time to time (subject to the consent of the Domestic B Agent if the Administrative Agent alters a Reserve, the effect of which would be to increase the Borrowing Bases or the Availability Amount).  Without limiting the generality of the foregoing, Reserves established to ensure the payment of accrued Consolidated Interest Expenses or Indebtedness shall be deemed to be a reasonable exercise of the applicable Agent’s credit judgment.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Parent Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Parent Borrower or any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in the Parent Borrower

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or any Subsidiary.  For the avoidance of doubt, the receipt by the Parent Borrower of its Equity Interests in settlement of any claim made by the Parent Borrower pursuant to the Uniplast Purchase Agreement as in effect on June 15, 2001, shall not be a Restricted Payment.

“Revolving Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.

“Revolving Exposure” means, with respect to any Lender at any time, the sum of the Domestic Revolving Exposure of such Lender and the Canadian Revolving Exposure of such Lender at such time.

“Revolving Loan” means a Domestic Revolving Loan or a Canadian Revolving Loan.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc.

“SEC” means the Securities and Exchange Commission.

“Second-Priority Collateral” has the meaning assigned to the term “2004 Notes First Lien Collateral” in the Intercreditor Agreement.

“Secured Obligations Reserve” means, at any time, the sum of (a) the Mark-to-Market Value of the Swap Obligations and Secured Swap Obligations of the Loan Parties that constitute Senior Lender Claims (as defined in the Intercreditor Agreement) at such time, (b) if, at such time, any Cash Management Arrangement is in effect that could give rise to Banking Services Obligations or Cash Management Obligations that would constitute Senior Lender Claims (as defined in the Intercreditor Agreement), the actual amount of Banking Services Obligations and Cash Management Obligations that constitute Senior Lender Claims (as defined in the Intercreditor Agreement) at such time and (c) any amount payable by a Loan Party that ranks pari passu with or senior to the Obligations.

“Secured Parties” means the “Secured Parties” as defined in the Domestic Security Agreement.

“Secured Swap Obligations” has the meaning assigned to the term “Senior Lender Hedging Obligations” in the Intercreditor Agreement.

 “Security Agreements” means the Domestic Security Agreement and the Canadian Security Agreement.

“Security Documents” means the Security Agreements, the Pledge Agreements, the Mortgages and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the Obligations.

“Sellers” has the meaning assigned to such term in Section 12.02(a).

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“Senior First Lien Note Documents” means the Senior First Lien Notes, the Senior First Lien Note Indenture, the Senior First Lien Security Documents, the Intercreditor Agreement and all other instruments, agreements and documents evidencing, guaranteeing or otherwise governing the terms of the Senior First Lien Notes.

“Senior First Lien Note Indenture” means the indenture dated as of February 17, 2004, or any other indenture or similar agreement or instrument, in each case pursuant to which any Senior First Lien Notes are issued.

“Senior First Lien Notes” means the $306,000,000 principal amount at maturity of 11-1/8% senior secured discount notes due 2009 of the Parent Borrower issued in exchange for the substantially identical notes of like tenor privately issued on the Effective Date and any Permitted Notes Refinancing Indebtedness in respect thereof.

“Senior First Lien Note Trustee” means the trustee under the Senior First Lien Note Indenture, or any successor thereto.

“Senior First Lien Security Documents” means any and all security agreements, pledge agreements, mortgages and other agreements and documents pursuant to which any Liens are granted to secure any Indebtedness or other obligations in respect of the Senior First Lien Notes.

“Senior Second Lien Note Documents” means the Senior Second Lien Notes, the Senior Second Lien Note Indenture, the Senior Second Lien Security Documents, the Intercreditor Agreement and all other instruments, agreements and documents evidencing, guaranteeing or otherwise governing the terms of the Senior Second Lien Notes.

“Senior Second Lien Note Indenture” means the indenture dated as of May 30, 2003, between the Parent Borrower and Wilmington Trust Company, as trustee, or any other indenture or similar agreement or instrument, in each case pursuant to which any Senior Second Lien Notes are issued.

“Senior Second Lien Notes” means the $250,000,000 aggregate principal amount of 11-1/8% senior secured notes due 2009 of the Parent Borrower outstanding on the Effective Date and any Permitted Notes Refinancing Indebtedness in respect thereof.

“Senior Second Lien Note Trustee” means the trustee under the Senior Second Lien Note Indenture, or any successor thereto.

“Senior Second Lien Security Documents” means any and all security agreements, pledge agreements, mortgages and other agreements and documents pursuant to which any Liens are granted to secure any Indebtedness or other obligations in respect of the Senior Second Lien Notes.

“Senior Subordinated Note Documents” means the Senior Subordinated Notes, the Senior Subordinated Note Indenture and all other instruments, agreements and documents evidencing, guaranteeing or otherwise governing the terms of the Senior Subordinated Notes.

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“Senior Subordinated Note Indenture” means collectively, (a) the indenture dated as of May 31, 2000, between the Parent Borrower and The Bank of New York, as trustee, (b) the indenture dated as of April 10, 2002, between the Parent Borrower and The Bank of New York, as trustee, and (c) any other indenture or similar agreement or instrument, in each case pursuant to which any Senior Subordinated Notes are issued.

“Senior Subordinated Notes” means the $320,000,000 aggregate principal amount of 13% senior subordinated notes due 2010 of the Parent Borrower outstanding on the Effective Date and any Permitted Notes Refinancing Indebtedness in respect thereof.

“Series B Preferred Stock” means the Series B Redeemable Preferred Stock of the Parent Borrower having the terms specified in the form of the Parent Borrower’s Fourth Amended and Restated Articles of Incorporation attached as Exhibit A to the Amendment and Waiver dated as of August 13, 2004, among the Parent Borrower and the Lenders party thereto, as such terms may be amended or modified from time to time pursuant to Section 6.12(a).

“Settlement Date” has the meaning assigned to such term in Section 12.02(a).

“Sponsor” means J.P. Morgan Partners, LLC.

“Standstill Period” has the meaning assigned to such term in Section 12.02.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Stockholders Agreement” means the Stockholders Agreement dated as of May 31, 2000, among Huntsman Packaging Corporation, a Utah corporation, and the stockholders party thereto.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held.

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“Subsidiary” means any subsidiary of the Parent Borrower.

“Subsidiary Loan Party” means any Subsidiary of the Parent Borrower; provided that (a) Pliant Investment Inc., a Utah corporation, shall not be a Subsidiary Loan Party and (b) a Foreign Subsidiary shall not be a Subsidiary Loan Party unless such Foreign Subsidiary is a Qualifying Foreign Subsidiary.

“Swap Agreement” means any agreement with respect to any swap, spot, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Parent Borrower or the Subsidiaries shall be a Swap Agreement.

“Swap Obligations” of each Loan Party means all obligations, monetary or otherwise, under each Swap Agreement that (i) is effective on the Effective Date with a counterparty that is a Lender (or an Affiliate of a Lender) as of the Effective Date or (ii) is entered into after the Effective Date with any counterparty that is a Lender (or an Affiliate thereof) at the time such Swap Agreement is entered into.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time.  The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.

“Swingline Lender” means General Electric Capital Corporation, in its capacity as lender of Swingline Loans hereunder.

“Swingline Loan” has the meaning assigned to such term in Section 2.04.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

“Transactions” means (a) the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, (b) the execution, delivery and performance by each Loan Party of the Senior First Lien Note Documents to which it is to be a party, the issuance of the Senior First Lien Notes and the use of the proceeds thereof, (c) modifications to the Senior Subordinated Note Indenture entered into in connection with the consummation of this Agreement, (d) ongoing discussions and negotiations with the holders of the Senior Subordinated Notes regarding a possible restructuring of their claims with respect thereto and (e) the payment of the Transaction Costs.

“Transaction Costs” means the fees and expenses incurred by, or required to be reimbursed or paid by, the Parent Borrower and the Subsidiaries in connection with the Transactions.

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“Trigger Notice” has the meaning assigned to such term in Section 12.01.

“2004 Notes” has the meaning assigned to such term in the definition of “2004 Notes Restatement”

“2004 Notes Refinancing Percentage” means the amount (expressed as a percentage) equal to (a) the aggregate accreted value of the Amended 2004 Notes divided by (b) the aggregate accreted value of the 2004 Notes, in each case on the 2004 Notes Restatement Date.

“2004 Notes Restatement” means (a) the amendment and restatement on or before May 15, 2005, of the Senior First Lien Note Indenture by the Parent Borrower and the Senior First Lien Note Trustee to (i) amend and restate the terms of the Senior First Lien Notes that (A) are outstanding on the effective date (the “2004 Notes Restatement Date”) of such amendment and restatement (the “2004 Notes”) and (B) were, on the record date established by the Parent Borrower for the purpose of consenting to such amendment and restatement (the “Record Date”), held of record by holders (the “Consenting Holders”) that delivered to the Senior First Lien Note Trustee an effective consent (which has not been validly withdrawn) to such amendment and restatement (the Senior First Lien Notes that satisfy the requirements of this clause (B) and clause (A) above, together with any identical notes issued in payment of interest thereon or on any such additional notes in accordance with their terms, the “Amended 2004 Notes”); provided that (1) the 2004 Notes Refinancing Percentage is not less than 51%, (2) the terms of the Amended 2004 Notes as of the 2004 Notes Restatement Date (other than the interest rate, the pay-in-kind interest requirements, the cash interest requirements, the voluntary redemption premiums (which shall be market premiums on the 2004 Notes Restatement Date) and the principal amount at maturity in respect thereof) shall be substantially identical to the terms of the 2004 Notes immediately prior to the 2004 Notes Restatement Date, (3) the Amended 2004 Notes shall not require the payment of any interest (other than through the issuance of additional Amended 2004 Notes and, to the extent permitted by clause (B) of the proviso to Section 6.09(b), in cash in accordance with the terms thereof), (4) the rate of interest on the Amended 2004 Notes shall be a fixed rate that is a market rate on the 2004 Notes Restatement Date (which may be greater than the rate of interest on the 2004 Notes immediately prior to the 2004 Notes Restatement Date) and in any event shall not exceed the per annum rate separately agreed upon by the Parent Borrower and the Administrative Agent, (5) the maturity date of the Amended 2004 Notes shall be June 15, 2009, and (6) such amendment and restatement shall otherwise be effected on terms reasonably acceptable to the Administrative Agent, and (ii) amend and restate the terms of the 2004 Notes (other than the Amended 2004 Notes) to eliminate the material restrictive covenants with respect thereto that can be eliminated by majority consent under the terms thereof, (b) in connection with the amendment and restatement described above in clause (a) of this definition and as soon as practicable after the 2004 Notes Restatement Date, the payment by the Parent Borrower to each Consenting Holder that consents to such amendment and restatement no later than the deadline established by the Parent Borrower for such purpose of a consent fee (which shall be a market amount) in cash in respect of each $1,000 in principal amount at maturity of Amended 2004 Notes held by such Consenting Holder on the Record Date; provided that the aggregate amount of such consent fees shall not exceed the aggregate amount separately agreed upon by the Parent Borrower and the Administrative Agent, and (c) the execution and delivery by the Parent Borrower, the Collateral Agent, the Senior First

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Lien Note Trustee and the Senior Second Lien Note Trustee of any amendment, amendment and restatement or reaffirmation of the Intercreditor Agreement in effect immediately prior to the 2004 Notes Restatement Date that the Administrative Agent and the Collateral Agent determine is reasonably necessary or desirable to effect the treatment under the Intercreditor Agreement of the 2004 Amended Notes in a manner substantially identical to the manner in which the 2004 Notes are treated under the Intercreditor Agreement as in effect at such time; provided, however, that the transactions described above in clauses (a), (b) and (c) of this definition will not satisfy the requirements for the 2004 Notes Restatement unless, no later than the 2004 Notes Restatement Date, the Parent Borrower shall have delivered to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, one or more opinions of counsel to the Parent Borrower as are reasonably requested by the Administrative Agent with respect to the Parent Borrower and the authorization and consummation of the transactions described above in clauses (a), (b) and (c).

“2004 Notes Remaining Amount” means (a) $306,000,000 minus (b) an amount equal to (i) the 2004 Notes Refinancing Percentage multiplied by (ii) $306,000,000.

“2004 Notes Restatement Date” has the meaning assigned to such term in the definition of “2004 Notes Restatement”.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the LIBO Rate or the Alternate Base Rate.

“USA Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001.

“US Lending Office”means, as to any Canadian Lender, the applicable branch, office or Affiliate of such Canadian Lender designated by such Canadian Lender to make Canadian Revolving Loans to the Parent Borrower or any Domestic Subsidiary Borrower.

“Wachovia” has the meaning assigned to such term in Section 4.01(s).

“Warrants” means the warrants of the Parent Borrower to acquire common stock of the Parent Borrower issued as units with the Senior Subordinated Notes.

“Wholly Owned Subsidiary” means a Subsidiary of which securities (except for directors’ qualifying shares or other de minimus shares) or other ownership interests representing 100% of the equity are at the time owned, directly or indirectly, by the Parent Borrower.

“Withdrawal Liability” means liability of the Parent Borrower or any ERISA Affiliate to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Work Fee Letter” means that certain Work Fee Letter dated November 14, 2005 between the Parent Borrower and the Administrative Agent, in form and substance satisfactory to the Administrative Agent.

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SECTION 1.02.  Classification of Loans and Borrowings.  For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”).  Borrowings also may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”).

SECTION 1.03.  Terms Generally.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.  To the extent that any of the Loan Documents executed in connection with the closing of the Existing Credit Agreement have not been amended or amended and restated in connection with the transactions contemplated by this Agreement, the parties hereby acknowledge that all references contained therein to (a) the “Credit Agreement” shall be references to this Agreement, (b) the “Administrative Agent” shall be references to the Administrative Agent as defined herein, (c) the “Collateral Agent” shall be referenced to the Collateral Agent as defined herein and (d) the “Loan Parties” shall be deemed to include all of the Loan Parties.

SECTION 1.04.  Accounting Terms; GAAP.  Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Parent Borrower notifies the Administrative Agent that the Parent Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Parent Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

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ARTICLE II

The Credits

SECTION 2.01.  Commitments; Loans Outstanding on Effective Date.

(a)  (i) Subject to the terms and conditions set forth herein, each Domestic A Lender agrees to make loans in dollars to the Parent Borrower and the Domestic Subsidiary Borrowers from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Domestic A Revolving Exposure exceeding such Lender’s Domestic A Commitment (after giving effect to the application of any proceeds being applied contemporaneously with the advance of such Domestic A Revolving Loans), (ii) the total Domestic A Revolving Exposures exceeding the total amount of the Domestic A Commitments, (iii) the total Revolving A Exposures exceeding the lesser of (A) the total amount of the Domestic A Commitments plus the Canadian Commitments and (B) the Borrowing Base A then in effect, subject to the Administrative Agent’s authority, in its sole discretion, to make Protective Advances pursuant to the terms of Section 2.19  and (iv) the total Revolving Exposures exceeding the lesser of (A) the total amount of the Commitments and (B) the Aggregate Borrowing Base then in effect, subject to the Administrative Agent’s authority, in its sole discretion, to make Protective Advances pursuant to the terms of Section 2.19.

(ii)  Subject to the terms and conditions set forth herein, each Domestic B Lender agrees to make its Domestic B Revolving Loan in dollars to the Parent Borrower and the Domestic Subsidiary Borrowers on the Effective Date in the amount of the Domestic B Lender’s Domestic B Commitment.  No payment with respect to the Domestic B Revolving Loans may be reborrowed.

(b)  Subject to the terms and conditions set forth herein, each Canadian Lender agrees to make its Canadian Revolving Loan in loans in dollars from its Canadian Lending Office to the Canadian Subsidiary Borrower on the Effective Date in the amount of the Canadian Lender’s Canadian Commitment and will make loans in dollars from its Canadian Lending Office to the Canadian Subsidiary Borrower from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Canadian Revolving Exposure exceeding such Lender’s Canadian Commitment (after giving effect to the application of any proceeds being applied contemporaneously with the advance of such Canadian Revolving Loans), (ii) the total Canadian Revolving Exposures exceeding the total amount of the Canadian Commitments and (iii) the total Revolving Exposures exceeding the lesser of (A) the total amount of the Commitments and (B) the Aggregate Borrowing Base then in effect.

(c)  Notwithstanding anything in this Agreement to the contrary, no Lender shall make any Loan to any Domestic Subsidiary Borrower unless (i) immediately after giving effect to such Loan (after giving effect to the application of any proceeds being applied contemporaneously with the advance of such Loan), the aggregate amount of Loans made to Uniplast U.S., Inc.  does not exceed $9,400,000 and (ii) such Loan constitutes “Permitted Debt” under Section 4.03(b)(iv) of each of the Senior Second Lien Notes Indenture and the Senior Subordinated Notes Indenture.

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(d)  Within the foregoing limits and subject to the terms and conditions set forth herein, the Parent Borrower, the Domestic Subsidiary Borrowers and the Canadian Borrower may borrow, prepay and reborrow Domestic A Revolving Loans and Canadian Revolving Loans during the Revolving Availability Period.

SECTION 2.02.  Loans and Borrowings.  (a)  Each Domestic A Revolving Loan (other than a Swingline Loan)  shall be made as part of a Borrowing consisting of Domestic A Revolving Loans of the same Type made by the Domestic A Lenders (or their Affiliates as provided in paragraph (b) below) ratably in accordance with their respective Domestic A Commitments.  Each Domestic B Revolving Loan shall be made as part of a Borrowing consisting of Domestic B Revolving Loans of the same Type made by the Domestic B Lenders (or their Affiliates as provided in paragraph (b) below) ratably in accordance with their respective Domestic B Commitments.  Each Canadian Revolving Loan shall be made as part of a Borrowing consisting of Canadian Revolving Loans of the same Type made by the Canadian Lenders (or their Affiliates as provided in paragraph (b) below) ratably in accordance with their respective Canadian Commitments.  The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.  Any Protective Advance and any Swingline Loan shall be made in accordance with the procedures set forth in Sections 2.19 and 2.04.

(b)  Subject to Section 2.13, each Revolving Loan shall be comprised entirely of ABR Loans or Eurodollar Loans as the Parent Borrower may request in accordance herewith; provided that all Borrowings made on the Effective Date must be made as ABR Loans but may be converted into Eurodollar Loans after November 30, 2006 in accordance with Section 2.07.  Each Swingline Loan shall be an ABR Loan.  Each Lender at its option may make any Canadian Revolving Loan or any Eurodollar Loan by causing any Canadian branch or Canadian Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of any Borrower to repay such Loan in accordance with the terms of this Agreement and shall not result in any increased costs under Section 2.14 or any obligation by any Borrower to make any payment under Section 2.16 in excess of the amounts, if any, that such Lender would be entitled to claim under Section 2.14 or 2.16, as applicable, without giving effect to such change in lending office.

(c)  At the commencement of each Interest Period for any Eurodollar Revolving Loan, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000.  At the time that each ABR Revolving Loan is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000; provided that an ABR Revolving Loan of any Class may be in an aggregate amount that is equal to the entire unused balance of the total amount of the Commitments of such Class or that is equal to the amount required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e).  Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $500,000.  Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of eight Eurodollar Borrowings outstanding.

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(d)  Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

SECTION 2.03.  Requests for Borrowings.  To request a Revolving Loan, the Parent Borrower shall notify the Administrative Agent (on behalf of itself or another Borrower) of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 1:00 p.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Loan to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing.  Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Parent Borrower (on behalf of itself or another Borrower).  Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i) whether the Parent Borrower is requesting such Borrowing on behalf of itself or for another Borrower (and, if on behalf of another Borrower, the identity of such Borrower);

(ii) whether the requested Borrowing is a Domestic A Revolving Loan or a Canadian Revolving Loan or, in the case of the Effective Date, a Domestic B Revolving Loan;

(iii) the aggregate amount of such Borrowing;

(iv) the date of such Borrowing, which shall be a Business Day;

(v) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

(vi) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of “Interest Period”; and

(vii) the location and number of the relevant Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with respect to any requested Eurodollar Revolving Loan, then the Parent Borrower shall be deemed to have selected (on behalf of itself or the applicable Borrower) an Interest Period of one month’s duration.  Promptly following receipt of a Borrowing Request with respect to a Borrowing of any Class in accordance with this Section, the Administrative Agent shall advise each Lender with respect to such Class of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

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SECTION 2.04.  Swingline Loans.  (a)  Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make loans (“Swingline Loans”) to the Parent Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $10,000,000, (ii) the total Domestic A Revolving Exposures exceeding the total amount of the Domestic A Commitments, (iii) the total Revolving A Exposures exceeding the lesser of (A) the total amount of the Domestic A Commitments plus the Canadian Commitments and (B) the Borrowing Base A then in effect and (iv) the total Revolving Exposures exceeding the lesser of (A) the total amount of the Commitments and (B) the Aggregate Borrowing Base then in effect; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan.  Within the foregoing limits and subject to the terms and conditions set forth herein, the Parent Borrower may borrow, prepay and reborrow Swingline Loans.

(b)  To request a Swingline Loan, the Parent Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 12:00 noon, New York City time, on the day of a proposed Swingline Loan.  Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day), the amount of the requested Swingline Loan and the wire transfer instructions for the account of the Parent Borrower to which the proceeds of such Swingline Loan should be transferred.  The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Parent Borrower.  The Swingline Lender shall make each Swingline Loan available to the Parent Borrower by wire transfer to the account specified by the Parent Borrower in the request for such Swingline Loan (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the Issuing Bank) by 2:00 p.m., New York City time, on the requested date of such Swingline Loan.

(c)  The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day require the Domestic A Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding.  Such notice shall specify the aggregate amount of Swingline Loans in which Domestic A Lenders will participate.  Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Domestic A Lender, specifying in such notice such Domestic A Lender’s Applicable Percentage of such Swingline Loan or Loans.  Each Domestic A Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Domestic A Lender’s Applicable Percentage of such Swingline Loan or Loans.  Each Domestic A Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Domestic A Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.  Each Domestic A Lender shall comply with its obligation under this paragraph by making a wire transfer to the Administrative Agent for the benefit of the Swingline Lender of immediately available funds, in the same manner as provided in Section 2.06 with respect to Domestic A Revolving Loans made by such Domestic A Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Domestic A Lenders), and the Administrative Agent shall promptly pay to the Swingline

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Lender the amounts so received by it from the Lenders.  The Administrative Agent shall notify the Parent Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender.  Any amounts received by the Swingline Lender from the Parent Borrower (or other party on behalf of the Parent Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Domestic A Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear.  The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Parent Borrower of any default in the payment thereof.

SECTION 2.05.  Letters of Credit.  (a)  General.  Subject to the terms and conditions set forth herein, the Parent Borrower may request the issuance of Letters of Credit for its own account or the account of any other Loan Party (provided that the Parent Borrower shall be a co-applicant with respect to each Letter of Credit issued for the account of or in favor of such other Loan Party, and the issuance of any such Letter of Credit shall constitute a Guarantee by the Parent Borrower of Indebtedness of such Loan Party pursuant to Section 6.05(e)), in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the LC Availability Period.  All Letters of Credit shall be denominated in U.S. dollars.  In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Parent Borrower to, or entered into by the Parent Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(b)  Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Parent Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit.  If requested by the Issuing Bank, the Parent Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit.  Subject to the requirements of the next sentence, upon such request, the Administrative Agent shall cause the Issuing Bank to issue the Letter of Credit, which Letter of Credit, if the Issuing Bank thereof is not a Lender, shall be guaranteed by the Administrative Agent.  A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Parent Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $25,000,000, (ii) the total Domestic A

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Revolving Exposures shall not exceed the total amount of the Domestic A Commitments, (iii) the total Revolving A Exposures exceeding the lesser of (A) the total amount of the Domestic A Commitments plus the Canadian Commitments and (B) the Borrowing Base A then in effect and (iv) the total Revolving Exposures shall not exceed the lesser of (A) the total amount of the Commitments and (B) the Aggregate Borrowing Base then in effect.

(c)  Expiration Date.  Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date.

(d)  Participations.  By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, (i) if the Issuing Bank is a Lender, hereby grants to each Domestic A Lender, and each Domestic A Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Domestic A Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit or (ii) if the Issuing Bank is not a Lender, the Administrative Agent hereby grants to each Domestic A Lender, and each Domestic A Lender hereby acquires from the Administrative Agent, a participation in the guarantee of such Letter of Credit equal to such Domestic A Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit.  In consideration and in furtherance of the foregoing, each Domestic A Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Domestic A Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Parent Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Parent Borrower for any reason.  Each Domestic A Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e)  Reimbursement.  If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Parent Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Parent Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Parent Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Business Day that the Parent Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Parent Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, if the Parent Borrower does not otherwise elect by notice to the Administrative Agent to make such payment, the Parent Borrower shall be deemed to have requested in accordance with Section 2.03 (but without regard to the minimum borrowing amounts specified in Section 2.02) that such LC Disbursement be financed with an

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ABR Domestic A Revolving Loan in an amount equal to such LC Disbursement, the Administrative Agent shall notify the Domestic A Lenders thereof, the Domestic A Lenders shall (subject to the conditions to borrowing herein) advance their respective ABR Domestic A Revolving Loans (which shall be applied to reimburse such LC Disbursement) and, to the extent such ABR Domestic A Revolving Loans are so advanced and applied, the Parent Borrower’s obligation to make such payment shall be deemed discharged as of the date due and replaced by the resulting ABR Domestic A Revolving Loans.  If and to the extent that the Parent Borrower’s obligation to make such payment is not fully discharged and replaced by ABR Domestic A Revolving Loans as aforesaid (whether as a result of the failure to satisfy any condition to borrowing or otherwise) and if the Parent Borrower otherwise fails to make such payment when due, the Administrative Agent shall notify each Domestic A Lender of the applicable LC Disbursement, the payment then due from the Parent Borrower in respect thereof and such Domestic A Lender’s Applicable Percentage thereof.  Promptly following receipt of such notice, each Domestic A Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Parent Borrower, in the same manner as provided in Section 2.06 with respect to Domestic A Revolving Loans made by such Domestic A Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Domestic A Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Domestic A Lenders.  Promptly following receipt by the Administrative Agent of any payment from the Parent Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Domestic A Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Domestic A Lenders and the Issuing Bank as their interests may appear.  Any payment made by a Domestic A Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Domestic A Revolving Loans as contemplated above) shall not constitute a Loan and shall not relieve the Parent Borrower of its obligation to reimburse such LC Disbursement.

(f)  Obligations Absolute.  The Parent Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Parent Borrower’s obligations hereunder.  Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of

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the Issuing Bank; provided that nothing in this Section 2.05 shall be construed to excuse the Issuing Bank from liability to the Parent Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Parent Borrower to the extent permitted by applicable law) suffered by the Parent Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank, the Issuing Bank shall be deemed to have exercised care in each such determination.  In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g)  Disbursement Procedures.  The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit.  The Issuing Bank shall promptly notify the Administrative Agent and the Parent Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Parent Borrower of its obligation to reimburse the Issuing Bank and the Domestic A Lenders with respect to any such LC Disbursement.

(h)  Interim Interest.  If the Issuing Bank shall make any LC Disbursement, then, unless the Parent Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Parent Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Domestic A Revolving Loans; provided that, if the Parent Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.12(d) shall apply.  Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Domestic A Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i)  Replacement of the Issuing Bank; Additional Issuing Banks.  The Issuing Bank may be replaced at any time by written agreement among the Parent Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank.  The Administrative Agent shall notify the Domestic A Lenders of any such replacement of the Issuing Bank or any such additional Issuing Bank.  At the time any such replacement shall become effective, the Parent Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.11(b).  From and after the effective date of any such replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be

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deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require.  After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.  If at any time there is more than one Issuing Bank hereunder, the Parent Borrower may, in its discretion, select which Issuing Bank is to issue any particular Letter of Credit.

(j)  Cash Collateralization.  If any Event of Default shall occur and be continuing, on the Business Day that the Parent Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Domestic A Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Parent Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Domestic A Lenders, an amount in cash equal to 105% of the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Parent Borrower described in clause (h) or (i) of Article VII.  The Parent Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.10(b), and any such cash collateral so deposited and held by the Administrative Agent hereunder shall constitute part of the Borrowing Base A for purposes of determining compliance with Section 2.10(b).  Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Parent Borrower under this Agreement.  The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account.  Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Parent Borrower’s risk and expense, such deposits shall not bear interest.  Interest or profits, if any, on such investments shall accumulate in such account.  Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Parent Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Domestic A Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Parent Borrower under this Agreement.  If the Parent Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Parent Borrower within three Business Days after all Events of Default have been cured or waived.  If the Parent Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.10(b), such amount (to the extent not applied as aforesaid) shall be returned to the Parent Borrower as and to the extent that, after giving effect to such return, the Parent Borrower would remain in compliance with Section 2.10(b) and no Default shall have occurred and be continuing.

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SECTION 2.06.  Funding of Borrowings.  (a)  Each Lender shall make each Loan of any Class to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose for such Class by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04.  The Administrative Agent will make such Loans available to the applicable Borrower by promptly transferring the amounts so received, in like funds, to the account of such Borrower designated by the Parent Borrower in the applicable Borrowing Request; provided that ABR Domestic A Revolving Loans made to finance the reimbursement of (i) an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the Issuing Bank and (ii) a Protective Advance shall be made by the Administrative Agent.

(b)  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may, in its sole discretion, assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the applicable Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to such Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of any Borrower, the interest rate applicable to ABR Loans.  If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

SECTION 2.07.  Interest Elections.  (a)  Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request.  Thereafter, the Parent Borrower may elect (on behalf of itself or another Borrower) to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section.  The Parent Borrower (on behalf of itself or another Borrower) may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.  This Section shall not apply to Swingline Loans or Protective Advances, which may not be converted or continued.

(b)  To make an election pursuant to this Section, the Parent Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Parent Borrower were requesting a Revolving Borrowing of the Class and Type resulting from such election to be made on the effective date of such election.  Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written

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Interest Election Request in a form approved by the Administrative Agent and signed by the Parent Borrower.

(c)  Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the Borrowing (including the identity of the applicable Borrower) to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Parent Borrower (on behalf of itself or the applicable Borrower) shall be deemed to have selected an Interest Period of one month’s duration.

(d)  Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e)  If the Parent Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing.  Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Parent Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.08.  Termination and Reduction of Commitments.  (a)  Unless previously terminated, the Commitments shall terminate on the Maturity Date.

(b)  The Parent Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000, (ii) the Parent Borrower shall not terminate or reduce the Commitments of any Class if (A) the total Domestic A Revolving Exposures would exceed the total amount of the Domestic

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A Commitments, (B) the total Domestic Revolving B Exposures would exceed the total amount of the Domestic B Commitments, (C)  the total Canadian Revolving Exposures would exceed the total amount of the Canadian Commitments, (D) the total Revolving Exposures would exceed the total amount of the Commitments or (E) after giving pro forma effect to such reduction, the Availability Amount would be less than $10,000,000 and (iii) the Parent Borrower shall not terminate or reduce the Domestic B Commitments if (A) any Domestic A Commitments are still outstanding or (B) any Canadian Commitments are still outstanding.  In connection with such termination or reduction, the Borrowers shall pay the applicable Prepayment Fee (if any).  No Prepayment Fee shall be payable on the Domestic Revolving A Commitments or the Canadian Revolving Commitments in the event this Agreement is terminated in connection with a refinancing of the Obligations in a transaction in which General Electric Capital Corporation (or its Affiliates), together with certain co-lenders selected by General Electric Capital Corporation,  provides for the Borrowers, as debtors-in-possession, a senior secured, superpriority, priming debtor-in-possession credit facility pursuant to Section 364(d)(1) of the Bankruptcy Code; provided that the order approving such facility provides, pursuant to Section 364(d)(1) of the Bankruptcy Code, that the liens and security interests securing such facility are superior in priority to the liens and security interests granted (x) to secure the obligations evidenced by the Credit Agreement, (y) to secure the obligations evidenced by the Senior First Lien Notes, and (z) to secure the obligations evidenced by the Senior Second Lien Notes (such credit facility, the “GECC-Led DIP Agreement”).  No Prepayment Fee shall be payable on the Domestic Revolving B Commitments in the event this Agreement is terminated in connection with the GECC-Led DIP Agreement, so long as the Domestic B Agent is a lender under such GECC-Led DIP Agreement.

(c)  The Parent Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments of any Class under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders with respect to such Class of Commitments of the contents thereof.  Each notice delivered by the Parent Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments of any Class delivered by the Parent Borrower under paragraph (b) of this Section may state that such notice is conditioned upon the effectiveness of other borrowings or the completion of the sale or issuance of stock of the Parent Borrower or the sale of assets of the Parent Borrower, in which case such notice may be revoked by the Parent Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.  Any termination or reduction of the Commitments of any Class shall be permanent.  Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.

SECTION 2.09.  Repayment of Loans; Evidence of Debt.  (a)  Each Borrower, jointly and severally, hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Maturity Date, (ii) to the Administrative Agent the then unpaid amount of each Protective Advance on the earlier of the Maturity Date and demand by the Administrative Agent and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the Maturity Date.

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(b)  Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c)  The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d)  The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be conclusive evidence (absent manifest error) of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of any Borrower to repay the Loans in accordance with the terms of this Agreement.

(e)  Any Lender may request that Loans made by it be evidenced by a promissory note.  In such event, the applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a customary form approved by the Administrative Agent and the Parent Borrower.  Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.10.  Prepayment of Loans.  (a)  The Borrowers shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section.

(b)  (i) If at any time (A) the total Domestic A Revolving Exposures exceed the total amount of the Domestic A Commitments, (B) the total Canadian Revolving Exposures exceed the total amount of the Canadian Commitments, (C) the total Revolving Exposures exceed the lesser of (1) the total amount of the Commitments at such time and (2) the Aggregate Borrowing Base then in effect, or (D) the total outstanding principal amount of Loans made to Uniplast U.S., Inc. by all Lenders exceeds $9,400,000, then in any such case the Borrowers shall immediately prepay first, Protective Advances, second, Swingline Loans third, Domestic A Revolving Loans and fourth, Canadian Revolving Loans, without demand or notice of any kind, to the extent necessary to eliminate such excess.  If any such excess remains after all Domestic A Revolving Loans, Canadian Revolving Loans, Protective Advances and Swingline Loans are prepaid, the Borrowers shall deposit cash collateral pursuant to Section 2.05(j) in an amount equal to such remaining excess.

(ii) If at any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian

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Commitments have been terminated (A) the total Domestic B Revolving Exposures exceed the Borrowing Base B or (B) the total outstanding principal amount of Loans made to Uniplast U.S., Inc. by all Lenders exceeds $9,400,000, then in any such case the Borrowers shall immediately prepay the Domestic B Revolving Loans, without demand or notice of any kind, to the extent necessary to eliminate such excess.

(c)  So long as no Event of Default shall have occurred and be continuing, on each Business Day, at or before 12:00 p.m., New York City time, the Administrative Agent will apply cash deposited in the Collateral Proceeds Account on such Business Day to prepay, first, Protective Advances, second, Swingline Loans, third, Domestic A Revolving Loans, fourth, Canadian Revolving Loans and fifth, after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, Domestic B Revolving Loans.  Unless otherwise directed by the Parent Borrower, the Administrative Agent will apply any prepayment of Revolving Borrowings made pursuant to this clause (c) to each Class of Revolving Borrowings on a pro rata basis, with each prepayment of Revolving Borrowings within any Class applied to prepay ABR Borrowings before any other Borrowings, with any excess prepayment amount applied to prepay Eurodollar Borrowings in order of expiration of their respective Interest Periods (and applied on a pro rata basis in respect of Eurodollar Borrowings with Interest Periods expiring on the same date).

(d)  Prior to any optional or mandatory prepayment of Borrowings hereunder (other than a mandatory prepayment made pursuant to clause (c) above), the Parent Borrower shall, subject to the requirements of clause (b) above, select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (e) of this Section; provided that (i) the Parent Borrower may elect not to provide notice, or select the Borrowing or Borrowings to be prepaid, in connection with a mandatory prepayment pursuant to clause (b) above and, in such an event, (A), such prepayment shall be applied to outstanding Borrowings in such manner as the Administrative Agent deems appropriate to comply with the terms of clause (b) above and (B) to the extent that the terms of clause (b) above and subclause (A) of this clause (i) do not require any prepayment to be allocated to any specific Class of Borrowings, the Administrative Agent shall apply such prepayment to each Class of Revolving Borrowings on a pro rata basis, and (ii) each prepayment of Revolving Borrowings within any Class shall be applied to prepay ABR Borrowings before any other Borrowings, with any excess prepayment amount applied to prepay Eurodollar Borrowings in order of expiration of their respective Interest Periods (and applied on a pro rata basis in respect of Eurodollar Borrowings with Interest Periods expiring on the same date).

(e)  The Parent Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment.  Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a

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reasonably detailed calculation of the amount of such prepayment; provided that (A) no notice shall be required in respect of any mandatory prepayment made pursuant to clause (c) above, (B) in the event the Parent Borrower elects to provide notice of a mandatory prepayment pursuant to clause (b) above to identify the Borrowings to be prepaid in connection therewith, such notice shall be given to the Administrative Agent on the same day that the applicable prepayment is required to be made pursuant to such clause, it being understood that any failure or delay on the part of the Parent Borrower in providing such notice to the Administrative Agent shall not affect the obligations of the Parent Borrower to make such prepayment, and (C) if a notice of optional prepayment is given in connection with a conditional notice of termination of the Commitments of any Class as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08.  Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof.  Each partial prepayment of any Borrowing shall be in an amount such that the remaining amount of such Borrowing not so prepaid would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment.  Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12.

SECTION 2.11.  Fees.  (a)  (i) The Parent Borrower agrees to pay to the Administrative Agent for the account of the office (or Affiliate) of each Domestic A Lender from which such Domestic Lender would make Domestic A Revolving Loans of any Class to the Borrowers hereunder (which office or Affiliate shall be specified by each Domestic A Lender for each Class of such Domestic A Lender’s Domestic A Commitments in a notice to the Administrative Agent prior to the initial payment to such Domestic A Lender under this paragraph) a commitment fee, which shall accrue at a per annum rate of 0.50% on the average daily unused amount of the Domestic A Commitment of such Domestic A Lender during the period from and including the Effective Date to but excluding the date on which such Domestic A Commitment terminates.  Accrued commitment fees with respect to each Domestic A Commitment shall be payable in arrears on the first Business Day of each month and on the date on which such Domestic A Commitment terminates, commencing on the first such date to occur after the date hereof.  All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  For purposes of determining the unused amount of the Domestic A Commitment of any Class of each Domestic A Lender for purposes of computing commitment fees with respect to Domestic A Commitments, a Domestic A Commitment of a Domestic A Lender shall be deemed to be used to the extent of the outstanding Domestic A Revolving Loans and LC Exposure of such Domestic A Lender (and the Swingline Exposure of such Domestic A Lender shall be disregarded for such purpose).

(ii) The Canadian Subsidiary Borrower agrees to pay to each Canadian Lender a commitment fee, which shall accrue at a per annum rate of 0.50% on the average daily unused amount of the Canadian Commitment of such Canadian Lender during the period from and including the Effective Date to but excluding the date on which such Canadian Commitment terminates.  Accrued commitment fees with respect to each Canadian Commitment shall be payable in arrears on the first Business Day of each month and on the date on which such

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Canadian Commitment terminates, commencing on the first such date to occur after the date hereof.  All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  For purposes of determining the unused amount of the Canadian Commitment of any Class of each Canadian Lender for purposes of computing commitment fees with respect to Canadian Commitments, a Canadian Commitment of a Canadian Lender shall be deemed to be used to the extent of the outstanding Canadian Revolving Loans of such Canadian Lender..

(b)  The Parent Borrower agrees to pay (i) to the Administrative Agent for the account of each Domestic A Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at 2.75% per annum on the average daily amount of such Domestic A Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Domestic A Lender’s Domestic A Commitment terminates and the date on which such Domestic A Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate or rates per annum separately agreed upon between the Parent Borrower and the Issuing Bank on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Domestic A Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder.  Participation fees and fronting fees accrued through and including the first Business Day of each month of each year shall be payable on such first Business Day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Domestic A Commitments terminate and any such fees accruing after the date on which the Domestic A Commitments terminate shall be payable on demand.  Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand.  All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c)  The Parent Borrower agrees to pay to each of the Administrative Agent and the Collateral Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Parent Borrower and the Administrative Agent or the Collateral Agent, as applicable.

(d)  All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank or the Collateral Agent, as applicable, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto.  Fees paid shall not be refundable under any circumstances.

SECTION 2.12.  Interest.  (a)  (i) The Loans made by the Domestic A Lenders and the Canadian Lenders comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus 1.50% per annum and (ii) the Loans made by

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the Domestic B Lenders comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus 5.25% per annum.

(b)  (i) The Loans comprising each Eurodollar Borrowing made by the Domestic A Lenders and the Canadian Lenders shall bear interest at the LIBO Rate for the Interest Period in effect for such Borrowing plus 2.75% per annum and (ii) the Loans comprising each Eurodollar Borrowing made by the Domestic B Lenders shall bear interest at the LIBO Rate for the Interest Period in effect for such Borrowing plus 6.50% per annum.

(c)  Each Protective Advance shall bear interest at the Alternate Base Rate plus 1.50% per annum plus 2%.

(d)  Notwithstanding the foregoing, so long as any Event of Default has occurred and is continuing under Article VII (a) or (b) or so long as any other Event of Default has occurred and is continuing and at the election of the Administrative Agent (or upon the written request of the Required Lenders excluding for this calculation, Domestic B Revolving Exposures and unused Domestic B Commitments from the total Revolving Exposures and unused Commitments), in the case of Domestic A Revolving Exposures and the Canadian Revolving Exposures, or the Required Domestic B Lenders, in the case of the Domestic B Revolving Exposures) confirmed by written notice to the Parent, the interest rates applicable to Loans and any fee or other amount payable by any Borrower hereunder shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a)(i) of this Section.

(e)  Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Domestic A Revolving Loans, Domestic B Revolving Loans and Canadian Revolving Loans, upon termination of the Domestic A Commitments, Domestic B Commitments or Canadian Commitments, as the case may be; provided that (A) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (B) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (C) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(f)  All interest hereunder shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  The applicable Alternate Base Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.  Solely for purposes of the Interest Act (Canada), (i) whenever interest is to be computed or expressed at any rate (the “Specified Rate”), the annual rate of interest to which each such Specified Rate is equal is such Specified Rate multiplied by a fraction, the numerator of which is the actual number of days in the relevant year and the denominator of which is 360; (ii) the principle of deemed reinvestment of interest shall not apply to any interest calculation hereunder; and (iii) the

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rates of interest stipulated herein are intended to be nominal rates and not effective rates or yields.

SECTION 2.13.  Alternate Rate of Interest.  If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or

(b) the Administrative Agent is advised by the Required Domestic A Lenders, the Required Domestic B Lenders or the Required Canadian Lenders that the LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Parent Borrower and the Domestic A Lenders, the Domestic B Lenders or the Canadian Lenders, as applicable, by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Parent Borrower and such Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Domestic Revolving Borrowing or Canadian Revolving Borrowing, as applicable, to, or continuation of any such Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request with respect to any Domestic Revolving Borrowing or Canadian Revolving Borrowing, as applicable, requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

SECTION 2.14.  Increased Costs.  (a)  If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the LIBO Rate) or the Issuing Bank; or

(ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate (on an after-tax basis) such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

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(b)  If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or the Issuing Bank, as the case may be, following receipt by the Parent Borrower of the certificate referred to in clause (c) below, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

(c)  A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section (and setting forth the underlying calculations) shall be delivered to the Parent Borrower and shall be conclusive absent manifest error.  The Borrowers shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d)  Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrowers shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Parent Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.15.  Break Funding Payments.  In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(e) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Parent Borrower pursuant to Section 2.18 or the CAM Exchange, then, in any such event, the Borrowers shall compensate each Lender for the loss, cost and expense attributable to such event.  In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount reasonably determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to

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borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.  A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section (and setting forth the underlying calculations) shall be delivered to the Parent Borrower and shall be conclusive absent manifest error.  The Borrowers shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

SECTION 2.16.  Taxes.  (a)  Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if any Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b)  In addition, the Borrowers shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c)  The Borrowers shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrowers hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability (and setting forth the underlying calculations) delivered to the Parent Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

(d)  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e)  Any Foreign Lender that is entitled to an exemption from or reduction of withholding Tax under the laws of the jurisdiction in which a Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement made by such Borrower, shall deliver to the Parent Borrower (with a copy to the Administrative Agent), at

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the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Parent Borrower as will permit such payments to be made without withholding or at a reduced rate.  Notwithstanding any other provision of this Section 2.16, no such Foreign Lender shall be required to deliver any form pursuant to this Section 2.16(e) that such Foreign Lender is not legally able to deliver.

(f)  If the Administrative Agent or a Lender (or transferee) determines, in its reasonable discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Borrower or with respect to which a Borrower has paid additional amounts pursuant to this Section 2.16, it shall pay over such refund to such Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower under this Section 2.16 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (or transferee) and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that the Borrowers, upon the request of the Administrative Agent or such Lender (or transferee), agree to repay the amount paid over to such Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority), to the Administrative Agent or such Lender (or transferee) in the event the Administrative Agent or such Lender (or transferee) is required to repay such refund to such Governmental Authority.  Nothing contained in this Section 2.16(f) shall require the Administrative Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to any Borrower or any other Person.

SECTION 2.17.  Payments Generally; Pro Rata Treatment; Sharing of Setoffs.  (a)  (i) The Parent Borrower and each Domestic Subsidiary Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to 2:00 p.m., New York City time, on the date when due, in immediately available funds, without setoff or counterclaim.  Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the Administrative Agent at its offices at 201 Merritt 7, Norwalk, Connecticut, except payments to be made directly to the Issuing Bank, Swingline Lender or Collateral Agent as expressly provided herein and except that payments pursuant to Sections 2.14, 2.15, 2.16 and 10.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein.  The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof.  If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.  All payments under each Loan Document shall be made in dollars.

(ii)  The Canadian Subsidiary Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.14, 2.15, 2.16 or 10.03, or otherwise) prior to 2:00 p.m., New York City time, on the date when due, in

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immediately available funds, without setoff or counterclaim.  Any amounts received after such time on any date may, in the discretion of the Canadian Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the Canadian Lender at its offices at 11 King West 1500, Toronto, Ontario and except that payments pursuant to other Loan Documents shall be made to the Persons specified therein.  If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.  All payments under each Loan Document shall be made in dollars.

(b)  Any proceeds of Collateral received by the Administrative Agent (i) not constituting either (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by the Borrowers), (B) a mandatory prepayment (which shall be applied in accordance with Section 2.10) or (C) amounts to be applied from the Collateral Proceeds Account (which shall be applied in accordance with Section 2.10(c)) or (ii) after an Event of Default has occurred and is continuing and the Administrative Agent so elects or the Required Lenders so direct, such funds shall be applied ratably as follows:

first, to pay any fees, indemnities, or expense reimbursements including amounts then due to the Agents and the Issuing Bank from the Borrowers (other than in connection with Banking Services or Swap Obligations);

second, to pay any fees or expense reimbursements then due to the Lenders from the Borrowers (other than in connection with Banking Services or Swap Obligations);

third, to pay interest due in respect of the Protective Advances and any amounts owing with respect to Banking Services;

fourth, to pay the principal of the Protective Advances;

fifth, to pay interest then due and payable on the Swingline Loans;

sixth, to pay the principal of the Swingline Loans;

seventh, if the Administrative Agent has declared the Loans then outstanding to be due and payable (in whole) pursuant to Article VII and is not longer permitting the Borrowers to request Domestic A Revolving Loans or Canadian Revolving Loans (other than Protective Advances), then as follows:

(1)  to pay interest on the Domestic A Revolving Loans and the Canadian Revolving Loans;

(2) to pay the principal of the Domestic A Revolving Loans and Canadian Revolving Loans and unreimbursed LC Disbursements;

(3) to pay an amount to the Administrative Agent equal to 105% of the aggregate undrawn face amount of all outstanding Letters of Credit and the aggregate amount of any unpaid LC Disbursements, to be held as cash collateral for such Obligations;

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amount of any unpaid LC Disbursements, to be held as cash collateral for such Obligations;

(4) to pay any amounts owing with respect to Swap Obligations;

(5) to pay interest due in respect of the Domestic B Revolving Loans; and

(6) to pay the principal of the Domestic B Revolving Loans;

eighth, if the Administrative Agent has not declared the Loans then outstanding to be due and payable (in whole or in part) pursuant to Article VII or has declared the Loans then outstanding to be due and payable but is permitting the Borrowers to request Domestic A Revolving Loans or Canadian Revolving Loans, then as follows:

(1) first, to pay interest on the Loans;

(2) to pay the principal of the Domestic A Revolving Loans and Canadian Revolving Loans and unreimbursed LC Disbursements;

(3) to pay an amount to the Administrative Agent equal to 105% of the aggregate undrawn face amount of all outstanding Letters of Credit and the aggregate amount of any unpaid LC Disbursements, to be held as cash collateral for such Obligations;

(4) to pay any amounts owing with respect to Swap Obligations; and

(5) to pay the principal of the Domestic B Revolving Loans; and

ninth, to the payment of any other Obligation due to the Agents or any Lender by the Borrowers.

Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrowers, or unless a Default is in existence, neither the Administrative Agent nor any Lender shall apply any payment which it receives to any Eurodollar Loan of a Class, except (a) on the expiration date of the Interest Period applicable to any such Eurodollar Loan or (b) in the event, and only to the extent, that there are no outstanding ABR Loans of the same Class and, in any event, the Borrowers shall pay the break funding payment required in accordance with Section 2.15. The Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations in accordance with the payment priorities established hereby.

(c)  At the election of the Administrative Agent, all payments of principal, interest, LC Disbursements, fees, premiums, reimbursable expenses (including, without limitation, all reimbursement for fees and expenses pursuant to Section 10.03), and other sums payable under the Loan Documents, may be paid from the proceeds of Borrowings made hereunder whether made following a request by the Borrower pursuant to Section 2.03 or a deemed request as provided in this Section or may be deducted from any deposit account of the Borrower maintained with the Administrative Agent. The Borrower hereby irrevocably

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authorizes (i) the Administrative Agent to make a Borrowing for the purpose of paying each payment of principal, interest and fees as it becomes due hereunder or any other amount due under the Loan Documents and agrees that all such amounts charged shall constitute Loans (including Swingline Loans, but such a Borrowing may only constitute a Protective Advance if it is to reimburse costs, fees and expenses as described in Section 10.03) and that all such Borrowings shall be deemed to have been requested pursuant to Section 2.03, 2.04 or 2.19, as applicable and (ii) the Administrative Agent to charge any deposit account of the Borrower maintained with the Administrative Agent for each payment of principal, interest and fees as it becomes due hereunder or any other amount due under the Loan Documents. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

(d)  If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Domestic A Revolving Loans, Canadian Revolving Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Domestic A Revolving Loans, Canadian Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Domestic A Revolving Loans, Canadian Revolving Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Domestic A Revolving Loans, Canadian Revolving Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Domestic A Revolving Loans, Canadian Revolving Loans or participations in LC Disbursements to any assignee or participant, other than to a Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against any Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation.

(e)  Unless the Administrative Agent shall have received notice from the Parent Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the applicable Borrower will not make

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such payment, the Administrative Agent may assume, in its sole discretion, that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if no Borrower has in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(f)  If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d), 2.05(e), 2.06(b), 2.17(e) or 10.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a)  If any Lender requests compensation under Section 2.14, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates (provided that, if such compensation or additional amounts relate to a particular Class of Loans, such designation or assignment may relate only to such Class of Loans), if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Each Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b)  If any Lender requests compensation under Section 2.14, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then the Parent Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Parent Borrower shall have received the prior written consent of the Administrative Agent, the Issuing Bank and Swingline Lender, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts), (iii) in the case of any such assignment resulting

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from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments and (iv) with respect to compensation or additional amounts (but not defaults) in respect of a particular Class of Loans, such assignment may be limited to such Class of Loans. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Parent Borrower to require such assignment and delegation cease to apply.

SECTION 2.19. Protective Advances. (a)  Subject to the limitations set forth below, the Administrative Agent is authorized by the Borrowers and the Lenders, from time to time in the Administrative Agent’s sole discretion (but shall have absolutely no obligation to), to make Loans to the Borrowers, on behalf of all Lenders, which the Administrative Agent, in its reasonable discretion, deems necessary or desirable (i) to preserve or protect the Collateral, or any portion thereof, (ii) to enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations, or (iii) to pay any other amount chargeable to or required to be paid by the Borrowers pursuant to the terms of this Agreement, including payments of reimbursable expenses (including costs, fees, and expenses as described in Section 10.03) and other sums payable under the Loan Documents (any of such Loans are herein referred to as “Protective Advances”); provided that, the aggregate amount of Protective Advances outstanding at any time shall not at any time exceed $10,000,000; and provided further that, the aggregate amount of outstanding Protective Advances plus the aggregate Revolving Exposure shall not exceed (i) the aggregate unused Commitments or (ii) any applicable limitation set forth in the Senior First Lien Note Indenture, the Senior Second Lien Note Indenture and the Senior Subordinated Note Indenture. Protective Advances may be made even if the conditions precedent set forth in Section 4.03 have not been satisfied. The Protective Advances shall be secured by the Liens in favor of the Collateral Agent in and to the Collateral and shall constitute Obligations hereunder. All Protective Advances shall be ABR Borrowings. The Administrative Agent’s authorization to make Protective Advances may be revoked at any time by the Required Lenders. Any such revocation must be in writing and shall become effective prospectively upon the Administrative Agent’s receipt thereof. At any time that the Availability Amount is greater than $0 and the conditions precedent set forth in Section 4.03 have been satisfied, the Administrative Agent may request the Domestic A Revolving Lenders and Canadian Revolving Lenders to make a Domestic A Revolving Loan or Canadian Revolving Loan, as applicable, to repay a Protective Advance. At any other time the Administrative Agent may require the Lenders to fund their risk participations described in Section 2.19(b).

(b)  Upon the making of a Protective Advance by the Administrative Agent (whether before or after the occurrence of a Default), each Domestic A Lender and Canadian Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Administrative Agent without recourse or warranty, an undivided interest and participation in such Protective Advance in proportion to its Applicable Percentage. From and after the date, if any, on which any Domestic A Lender or Canadian Lender is required to fund its participation in any Protective Advance purchased hereunder, the Administrative Agent shall promptly distribute to such Lender, such Lender’s Applicable Percentage of all payments of principal and interest and all proceeds of Collateral received by the Administrative Agent in respect of such Protective Advance.

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ARTICLE III

Representations and Warranties

The Parent Borrower represents and warrants to the Lenders that:

SECTION 3.01. Organization; Powers. Each of the Parent Borrower and the Subsidiaries is duly organized, validly existing and, where applicable, in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

SECTION 3.02. Authorization; Enforceability. The Transactions entered into and to be entered into by each Loan Party are within such Loan Party’s corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by each Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of such Borrower or such Loan Party (as the case may be), enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other Person, except such as have been obtained or made and are in full force and effect or, if not obtained or made, would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect and except filings necessary to perfect Liens created under the Loan Documents, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Parent Borrower or any of the Subsidiaries or any order of any Governmental Authority, except, with respect to any violation of applicable law or regulation or any order of any Governmental Authority, to the extent any such violation would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect, (c) will not violate or result in a default under any material indenture, agreement or other instrument binding upon the Parent Borrower or any of the Subsidiaries or its assets, except to the extent any such violation, default or right would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect, or give rise to a right thereunder to require any payment to be made by the Parent Borrower or any of the Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Parent Borrower or any of the Subsidiaries, except Liens created under the Loan Documents, the Senior First Lien Security Documents and the Senior Second Lien Security Documents.

SECTION 3.04. Financial Condition; No Material Adverse Change. (a)  The Parent Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders’ equity and cash flows (i) as of and for the fiscal year ended December 31, 2004, reported on by Ernst & Young LLP, independent public accountants and

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(ii) as of and for the fiscal quarter ended June 30, 2005, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Parent Borrower and its consolidated Subsidiaries, as of such dates and for such periods in accordance with GAAP and in the case of clause (ii) above, subject to normal year-end audit adjustments and the absence of footnotes.

(b)  The Parent Borrower has heretofore made available to the Lenders its pro forma consolidated balance sheet as of September 30, 2005, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith based on the same assumptions used to prepare the applicable pro forma financial statements, which were simultaneously made available to the Lenders (which assumptions are believed by the Parent Borrower to be reasonable), (ii) is based on the best information available to the Parent Borrower after due inquiry, (iii) accurately reflects all material adjustments necessary to give effect to the Transactions and (iv) presents fairly, in all material respects, the pro forma financial position of the Parent Borrower and its consolidated Subsidiaries as of September 30, 2005, as if the Transactions had occurred on such date.

(c)  Except as disclosed in the financial statements referred to above or the notes thereto, after giving effect to the Transactions, none of the Parent Borrower or any of the Subsidiaries has, as of the Effective Date, any material contingent liabilities, unusual long-term commitments or unrealized losses.

(d)  Since June 30, 2005 or as otherwise disclosed to the Agents on or before the Effective Date, there has been no material adverse change in the business, operations, properties, assets, condition (financial or otherwise) or contingent or other liabilities of the Parent Borrower and the Subsidiaries, taken as a whole.

SECTION 3.05. Properties. (a)  Each of the Parent Borrower and the Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business (including its Mortgaged Properties), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes and other Permitted Encumbrances.

(b)  Each of the Parent Borrower and the Subsidiaries owns, or is licensed or otherwise permitted to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to the business of the Parent Borrower and the Subsidiaries, taken as a whole, and the use thereof by the Parent Borrower and the Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(c)  Schedule 3.05 sets forth the address of each parcel of real property that is owned or leased (the “Real Estate”) by the Parent Borrower or any of the Subsidiaries as of the Effective Date.

(d)  As of the Effective Date, neither the Parent Borrower nor any of the Subsidiaries has received notice of, or has knowledge of, any pending or contemplated

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condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein held by any Person, other than the Parent Borrower or any Subsidiary Loan Party.

SECTION 3.06. Litigation and Environmental Matters. (a)  There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Parent Borrower, threatened against or affecting the Parent Borrower or any of the Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve any of the Loan Documents or the Transactions.

(b)  Except with respect to any matters that, individually or in the aggregate, would not be reasonably likely to result in a Material Adverse Effect, neither the Parent Borrower nor any of the Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

SECTION 3.07. Compliance with Laws and Agreements. Each of the Parent Borrower and the Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

SECTION 3.08. Investment Company Status. Neither the Parent Borrower nor any of the Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

SECTION 3.09. Taxes. Each of the Parent Borrower and the Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Parent Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan individually (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent audited financial statements reflecting such amounts, exceed by more than $25,000,000 the fair market value of the assets of such Plan individually, and the present value of all accumulated benefit obligations of all underfunded

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Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent audited financial statements reflecting such amounts, exceed by more than $28,000,000 the fair market value of the assets of all such underfunded Plans.

SECTION 3.11. Disclosure. The Parent Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which the Parent Borrower or any of the Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. The reports, financial statements, certificates and other written information furnished by or on behalf of any Loan Party to any Agent, either Arranger or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished), when made or delivered, did not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Parent Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of, the jurisdiction of organization of, and the direct or indirect ownership interest of the Parent Borrower in, each Subsidiary of the Parent Borrower and identifies each Subsidiary that is a Loan Party, in each case as of the Effective Date.

SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all insurance maintained by or on behalf of the Parent Borrower and the Subsidiaries as of the Effective Date. As of the Effective Date, all premiums that are due and payable in respect of such insurance have been paid. The Parent Borrower believes that the insurance maintained by or on behalf of the Parent Borrower and the Subsidiaries is adequate.

SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against the Parent Borrower or any Subsidiary pending or, to the knowledge of the Parent Borrower, threatened that could reasonably be expected to result in a Material Adverse Effect. All material payments due from the Parent Borrower or any Subsidiary, or for which any claim may be made against the Parent Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Parent Borrower or such Subsidiary. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Parent Borrower or any Subsidiary is bound.

SECTION 3.15. Solvency. Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan (if any) made on the Effective Date and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the

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probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) each Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Effective Date.

SECTION 3.16. Security Documents. (a)  The Pledge Agreements are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein (and the proceeds thereof) and, when such Collateral is delivered to the Collateral Agent, the Collateral Agent shall have a fully perfected first-priority Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof as security for the Obligations, as applicable, in each case prior and superior in right to any other Person.

(b)  The Security Agreements are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein (and the proceeds thereof) and, when financing statements (and/or other filings, notices and registrations, in the case of Collateral under the Canadian Security Agreement) in appropriate form are filed with the appropriate offices in each relevant jurisdiction (including those specified on Schedule 6 to the Domestic Perfection Certificate and those specified on Schedule 6 to the Canadian Perfection Certificate), the Collateral Agent shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral (other than the Intellectual Property (as defined in the Domestic Security Agreement) and, subject to Section 9-315 of the New York Uniform Commercial Code (and the equivalent legislation in other jurisdictions), the proceeds thereof, as security for the Obligations, in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 6.03.

(c)  When the Domestic Security Agreement (or a summary thereof) is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Collateral Agent shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Domestic Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the Effective Date), other than with respect to Liens permitted by Section 6.03.

(d)  The Mortgages are effective to create, subject to the exceptions listed in each title insurance policy covering such Mortgage, in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.16(d), the Collateral

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Agent shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Properties and, to the extent applicable, subject to Section 9-315 of the New York Uniform Commercial Code (and the equivalent legislation in other jurisdictions), the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Liens expressly permitted by Section 6.03.

SECTION 3.17. Federal Reserve Regulations. (a)  Neither the Parent Borrower nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.

(b)  No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or any security convertible into or exchangeable for Margin Stock, or extend credit to others for the purpose of purchasing or carrying Margin Stock or any security convertible into or exchangeable for Margin Stock, or to refund Indebtedness originally incurred for such purpose, or (ii) for any purpose that entails a violation of the provisions of the Regulations of the Board, including Regulation U or Regulation X.

SECTION 3.18. Senior Secured Obligations. All the Obligations constitute (a) ”Credit Agreement Obligations” under and as defined in the Senior First Lien Note Indenture and the Senior Second Lien Note Indenture (in each case with respect to the First-Priority Collateral), (b) ”Second-Priority Obligations” under and as defined in the Senior First Lien Note Indenture and “Other Second-Lien Obligations” under and as defined in the Senior Second Lien Note Indenture (in each case with respect to the Second-Priority Collateral) and (c) ”Senior Indebtedness” and “Designated Senior Indebtedness” under and as defined in the Senior Subordinated Note Indenture. The Liens granted pursuant to the Security Documents (a) in respect of the First-Priority Collateral, are prior to the Liens granted pursuant to the Senior First Lien Note Documents and the Senior Second Lien Note Documents in respect of such Collateral and (b) in respect of the Second-Priority Collateral, are equal in priority to the Liens granted pursuant to the Senior Second Lien Note Documents in respect of such Collateral.

SECTION 3.19. Related Names. None of Huntsman Corporation Canada Inc.,  Huntsman Chemical Company of Canada Inc., Tioxide Canada Inc., Huntsman ICI (Canada) Corp., La Corporation Huntsman Canada Inc., Huntsman Corporation Canada Inc./La Corporation Huntsman Canada Inc., La Corporation Huntsman Canada Inc./Huntsman Corporation Canada Inc. or Huntsman - Tioxide Canada Inc. are subsidiaries of any Loan Party.

SECTION 3.20. Permanent Establishment in Canada. Neither the Parent Borrower nor Pliant Solutions Corporation (a) maintains any location in Canada, (b) has any income attributable to a permanent establishment in Canada or (c) is required to pay any income taxes in Canada.

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ARTICLE IV

Conditions

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02):

(a) The Agents (or their respective counsel) shall have received from the Parent Borrower, the Domestic Subsidiary Borrowers, the Canadian Subsidiary Borrower and each Lender, a counterpart of this Agreement signed on behalf of such party.

(b) The Agents shall have received a favorable written opinion (addressed to the Agents, the Issuing Bank and the Lenders and dated the Effective Date) of each of (i) Sidley Austin Brown & Wood LLP, counsel for the Parent Borrower, the Domestic Subsidiary Borrowers and the Guarantors, in form and substance satisfactory to the Agents, (ii) General Counsel of the Parent Borrower, the Domestic Subsidiary Borrowers and the Guarantors, in form and substance satisfactory to the Agents, (iii) Van Cott, Bagley, Cornwall & McCarthy, P.C., Utah counsel for the Parent Borrower, the Guarantors and certain Domestic Subsidiary Borrowers, in form and substance satisfactory to the Agents, (iv) Fasken Martineau Dumoulin LLP, Canadian counsel for the Canadian Subsidiary Borrower and Pliant Packaging of Canada Ltd., in form and substance satisfactory to the Agents, and (v) Stewart McKelvey Stirling Scales, Nova Scotia counsel for the Canadian Subsidiary Borrower, in form and substance satisfactory to the Agents, and, in the case of each such opinion required by this paragraph, covering such other matters relating to the Loan Parties, the Loan Documents or the Transactions as the Agents shall reasonably request (including that the Administrative Agent will be entitled to all of the rights and benefits of the “Credit Agent” under the Intercreditor Agreement). Each Borrower hereby requests such counsel to deliver such opinions.

(c) The Agents shall have received such documents and certificates as the Agents or their respective counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Agents and their respective counsel.

(d) The Agents shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Parent Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.03.

(e) The Agents shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document.

(f) The Agents shall have received counterparts of the Domestic Pledge Agreement signed on behalf of each Loan Party (other than the Canadian Subsidiary Borrower) and the Canadian Pledge Agreement signed on behalf of the Canadian Subsidiary Borrower, together with certificates (if any) representing all the outstanding

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Equity Interests of each Subsidiary owned by or on behalf of any Loan Party as of the Effective Date after giving effect to the Transactions (except that such delivery of certificates representing Equity Interests of a Foreign Subsidiary that is not a Loan Party may be limited to 65% of the outstanding voting Equity Interests of a first-tier Foreign Subsidiary), promissory notes evidencing all intercompany Indebtedness (other than the intercompany Indebtedness set forth on Schedule 4.01(f)) owed to any Loan Party by the Parent Borrower or any Subsidiary as of the Effective Date after giving effect to the Transactions and stock powers and instruments of transfer, endorsed in blank, with respect to such certificates and promissory notes.

(g) The Agents shall have received counterparts of the Domestic Security Agreement signed on behalf of each Loan Party (other than the Canadian Subsidiary Borrower) and the Canadian Security Agreement signed on behalf of the Canadian Subsidiary Borrower, together with the following:

(i) all documents and instruments, including Uniform Commercial Code (or equivalent) financing statements, required by the Security Agreements or by law or reasonably requested by the Agents to be filed, registered or recorded to create or perfect the Liens intended to be created under the Security Agreements, in proper form for filing, registration or recordation; and

(ii) completed Perfection Certificates dated the Effective Date and signed by an executive officer or Financial Officer of the Parent Borrower or the Canadian Subsidiary Borrower, as applicable, together with all attachments contemplated thereby, including the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificates other than the jurisdictions set forth on Schedule 4.01(g) and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Agents that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.03 or have been released.

(h) The Agents shall have received a counterpart of the Guarantee Agreement signed on behalf of each Loan Party which is not a Borrower.

(i) The Lenders shall have received the financial statements described in Section 3.04, which financial statements shall not be materially inconsistent with the financial statements or forecasts previously provided to the Lenders.

(j) The Lenders shall have received projections of the Parent Borrower and the Subsidiaries through the fiscal year ending December 31, 2008, presented on a monthly basis through December 31, 2006 and annually thereafter (the “Projections”), which Projections shall not be materially inconsistent with the projections previously provided to the Agents and the Arrangers.

(k) The Agents shall have received evidence satisfactory to them that the insurance required by Section 5.07 is in effect.

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(l) The Agents shall have received copies of the Senior First Lien Note Documents, Senior Second Lien Note Documents and the Senior Subordinated Note Documents, each certified by a Financial Officer as complete and correct. The Agents and the Arrangers shall be satisfied with the terms of the Senior First Lien Note Documents, the Senior Second Lien Note Documents, the Senior Subordinated Note Documents and the Intercreditor Agreement.

(m) The Agents shall have received an agreement executed by each Loan Party under the Existing Credit Agreement reaffirming its obligations under each Loan Document to which such Loan Party is a party thereto, in form and substance satisfactory to the Agents.

(n) The Lenders shall have received a pro forma consolidated balance sheet of the Parent Borrower as of September 30, 2005 reflecting all pro forma adjustments as if the Transactions had been consummated on such date, and such pro forma consolidated balance sheet shall be consistent in all material respects with the forecasts and other information previously provided to the Lenders. After giving effect to the Transactions, the Parent Borrower and the Subsidiaries shall not have any outstanding Indebtedness or preferred stock other than (i) Indebtedness incurred under the Loan Documents, (ii) the Senior First Lien Notes, (iii) the Senior Second Lien Notes, (iv) the Senior Subordinated Notes, (v) the Existing Preferred Stock and (vi) the Indebtedness permitted pursuant to Section 6.01(ii).

(o) The Agents shall be reasonably satisfied as to the amount and nature of any contingent liabilities relating to environmental and employee health and safety exposures to which the Parent Borrower and the Subsidiaries may be subject, and with the plans of the Parent Borrower and the Subsidiaries with respect thereto.

(p) Each Agent shall have received all documentation and other information requested by it to satisfy the requirements of bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act.

(q) The Agents shall have received a completed Borrowing Base Certificate that sets forth the Pro Forma Opening Borrowing Base.

(r) The Agents shall have (i) received the results of a field examination with respect to the accounts receivable and inventory of the Parent Borrower and the Subsidiaries and an inventory appraisal with respect to the inventory of the Parent Borrower and the Subsidiaries, in each case in form and substance reasonably satisfactory to the Agents and (ii) otherwise have completed its business and legal due diligence, with results satisfactory to the Agents.

(s) The Agents shall have received a fully executed copy of the Notice of Change of Collateral Agent’s Account from the Existing Collateral Agent to (A) Wachovia Bank, National Association (“Wachovia”), (B) LaSalle Bank National Association (“LaSalle”)

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and (C) The Bank of Nova Scotia (“BONS” and together with Wachovia and LaSalle, the “Depository Banks”).

(t) After giving effect to all Borrowings to be made on the Effective Date and the issuance of any Letters of Credit on the Effective Date and payment of all fees and expenses due hereunder, and with all of the Loan Parties’ indebtedness, liabilities, and obligations current, the Availability Amount shall not be less than $7,000,000.

(u) The corporate capital and ownership structure of each Loan Party and the terms and conditions of all Indebtedness of each Loan Party shall be acceptable to the Agents in their sole discretion.

(v) The Agents shall have received evidence in form and substance satisfactory to them in their sole discretion that the holders of the Senior Subordinated Notes shall have consented to the structure of the Domestic A Revolver, the Canadian Revolver and Domestic B Revolver.

(w) The Administrative Agent shall have received such other documents as any Agent, the Issuing Bank, any Lender or their respective counsel may have reasonably requested.

The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) at or prior to 5:00 p.m., New York City time, on November 21, 2005. The Administrative Agent shall notify the Parent Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.

SECTION 4.02. Subsequent to the Effective Date. The obligation of the Lenders to continue to make or maintain Loans (or otherwise extend credit hereunder) and of the Issuing Bank to continue to issue Letters of Credit is subject to the fulfillment, on or before the date applicable thereto, if any, of each of the conditions subsequent set forth below (unless waived in accordance with Section 10.02):

(a) Within 10 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Agents shall have received the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the jurisdictions set forth on Schedule 4.01(g)  and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Agents that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.03 or have been released;

(b) Within 30 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Collateral Agent shall have received:

(i) counterparts of an amendment to each Existing Mortgage signed on behalf of the record owner of such Mortgaged Property, in form and substance satisfactory to the Collateral Agent;

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(ii) endorsements to the Existing Title Policies, insuring the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property described therein, free of any other Liens except as permitted by Section 6.03, in form and substance satisfactory to the Collateral Agent, together with such coinsurance and reinsurance as the Collateral Agent or the Required Lenders may reasonably request;

(iii) copies of all existing surveys and such other information and documents with respect to the Mortgaged Properties as shall be necessary for the aforesaid title insurance policies to be issued without a survey exception;

(iv) a UCC amendment to the fixture financing statement for the Mortgaged Property in Pittsburgh County, Oklahoma to be filed in the appropriate jurisdiction as necessary, in the Collateral Agent’s sole discretion, to continue the perfection of the Collateral Agent’s Lien on such Mortgaged Property;

(v) a favorable written opinion (addressed to Agents, the Issuing Bank and the Lenders) of local counsel for each of the Mortgaged Properties located in Tennessee, Virginia and Oklahoma, substantially in a form agreed to by the Agents, covering such matters relating to the Loan Parties, the Loan Documents or the Transactions as the Agents shall reasonably request; and

(vi) such other customary documentation with respect to the Mortgaged Properties as the Collateral Agent may reasonably require; and

(c) Within 30 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Collateral Agent shall have received duly executed copies of amended and restated deposit account control agreements with each Depository Bank covering the Loan Parties’ accounts at such Depository Bank, each in form and substance satisfactory to the Collateral Agent.

(d) Within 30 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Administrative Agent shall have received evidence that (i) the name on account number 1014-770 at The Bank of Montreal has been changed from the Parent Borrower to Pliant Corporation of Canada Ltd. and (ii) the judgments against the Parent Borrower in King County, Washington in favor of Infonet Inc. and Arrow Financial Services have been satisfied.

(e) Within 30 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Agents shall have received a favorable written opinion (addressed to Agents, the Issuing Bank and the Lenders) of foreign counsel in each jurisdiction listed on Schedule 4.02, substantially in a form agreed to by the Agents, covering such matters relating to the Loan Parties, the Loan Documents or the Transactions as the Agents shall reasonably request.

(f) Within 30 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Administrative Agent shall have received evidence or the documentation required by Section 5.12, as applicable, that (i)

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Pliant Investment, Inc. has either (A)(1) merged into or consolidated with a Loan Party or (2) liquidated or dissolved or (B) become a Borrower or Guarantor pursuant to Section 5.12 and (ii) Alliant Company LLC has either (A)(1) merged into or consolidated with a Loan Party or (2) liquidated or dissolved or (B) had its membership interests pledged to the Collateral Agent by Pliant Investment Inc. pursuant to Section 5.12.

(g) Within 30 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Collateral Agent shall have received a duly executed copy of a deposit account control agreement between the Collateral Agent, the Canadian Subsidiary Borrower and the applicable depository bank, in form and substance satisfactory to the Collateral Agent.

(h) Within 30 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Administrative Agent shall have received (i) evidence that the PPSA filings referred to in the Canadian Filings Certificate have been (A) modified to reflect the appropriate description of assets covered thereby or (B) terminated or (ii) an estoppel letter from the applicable secured party of record on the PPSA filings referred to in the Canadian Filings Certificate which letter shall indicate that notwithstanding the description of the assets covered by the such PPSA filing, the Lien evidenced by such PPSA filing is limited to a Lien permitted by Section 6.02.

(i) within 10 days of the Effective Date (or such longer period of time as may be acceptable to the Agents in their sole discretion), the Collateral Agent shall have received a master promissory note evidencing all intercompany Indebtedness set forth on Schedule 4.01(f) together with a note power, endorsed in blank.

SECTION 4.03. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:

(a) The representations and warranties of each Loan Party set forth in the Loan Documents qualified as to materiality shall be true and correct and those not so qualified shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date.

(b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

(c) At the time of, and after giving effect to, such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, (i) the total Domestic A Revolving Exposures shall not exceed the total amount of the Domestic A Commitments, (ii) the total Domestic B Revolving Exposures shall not exceed the total amount of the Domestic B Commitments, (iii) the total Canadian Revolving Exposures shall not exceed

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the total amount of the Canadian Commitments, (iv) the total Revolving A Exposures exceeding the lesser of (A) the total amount of the Domestic A Commitments plus the Canadian Commitments and (B) the Borrowing Base A then in effect and (v) the total Revolving Exposures shall not exceed the lesser of (A) the total amount of the Commitments and (B) the Aggregate Borrowing Base then in effect.

(d) The Administrative Agent shall have received an Officers’ Certificate (as defined in the Senior First Lien Note Indenture, the Senior Second Lien Note Indenture and the Senior Subordinated Note Indenture) of the Parent Borrower, dated the date of such Borrowing, or the issuance, amendment, renewal or extension of such Letter of Credit (delivered, and containing a statement that it was delivered, in good faith after reasonable investigation) to the effect that such Borrowing, or the issuance, amendment, renewal or extension of such Letter of Credit, does not violate the provisions of the Senior First Lien Note Indenture, the Senior Second Lien Note Indenture and the Senior Subordinated Note Indenture (including a reasonably detailed summary as to the calculations necessary to determine the absence of any such violation).

The making of any Loan on the occasion of each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Parent Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section.

ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, each Borrower covenants and agrees with the Lenders that:

SECTION 5.01. Financial Statements and Other Information. The Parent Borrower will furnish to the Administrative Agent, which will deliver to each other Agent and each Lender:

(a) within 90 days after the end of each fiscal year of the Parent Borrower, its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Ernst & Young LLP or other independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

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(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Parent Borrower, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c) within 30 days after the end of each fiscal month of each fiscal year (or within 45 days after the end of each final fiscal month of each fiscal quarter) of the Parent Borrower, (i) its consolidated balance sheet and related statements of operations as of the end of and for such fiscal month and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) (A) the previous fiscal year and (B) the Projections, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes and (ii) information to support the calculation of the Fixed Charge Coverage Ratio as of the end of and for such fiscal month, certified by one of its Financial Officers;

(d) concurrently with any delivery of financial statements under clause (a), (b) or (c) above, a certificate of a Financial Officer of the Parent Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations with respect to compliance with Section 6.09, (iii) setting forth reasonably detailed calculations of the Fixed Charge Coverage Ratio as of the last day of the last fiscal period covered by such financial statements and (iv) stating whether any change in GAAP or in the application thereof has occurred since the date of the Parent Borrower’s audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(e) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);

(f) no later than 12:00 noon, New York City time, on Wednesday of each week, and at any time an Event of Default has occurred and is continuing, at such other times as may be requested by any Agent, a completed Borrowing Base Certificate calculating and certifying the Borrowing Bases as of the last day of the prior week and accompanied by such supporting detail and documentation as shall be reasonably requested by any Agent;

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provided, however, that (A) the unit cost for Eligible Raw Materials may be calculated as of the last day of the immediately preceding calendar month and (B) the cost for polyvinyl chloride (PVC) resin, polyethylene (PE) resin and polypropylene (PP) resin may be calculated on a weekly average basis;

(g) to the extent requested by any Agent at any time when it reasonably believes that the then-existing Borrowing Base Certificate is materially inaccurate or that either Borrowing Base at such time would, if calculated at such time, be materially different than such Borrowing Base reflected in such then-existing Borrowing Base Certificate, within 10 Business Days of such request, a completed Borrowing Base Certificate that satisfies the requirements of Section 5.01(f) showing such Borrowing Base as of the date so requested, accompanied by the reports and supporting information contemplated thereby or otherwise requested by any Agent;

(h) within two Business Days of any request therefor, such other information concerning the amount, composition and manner of computation of the Borrowing Bases as any Agent may reasonably request (in such detail as may reasonably be requested by any Agent);

(i) not later than 45 days following the commencement of each fiscal year of the Parent Borrower, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of and for such fiscal year), presented on a monthly basis, and, promptly when available, any significant revisions of such budget;

(j) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Parent Borrower or any Subsidiary with the SEC, or any Governmental Authority succeeding to any or all of the functions of the SEC, or with any national securities exchange, as the case may be;

(k) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Parent Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent, the Collateral Agent or any Lender may reasonably request;

(l) as soon as available but in any event within five Business Days of after the end of each calendar month, and at such other times as may be requested by any Agent, as of the period then ended:

(i) with respect to each Borrower, a summary of Inventory by location and type and, if requested by any Agent, a supporting perpetual Inventory report, in each case accompanied by such supporting detail and documentation as may be reasonably requested by any Agent;

(ii) with respect to each Borrower, a monthly trial balance showing Accounts outstanding aged from invoice date as follows:  1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by such supporting detail and documentation as may be reasonably requested by any Agent;

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(iii) with respect to each Borrower, a schedule and aging of such Borrower’s accounts payable; and

(iv) with respect to each Borrower, a report from the resin integration purchase system (RIPS) listing all resin payments due as of the date of delivery of such report; and

(m) as soon as available but in any event within five Business Days of after the end of each calendar month, and at such other times as may be requested by any Agent, a report setting forth additions and reductions (cash and non-cash) with respect to Accounts of each Borrower, as of the period then ended.

SECTION 5.02. Notices of Material Events. The Parent Borrower will furnish to each Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of an executive officer or a Financial Officer of the Parent Borrower, affecting the Parent Borrower or any Affiliate thereof that would reasonably be expected to result in a Material Adverse Effect;

(c) any downgrade of the ratings of the Parent Borrower’s senior secured indebtedness for borrowed money by S&P, Moody’s or any other rating agency;

(d) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, would reasonably be expected to result in liability of the Parent Borrower and the Subsidiaries in an aggregate amount exceeding $5,000,000; and

(e) any other development that results in, or would reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Parent Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Information Regarding Collateral. (a)  The Parent Borrower will furnish to the Agents 10 day’s prior written notice of any change (i) in any Loan Party’s corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of any Loan Party’s chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it having an aggregate fair value in excess of $100,000 is located (including the establishment of any such new office or facility), (iii) in any Loan Party’s identity or corporate structure, (iv) in any Loan Party’s Federal Taxpayer Identification Number or other organizational identification number (or, with respect to each Foreign Subsidiary, any comparable identification numbers issued by

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any Governmental Authority) or (v) in any Loan Party’s jurisdiction of incorporation or organization. The Parent Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code (or the equivalent legislation of other jurisdictions) or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral; provided that the Collateral Agent shall take any action reasonably requested by the Parent Borrower to maintain a valid, legal and perfected security interest in all the Collateral.

(b)  Each quarter, at the time of delivery of annual or quarterly financial statements with respect to the preceding fiscal year or fiscal quarter pursuant to clause (a) or clause (b) of Section 5.01, the Parent Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer and the chief legal officer of the Parent Borrower or the Canadian Subsidiary Borrower, as applicable, (i) setting forth the information required pursuant to Section 2 of the Domestic Perfection Certificate and Section 2 of the Canadian Perfection Certificate or confirming that there has been no change in such information since the date of the applicable Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section and (ii) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the Security Agreements for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period).

SECTION 5.04. Existence; Conduct of Business. The Parent Borrower will, and will cause each of the Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of the business of the Parent Borrower and the Subsidiaries, taken as a whole; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.04.

SECTION 5.05. Payment of Obligations; Compliance with Leases. (a)  The Parent Borrower will, and will cause each of the Subsidiaries to, pay (i) all material Taxes and other charges of any Governmental Authority imposed on it or any of its properties or assets or in respect of any of its franchises, business, income or property before any material penalty or interest accrues thereon and (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien (other than a Lien permitted under Section 6.03) upon any of the property or assets of the Parent Borrower or any of the Subsidiaries, prior to the time when any penalty or fine shall be incurred with respect thereto, except where (A) the validity or amount thereof is being contested in good faith by appropriate procedures or proceedings, (B) the Parent Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (C) such contest effectively suspends collection of the contested obligation and the

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enforcement of any Lien securing such obligation and (D) the failure to make payment pending such contest would not reasonably be expected to result in a Material Adverse Effect.

(b)  The Parent Borrower will, and will cause each of the Subsidiaries to, comply with all material terms of each lease under which the Parent Borrower or any Subsidiary leases any property, as lessee, and at which Accounts or Inventory that is included in the calculation of the Borrowing Bases is located.

SECTION 5.06. Maintenance of Properties. The Parent Borrower will, and will cause each of the Subsidiaries to, keep and maintain all property material to the conduct of the business of the Parent Borrower and the Subsidiaries taken as a whole in good working order and condition, ordinary wear and tear excepted.

SECTION 5.07. Insurance. The Parent Borrower will, and will cause each of the Subsidiaries to, maintain insurance with respect to its material properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons. Such insurance shall be maintained with financially sound and reputable insurers, except that a portion of such insurance program (not to exceed that which is customary in the case of companies engaged in the same or similar business or having similar properties similarly situated) may be effected through self-insurance, provided adequate reserves therefor, in accordance with GAAP, are maintained. All insurance policies or certificates (or certified copies thereof) with respect to such insurance (A) shall, subject to the terms of the Intercreditor Agreement, be endorsed to the Collateral Agent’s reasonable satisfaction for the benefit of the Lenders (including by naming the Collateral Agent as loss payee or additional insured, as appropriate); and (B) shall state that such insurance policy shall not be canceled without 30 days’ prior written notice thereof (or, in connection with any cancellation resulting from the non-payment of premiums, 10 days’ prior written notice thereof). The Parent Borrower shall promptly notify the Administrative Agent of any material change or revision, or notice of expiration or non-renewal, with respect to any such insurance policy. The Parent Borrower shall furnish to the Administrative Agent, on the Effective Date and on the date of delivery of each annual financial statement, full information as to the insurance carried. At any time that insurance at levels described in Schedule 5.07 is not being maintained by or on behalf of the Parent Borrower or any of the Subsidiaries, the Parent Borrower will notify the Lenders in writing within two Business Days thereof and, if thereafter notified by the Administrative Agent or the Required Lenders to do so, the Parent Borrower or any such Subsidiary, as the case may be, shall obtain insurance at such levels at least equal to those set forth on Schedule 5.07; provided that such insurance can be obtained at commercially reasonable rates.

SECTION 5.08. Casualty and Condemnation. (a)  The Parent Borrower will furnish to each Agent and the Lenders prompt written notice of any casualty or other insured damage to any portion of any Collateral or the commencement of any action or proceeding for the taking of any Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding, where the fair market value of the Collateral so affected in connection with any such casualty event or condemnation is at least $1,000,000.

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(b)  If any event described in paragraph (a) of this Section results in Net Proceeds (whether in the form of insurance proceeds, condemnation award or otherwise), the Collateral Agent is authorized to collect such Net Proceeds and, if received by the Parent Borrower or any Subsidiary, such Net Proceeds shall be paid over to the Collateral Agent; provided that (i) if the aggregate Net Proceeds in respect of such event (other than proceeds of business interruption insurance) are less than $5,000,000, such Net Proceeds shall be paid over to the Parent Borrower unless a Default has occurred and is continuing, (ii) all proceeds of business interruption insurance shall be paid over to the Parent Borrower unless a Default has occurred and is continuing and (iii) for so long as the Senior First Lien Notes remain outstanding, all Net Proceeds in respect of Second-Priority Collateral shall be paid over to the Senior First Lien Note Trustee to the extent required by the terms of the Senior First Lien Note Documents. All such Net Proceeds retained by or paid over to the Collateral Agent shall be held by the Collateral Agent and released from time to time to pay the costs of repairing, restoring or replacing the affected property or funding expenditures for assets in any business permitted under Section 6.04(b), in each case in accordance with the terms of the applicable Security Document, subject to the provisions of the applicable Security Document regarding application of such Net Proceeds during a Default.

SECTION 5.09. Books and Records; Inspection and Audit Rights. (a)  The Parent Borrower will, and will cause each of the Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made in all material respects of all dealings and transactions in relation to its business and activities. The Parent Borrower will, and will cause each of the Subsidiaries to, permit any representatives designated by any Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants (and the Parent Borrower shall be provided the opportunity to participate in any such discussions with such independent accountants), all at such reasonable times and as often as reasonably requested. The Parent Borrower shall pay the reasonable fees and expenses of any representatives retained by the Administrative Agent (such representatives to be reasonably acceptable to the Domestic B Agent), or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, the Domestic B Agent, to conduct any such inspection; provided, however that so long as no Event of Default shall have occurred and be continuing, the Parent Borrower shall only be required to pay for one such inspection per fiscal quarter of the Parent Borrower.

(b)  The Parent Borrower will, and will cause each of the Subsidiaries to, permit any representatives designated by any Agent (including any consultants, accountants, lawyers and appraisers retained by such Agent) to conduct evaluations and appraisals of the Parent Borrower’s computation of the Borrowing Bases and the assets included in the Borrowing Bases, all at such reasonable times and as often as reasonably requested. The Parent Borrower shall pay the reasonable fees and expenses of any representatives retained by the Administrative Agent (such representatives to be reasonably acceptable to the Domestic B Agent), or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, the Domestic B Agent, to conduct any such evaluation or appraisal; provided, however that so long as no Event of Default shall have occurred and be continuing, the Parent Borrower shall only be

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required to pay for one such evaluation or appraisal per calendar year. The Parent Borrower also agrees to modify or adjust the computation of the Borrowing Bases (which may include maintaining additional reserves or modifying the eligibility criteria for the components of the Borrowing Base) to the extent required by any Agent or the Required Lenders as a result of any such evaluation or appraisal or otherwise.

(c)  In the event that historical accounting practices, systems or reserves relating to the components of the Borrowing Base A are modified in a manner that is adverse to the Domestic A Lenders, the Domestic B Lenders or the Canadian Lenders in any material respect, the Parent Borrower will agree to maintain such additional reserves (for purposes of computing the Borrowing Base A and the Borrowing Base B) in respect of the components of the Borrowing Base A and the Borrowing Base B and make such other adjustments to its parameters for including the components of the Borrowing Base A and the Borrowing Base B as the Administrative Agent or the Required Lenders in their discretion shall require based upon such modifications.

(d)  In the event that historical accounting practices, systems or reserves relating to the components of the Borrowing Base B are modified in a manner that is adverse to the Domestic A Lenders, the Domestic B Lenders or the Canadian Lenders in any material respect, the Parent Borrower will agree to maintain such additional reserves (for purposes of computing the Borrowing Base B) in respect of the components of the Borrowing Base A and the Borrowing Base B and make such other adjustments to its parameters for including the components of the Borrowing Base A and the Borrowing Base B as the Administrative Agent, or any time after the Domestic A Revolving Loans and the Canadian Revolving Loans have been paid in full and the Domestic A Commitments and the Canadian Commitments have been terminated, the Domestic B Agent or the Required Lenders in their discretion shall require based upon such modifications.

SECTION 5.10. Compliance with Laws. The Parent Borrower will, and will cause each of the Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, including Environmental Laws except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of the Loans will be used solely for general corporate purposes of the applicable Borrower. No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or any security convertible into or exchangeable for Margin Stock, or extend credit to others for the purpose of purchasing or carrying Margin Stock or any security convertible into or exchangeable for Margin Stock, or to refund Indebtedness originally incurred for such purpose, or (ii) for any purpose that entails a violation of any of the Regulations of the Board, including Regulation U and Regulation X. Letters of Credit will be issued only for general corporate purposes.

SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is formed or acquired after the Effective Date (or if any Subsidiary ceases to be an Excluded Subsidiary after the Effective Date), the Parent Borrower will notify the Agents and the Lenders thereof and

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(a) if (i) such Subsidiary is a Loan Party (other than a Loan Party organized under the laws of Canada or any province thereof), the Parent Borrower will cause such Subsidiary to become a party to (x) this Agreement, as a Borrower, or the Guarantee Agreement, as a Guarantor (y) the Domestic Security Agreement, the Domestic Pledge Agreement and each other applicable Security Document in the manner provided therein (or, if such Loan Party is a Foreign Subsidiary not organized under the laws of Canada or any province thereof, such mortgages and security, pledge, guarantee and subordination agreements as reasonably requested by the Administrative Agent or the Collateral Agent to guarantee and secure the Obligations) and (ii) if such Subsidiary is a Loan Party organized under the laws of Canada or any province thereof, the Parent Borrower will cause such Subsidiary to become a party to the Guarantee Agreement, the Canadian Security Agreement, the Canadian Pledge Agreement and each other applicable Security Document in the manner provided therein, in each case within three Business Days after such Subsidiary is formed or acquired and promptly take such actions to create and perfect Liens on such Subsidiary’s assets to secure the Obligations as the Administrative Agent or the Collateral Agent or the Required Lenders shall reasonably request and (b) if any Equity Interests or Indebtedness of such Subsidiary are owned by or on behalf of any Loan Party, the Parent Borrower will cause certificates and promissory notes evidencing such Equity Interests and Indebtedness to be pledged to secure the Obligations within three Business Days after such Subsidiary is formed or acquired (except that, if such Subsidiary is a Foreign Subsidiary and is not a Loan Party, Equity Interests of such Subsidiary that are owned by or on behalf of the Parent Borrower or a Subsidiary Loan Party and that are to be pledged to secure the Obligations may be limited to 65% of the outstanding voting Equity Interests of such Subsidiary).

SECTION 5.13. Further Assurances. (a)  The Parent Borrower will, and will cause each other Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), that may be required under any applicable law, or which any Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties. The Parent Borrower also agrees to provide to the Agents, from time to time upon request, evidence reasonably satisfactory to the Agents as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

(b)  If any material assets (including any real property or improvements thereto or any interest therein) are acquired by the Parent Borrower or any other Loan Party after the Effective Date (other than assets constituting Collateral that become subject to the Lien of the appropriate Security Agreements upon acquisition thereof), the Parent Borrower will notify the Agents and the Lenders thereof, and, if requested by any Agent or the Required Lenders, the Parent Borrower will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the other Loan Parties to take, such actions as shall be necessary or reasonably requested by any Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section, all at the expense of the Loan Parties; provided that the following property shall not be covered by this Section 5.13(b):  (i) intellectual property a security interest in which would require filings or recordations under laws other than the laws of the United States, Canada (in the case of intellectual property of the Canadian Subsidiary

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Borrower or another Loan Party organized under the laws of Canada or any province thereof) or any jurisdiction thereof, (ii) owned real estate or leasehold interests with an aggregate fair market value of less than $5,000,000, (iii) any other items of tangible personal property with, in each case, a fair market value of less than $500,000 and (iv) items explicitly excluded by exceptions in any Security Agreement, Pledge Agreement or other Security Document.

SECTION 5.14. Supplemental Disclosure. From time to time as may be reasonably requested by the Administrative Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of an Event of Default) or at the Loan Parties’ election, the Parent Borrower shall supplement each Schedule, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedule or as an exception to such representation or that is necessary to correct any information in such Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Schedule, such Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Schedule or representation shall amend, supplement or otherwise modify any Schedule or representation, or be or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Agent and Requisite Lenders in writing, and (b) no supplement shall be required or permitted as to representations and warranties that relate solely to the Closing Date.

SECTION 5.15. Intellectual Property. The Parent Borrower will, and will cause each of the Subsidiaries to, conduct its business and affairs without infringement of or interference with any Intellectual Property (as defined in the Domestic Security Agreement) of any other Person in any material respect and shall comply in all material respects with the terms of its Licenses (as defined in the Domestic Security Agreement).

SECTION 5.16. Landlord Lien Waivers, Mortgagee Agreements and Bailee Letters. As reasonably requested by the Collateral Agent, the Parent Borrower will, and will cause each of the Subsidiaries to, use commercially reasonable efforts to obtain a Landlord Lien Waiver, mortgagee agreement or Bailee Letter, as applicable, from the lessor of each leased property, mortgagee of owned property or bailee with respect to any warehouse, processor or converter facility or other location where Collateral is stored or located, which agreement or letter shall contain a waiver or subordination of all Liens or claims that the landlord, mortgagee or bailee may assert against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and substance to the Collateral Agent. Each Loan Party shall timely and fully pay and perform its obligations under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located.

SECTION 5.17. Depository Banks. The Parent Borrower will, and will cause each of the Subsidiaries to, maintain a bank reasonably acceptable to the Administrative Agent as its principal depository bank, including for the maintenance of operating, administrative, cash management, collection activity, and other deposit accounts for the conduct of its business.

SECTION 5.18. ERISA. The Parent Borrower will, and will cause each of the Subsidiaries to, establish, maintain and operate all Plans to comply in all material respects with

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the provisions of ERISA, the Code, and all other applicable laws, and the regulations and interpretations thereunder other than to the extent that the Loan Parties are in good faith contesting by appropriate proceedings the validity or implication of any such provision, law, rule, regulation or interpretation.

ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Parent Borrower covenants and agrees with the Lenders that:

SECTION 6.01. Indebtedness. The Parent Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:

(i) Indebtedness created under the Loan Documents;

(ii) Indebtedness existing on the Effective Date and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof;

(iii) Indebtedness of the Parent Borrower to any Subsidiary and of any Subsidiary to the Parent Borrower or any other Subsidiary; provided that Indebtedness of any Subsidiary that is not a Loan Party to any Loan Party shall be subject to Section 6.05;

(iv) Guarantees by the Parent Borrower of Indebtedness of any Subsidiary or Joint Venture and by any Subsidiary of Indebtedness of the Parent Borrower, any other Subsidiary or any Joint Venture; provided that (i) Guarantees by (A) any Loan Party of Indebtedness of any Subsidiary that is not a Loan Party and (B) the Parent Borrower or any Subsidiary of Indebtedness of a Joint Venture, in each case shall be subject to Section 6.05, (ii) any Guarantee of the Senior Subordinated Notes by a Subsidiary shall be subordinated on the same terms as the Senior Subordinated Notes and (iii) any Guarantee of the Senior Subordinated Notes, the Senior First Lien Notes or the Senior Second Lien Notes shall be given only by a Subsidiary that is a Loan Party;

(v) Indebtedness of the Parent Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, including Capital Lease Obligations incurred pursuant to transactions permitted by Section 6.07, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (A) such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this clause (v) shall not exceed $10,000,000 at any time outstanding;

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(vi) the Senior First Lien Notes in an aggregate principal amount at maturity not exceeding (A) prior to the 2004 Notes Restatement Date, $306,000,000 plus the amount of additional Permitted Notes Refinancing Indebtedness in respect thereof incurred in respect of unpaid accrued interest (not included in the accreted value) and premium thereon and (B) on and after the 2004 Notes Restatement Date, an amount equal to the sum of (1) the aggregate accreted value of the Amended 2004 Notes on the 2004 Notes Restatement Date plus the aggregate principal amount of additional Senior First Lien Notes issued in payment of interest thereon plus the amount of additional Permitted Notes Refinancing Indebtedness in respect thereof incurred in respect of unpaid accrued interest and premium thereon and (2) the 2004 Notes Remaining Amount plus the amount of additional Permitted Notes Refinancing Indebtedness in respect thereof incurred in respect of unpaid accrued interest (not included in the accreted value) and premium thereon;

(vii) Indebtedness with respect to surety, appeal and performance bonds obtained by the Parent Borrower or any of the Subsidiaries in the ordinary course of business;

(viii) other Indebtedness of any Loan Party; provided that (A) the aggregate principal amount of Indebtedness that may be incurred pursuant to this clause (viii) shall not exceed $5,000,000 at any time outstanding and (B) any such Indebtedness shall be unsecured (other than Indebtedness secured by a Lien permitted by Section 6.03(d));

(ix) other Indebtedness of any Subsidiary that is not a Loan Party; provided that the aggregate amount of Indebtedness that may be incurred pursuant to this clause (ix) and outstanding at any time shall not exceed $35,000,000, minus (A) the aggregate amount of Indebtedness that has been incurred pursuant to clauses (v) and (viii) above and that is outstanding at such time and (B) the aggregate amount of other obligations that have been secured pursuant to subclause (i) of clause (d) of the definition of “Permitted Encumbrances” and that are outstanding at such time;

(x) the Senior Second Lien Notes in an aggregate principal amount not exceeding $250,000,000 plus the amount of additional Permitted Notes Refinancing Indebtedness in respect thereof incurred in respect of unpaid accrued interest and premium thereon;

(xi) the Senior Subordinated Notes in an aggregate principal amount not exceeding $320,000,000 plus the amount of additional Permitted Notes Refinancing Indebtedness in respect thereof incurred in respect of unpaid accrued interest and premium thereon;

(xii) the Existing Preferred Stock and all additional shares of such Preferred Stock permitted to be issued under Section 6.09(a)(ii), in each case to the extent that such Preferred Stock is or may subsequently become characterized as Indebtedness in the consolidated financial statements of the Parent Borrower in accordance with GAAP and other applicable financial accounting standards;

(xiii) [Intentionally Omitted];

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(xiv) [Intentionally Omitted];

(xv) the Series B Preferred Stock permitted to be issued under this Agreement, to the extent that such Series B Preferred Stock is or may subsequently become characterized as Indebtedness in the consolidated financial statements of the Parent Borrower in accordance with GAAP and other applicable accounting standards; and

(xvi) unsecured Indebtedness of the Parent Borrower in an aggregate principal amount not exceeding $10,000,000 pursuant to an overdraft line of credit in form and substance reasonably satisfactory to each Agent (which shall line of credit shall include subordination terms and conditions that are acceptable to the Agents); provided, however, that to the extent a legal opinion is delivered by counsel to the Parent Borrower in connection with such overdraft line of credit, the Administrative Agent shall receive concurrently therewith a reliance letter in favor of the Agents, the Lenders and the Issuing Bank.

SECTION 6.02. Certain Equity Securities. The Parent Borrower will not, nor will it permit any Subsidiary to, issue any preferred stock (other than Qualified Preferred Stock of the Parent Borrower) or be or become liable in respect of any obligation (contingent or otherwise) to purchase, redeem, retire, acquire or make any other payment in respect of any Equity Interests of the Parent Borrower or any Subsidiary, except for (i) the warrants issued in connection with the Existing Preferred Stock, (ii) the Warrants, (iii) actions otherwise permitted under Section 6.09, (iv) Series B Preferred Stock, to the extent issued pursuant to Section 6.10(e), and (v) Qualified Preferred Stock of the Parent Borrower.

SECTION 6.03. Liens. The Parent Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a) Liens created under the Loan Documents;

(b) Permitted Encumbrances;

(c) any Lien on any property or asset of the Parent Borrower or any Subsidiary existing on the Effective Date and set forth in Schedule 6.03; provided that (i) such Lien shall not apply to any other property or asset of the Parent Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations that it secures on the Effective Date and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(d) any Lien existing on any property or asset prior to the acquisition thereof by the Parent Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the Effective Date prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Parent Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations that it secures on

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the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(e) Liens on fixed or capital assets acquired, constructed or improved by the Parent Borrower or any Subsidiary; provided that (i) such Liens secure Indebtedness permitted by clause (v) of Section 6.01, (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Parent Borrower or any Subsidiary other than property directly related to such fixed or capital assets and of a type customarily covered by such Liens, except that such security interests may not apply to any accounts receivable or inventory;

(f) Liens securing Indebtedness incurred pursuant to Section 6.01(ix); provided that such Liens shall apply only to properties and assets of Foreign Subsidiaries that are not Loan Parties;

(g) leases and subleases of real property and tangible personal property and licenses and sublicenses of intellectual property rights, in each case granted in the ordinary course of business and not interfering individually or in the aggregate (with all such licenses and subleases being taken as a whole) in any material respect with the conduct of the business of the Parent Borrower and the Subsidiaries;

(h) Liens to secure compensation and indemnity obligations to the trustee under the indenture for the Senior Subordinated Notes and the warrant agent under the warrant agreement for the Warrants;

(i) Liens granted under the Senior First Lien Security Documents or the Senior Second Lien Security Documents; provided that (i) such Liens secure only obligations under the Senior First Lien Note Documents and the Senior Second Lien Note Documents, respectively, except that such obligations shall not include obligations under any Indebtedness (or obligations under any Swap Agreements) except to the extent incurred pursuant to Section 6.01(x), with respect to the Senior Second Lien Notes, or Section 6.01(vi), with respect to the Senior First Lien Notes, (ii) such Liens do not apply to any asset other than Collateral that is subject to a Lien granted under a Security Document to secure the Obligations, (iii) any Liens on any First-Priority Collateral that secure obligations in respect of the Senior First Lien Notes or Senior Second Lien Notes are subordinated to the Liens on such First-Priority Collateral that secure the Obligations, (iv) any Liens on any Second-Priority Collateral that secure obligations in respect of the Senior Second Lien Notes rank equally and ratably with the Liens on such Second-Priority Collateral that secure the Obligations and (v) all such Liens granted under the Senior First Lien Security Documents and Senior Second Lien Security Documents shall be subject to the terms of the Intercreditor Agreement; and

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(j) Liens on cash deposited with the issuing bank for any Existing Letter of Credit to cash collateralize such Existing Letter of Credit (including with respect to interest, fees and expenses associated therewith); provided that (i) the amount of such cash subject to such Lien at any time shall not exceed 105% of the face amount of such Existing Letter of Credit and (ii) upon the termination or expiration of such Existing Letter of Credit, to the extent there has been no drawing under such Existing Letter of Credit that has not been reimbursed at such time, an amount of cash equal to 105% of the face amount of such Existing Letter of Credit (less any amounts retained to pay interest, fees and expenses associated therewith) shall be promptly released from such Lien.

SECTION 6.04. Fundamental Changes. (a)  The Parent Borrower will not and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Subsidiary (other than the Canadian Subsidiary Borrower) may merge into the Parent Borrower in a transaction in which the Parent Borrower is the surviving corporation, (ii) any Subsidiary (other than the Canadian Subsidiary Borrower) may merge into any Subsidiary that is a Loan Party; provided that if any Subsidiary that is party to such transaction is (A) a Loan Party, the surviving entity must be a Loan Party or (B) a Domestic Subsidiary Borrower, the surviving entity must be a Domestic Subsidiary Borrower, (iii) any Subsidiary that is not a Loan Party may merge into any Subsidiary that is not a Loan Party, (iv)  any Subsidiary (other than any Domestic Subsidiary Borrower or the Canadian Subsidiary Borrower) may liquidate or dissolve if the Parent Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Parent Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a Wholly Owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.05 and (v) the Parent Borrower may merge with an Affiliate incorporated under the laws of the State of Delaware solely for the purpose of incorporating or organizing the Parent Borrower under the laws of the State of Delaware; provided that such merger does not adversely affect the Lenders in any material respect.

(b)  The Parent Borrower will not, and will not permit any of the Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Parent Borrower and the Subsidiaries on the Effective Date and businesses reasonably related, ancillary or complementary thereto.

SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions. The Parent Borrower will not, and will not permit any of the Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a Wholly Owned Subsidiary prior to such merger) any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the forgoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:

(a) Permitted Investments;

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(b) investments existing on the date hereof and set forth on Schedule 6.05(b), to the extent such investments would not be permitted under any other clause of this Section 6.05;

(c) investments by the Parent Borrower and the Subsidiaries in the Equity Interests of their respective Subsidiaries (that are Subsidiaries prior to such Investment); provided that (i) any such Equity Interests owned by a Loan Party shall be pledged to secure the Obligations and (ii)(A) the amount of any such investment by a Loan Party in a Subsidiary that is not a Loan Party shall be automatically added to the Accumulated Investment Balance and (B) the Accumulated Investment Balance shall not exceed $7,000,000 during any fiscal year of the Parent Borrower;

(d) loans or advances made by the Parent Borrower to any Subsidiary and made by any Subsidiary to the Parent Borrower or any other Subsidiary; provided (i) that any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged to secure the Obligations and (ii)(A) the amount of any such loan or advance by a Loan Party to a Subsidiary that is not a Loan Party shall be automatically added to the Accumulated Investment Balance and (B) the Accumulated Investment Balance shall not exceed $7,000,000 during any fiscal year of the Parent Borrower;

(e) Guarantees by the Parent Borrower of Indebtedness and other obligations of any Subsidiary or any Joint Venture and Guarantees by any Subsidiary of Indebtedness or other obligations of the Parent Borrower or any Subsidiary or any Joint Venture; provided that (i) a Subsidiary shall not Guarantee the Senior First Lien Notes, Senior Second Lien Notes or Senior Subordinated Notes unless (A) such Subsidiary also has Guaranteed the Obligations and (B) with respect to any Guarantee of the Senior Subordinated Notes, such Guarantee is subordinated to such Guarantee of the Obligations on terms no less favorable to the Lenders than the subordination provisions of the Senior Subordinated Notes, (ii) any such Guarantee constituting Indebtedness is permitted by Section 6.01 and (iii) in the event of any Guarantee by a Loan Party of Indebtedness of a Person that is not a Loan Party, (A) the aggregate principal amount of such Indebtedness shall be automatically added to the Accumulated Investment Balance and (B) the Accumulated Investment Balance shall not exceed $7,000,000 during any fiscal year of the Parent Borrower;

(f) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

(g) [Intentionally Omitted];

(h) [Intentionally Omitted];

(i) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

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(j) investments of any Person existing at the time such Person becomes a Subsidiary or at the time such Person merges or consolidates with the Parent Borrower or any of the Subsidiaries, in either case in compliance with the terms of this Agreement; provided that such investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary or such merger or consolidation;

(k) Swap Agreements entered into in compliance with Section 6.08;

(l) other loans, advances and investments; provided that (i) the amount of any such loan, advance or investment made pursuant to this clause (l) shall be automatically added to the Accumulated Investment Balance and (ii) the Accumulated Investment Balance shall not exceed $7,000,000 during any fiscal year of the Parent Borrower; and

(m) notes or other evidences of Indebtedness acquired as consideration in connection with a sale, transfer, lease or other disposition of any asset by the Parent Borrower or any of the Subsidiaries.

SECTION 6.06. Asset Sales. The Parent Borrower will not, and will not permit any of the Subsidiaries to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it (other than any such sale, transfer, lease or other disposition resulting from any casualty or condemnation of any assets of the Parent Borrower or any of the Subsidiaries), nor will the Parent Borrower permit any of the Subsidiaries to issue any additional Equity Interest in such Subsidiary, except:

(a) sales of inventory, used or surplus tangible property and Permitted Investments in the ordinary course of business;

(b) sales, transfers, issuances and dispositions to the Parent Borrower or a Subsidiary; provided that any such sales, transfers or dispositions involving a Subsidiary that is not a Loan Party shall be made in compliance with Section 6.10;

(c) leases and licenses entered into in the ordinary course of business;

(d) sales in connection with sale-leasebacks permitted under Section 6.07;

(e) sales of investments referred to in clauses (b), (f), (l) and (m) of Section 6.05;

(f) sales, transfers and dispositions of assets (other than Equity Interests of a Subsidiary) that are not permitted by any other clause of this Section; provided that the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (f) shall not, in the aggregate, exceed $5,000,000 during the term of this Agreement;

(g) sales, transfers and dispositions of Foreign Assets;

(h) transfers and dispositions constituting investments permitted under Section 6.05; and

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(i) sales, transfers and dispositions of the assets set forth in Schedule 6.06; provided that the Parent Borrower provides the Administrative Agent, the Collateral Agent with written notice of any such sale, transfer or disposition not less than five Business Days prior to the consummation thereof;

provided that all sales, transfers, leases and other dispositions permitted hereby shall be made for an amount not less than fair value (as determined in good faith by the Board of Directors of the Parent Borrower), or, in the case of clause (d) above, for an amount, if less, equal to the aggregate cost expended for the property that is the subject of such sale-leaseback (except that those permitted by clause (a) above shall be made on terms that are customary in the ordinary course) and for consideration in cash. For purposes of this Section 6.06, the following shall be deemed to be cash:  (a) the assumption of any liabilities of the Parent Borrower or any Subsidiary with respect to, and the release of the Parent Borrower or such Subsidiary from all liability in respect of, any Indebtedness of the Parent Borrower or the Subsidiaries permitted hereunder (in the amount of such Indebtedness) in connection with a sale, transfer, lease or other disposition of Second-Priority Collateral permitted under Section 6.06 and (b) securities received by the Parent Borrower or any Subsidiary from the transferee that are immediately convertible into cash without breach of their terms or the agreement pursuant to which they were purchased and that are promptly converted by the Parent Borrower or such Subsidiary into cash.

For purposes of this Section 6.06 and for so long as any Senior First Lien Notes that are secured by a first-priority Lien on the Second-Priority Collateral remain outstanding, (a) any sale, transfer, lease or other disposition of the Equity Interests of any Loan Party that owns assets constituting First-Priority Collateral or Second-Priority Collateral shall be deemed to be a sale, transfer, lease or disposition of such First-Priority Collateral or Second-Priority Collateral, (b) any sale, transfer, lease or other disposition of Equity Interests of a Loan Party that owns both First-Priority Collateral and Second-Priority Collateral shall be deemed to be a separate sale, transfer, lease or disposition of such First-Priority Collateral and such Second-Priority Collateral) and (c) the proceeds received by the Parent Borrower or any Subsidiary in respect of any such sale, transfer, lease or disposition referred to in clause (b) above (or any sale, transfer, lease or other disposition of assets (other than those described in clause (b) above) including both First-Priority Collateral and Second-Priority Collateral without allocating the purchase price between First-Priority Collateral and Second-Priority Collateral) shall be allocated to the First-Priority Collateral and the Second-Priority Collateral pursuant to the terms of the Intercreditor Agreement.

SECTION 6.07. Sale and Lease-Back Transactions. The Parent Borrower will not, and will not permit any Subsidiary to, enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred, except for any such sale of fixed or capital assets that is consummated within 120 days after the date the Parent Borrower or such Subsidiary acquires or finishes construction of such fixed or capital asset.

SECTION 6.08. Swap Agreements. The Parent Borrower will not, and will not permit any of the Subsidiaries to, enter into any Swap Agreement, except (a) Swap Agreements

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entered into to hedge or mitigate risks to which the Parent Borrower or any Subsidiary has actual exposure (other than those in respect of Equity Interests of the Parent Borrower or any of the Subsidiaries) and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate, to a fixed rate or otherwise) with respect to any interest-bearing liability or investment of the Parent Borrower or any Subsidiary.

SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness. (a)  The Parent Borrower will not, and will not permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except (i) Wholly Owned Subsidiaries may declare and pay dividends with respect to their Equity Interests and Subsidiaries that are not Wholly Owned Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests, (ii) the Parent Borrower may, subject to Section 6.02, make dividends with respect to its Equity Interests consisting solely of additional Equity Interests permitted hereunder and (iii) the Parent Borrower may make Restricted Payments to management or employees of the Parent Borrower and the Subsidiaries or their Permitted Transferees (as defined in the Stockholders Agreement) in an aggregate amount not to exceed $1,000,000 during the term of this Agreement, pursuant to and in accordance with the Stockholders Agreement, employment agreements, stock option plans or agreements or other benefit plans or agreements; provided that no Default has occurred and is continuing or would result therefrom; and provided further that no Restricted Payments shall be permitted pursuant to this clause (iii) in respect of shares of the Series B Preferred Stock, other than in connection with the repurchase by the Parent Borrower of unvested shares of Series B Preferred Stock under the terms of the 2004 Restricted Stock Incentive Plan of the Parent Borrower; (iv) the Parent Borrower may repurchase or otherwise acquire from any holder thereof shares of Qualified Preferred Stock for consideration consisting solely of (x) Qualified Preferred Stock, (y) cash in an aggregate amount not greater than the amount of Net Proceeds received from a substantially concurrent issuance of Qualified Preferred Stock or (z) a combination of the Qualified Preferred Stock described in clause (x) and the cash described in clause (y); provided that no Default has occurred and is continuing or would result therefrom; and (v)  the Parent Borrower may issue shares of the Series B Preferred Stock as provided in Section 6.02(iv) (insofar as such issuance constitutes the agreement to make the Restricted Payments contemplated by the terms of the Series B Preferred Stock); provided that this clause (v) shall not permit the making of any Restricted Payment in respect of the Series B Preferred Stock.

(b)  The Parent Borrower will not, and will not permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Senior First Lien Note, Senior Second Lien Note or Senior Subordinated Note, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Senior First Lien Note, Senior Second Lien Note or Senior Subordinated Note, except (i) payment of regularly scheduled interest payments as and when due in respect of the Senior First Lien Notes; provided that the Parent Borrower shall not be permitted to make cash interest payments (A) on and prior to June 15, 2007, in respect of any Senior First Lien Notes (other than the Amended 2004 Notes and any initial or successive Permitted Notes Refinancing Indebtedness in respect thereof) unless (x) such payment is made after the date that

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is 18 months after the Effective Date, (y) no Default has occurred and is continuing or would result therefrom and (z) the Fixed Charge Coverage Ratio as of the last day of the most recently completed fiscal month for which financial statements have been delivered pursuant to Section 5.01(a), (b) or (c) is equal to or greater than 1.15 to 1.00 or (B) at any time, in respect of any Amended 2004 Notes (or any initial or successive Permitted Notes Refinancing Indebtedness in respect thereof), except (in the case of this clause (B)) for any cash interest payment made in lieu of any payment of interest in-kind in an amount less than the minimum denomination of the applicable notes in accordance with the terms thereof, (ii) payment of regularly scheduled interest payments as and when due in respect of the Senior Second Lien Notes and Senior Subordinated Notes and (iii) payment of principal or accreted value of or interest on any Senior First Lien Note, Senior Second Lien Note or Senior Subordinated Note in connection with the incurrence of any Permitted Notes Refinancing Indebtedness in respect thereof (including payment of cash in respect of the Senior First Lien Notes as expressly contemplated by clause (b) of the definition of “2004 Notes Restatement”).

SECTION 6.10.  Transactions with Affiliates.  The Parent Borrower will not, and will not permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates (including any Subsidiary), except (a) transactions in the ordinary course of business that are at prices and on terms and conditions not less favorable to the Parent Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties (as determined in good faith by members of the board of directors of the Parent Borrower having a majority of the voting power held by all disinterested members of the board of directors of the Parent Borrower), (b) transactions between or among the Loan Parties and not involving any other Affiliate (except to the extent the involvement with the other Affiliate otherwise complies with this Section 6.10), (c) any Restricted Payment permitted by Section 6.09, (d) transactions expressly contemplated by Schedule 6.10 and (e) the issuance of shares of the Series B Preferred Stock to “Eligible Persons” pursuant to the terms of the 2004 Restricted Stock Incentive Plan of the Parent Borrower, to the extent such issuance has been approved in good faith by members of the board of directors of the Parent Borrower having a majority of the voting power held by all disinterested members of the board of directors of the Parent Borrower.

SECTION 6.11.  Restrictive Agreements.  The Parent Borrower will not and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Parent Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests (it being understood that the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on capital stock) or to make or repay loans or advances to the Parent Borrower or any other Subsidiary (it being understood that the subordination of loans or advances made to the Parent Borrower or any Subsidiary to other Indebtedness incurred by the Parent Borrower or such Subsidiary shall not be deemed a restriction on the ability to make loans or advances) or to Guarantee Indebtedness of the Parent Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by

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any Loan Document, (ii) the foregoing shall not apply to restrictions and conditions existing on the Effective Date identified on Schedule 6.11, (iii) the foregoing shall not apply to any restriction or condition with respect to a Subsidiary pursuant to an agreement relating to any Equity Interests or Indebtedness of such Subsidiary, in each case incurred by such Subsidiary prior to the date on which such Subsidiary was acquired by the Parent Borrower (other than Equity Interests or Indebtedness incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was otherwise acquired by the Parent Borrower) and outstanding on such date; (iv) the foregoing shall not apply to any restriction or condition pursuant to an agreement refinancing an agreement referred to in clause (i), (ii) or (iii) or this clause (iv) or contained in any amendment to an agreement referred to in clause (i), (ii) or (iii) or this clause (iv); provided, however, that the conditions and restrictions contained in any such refinancing agreement or amendment are no more restrictive, taken as a whole, than the encumbrances and restrictions contained in the applicable predecessor agreement; (v) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or assets pending such sale; provided such restrictions and conditions apply only to the Subsidiary or assets that are to be sold and such sale is permitted hereunder, (vi) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness or other secured obligations permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness or other obligations, (vii) clause (a) of the foregoing shall not apply to customary provisions in contracts restricting the assignment thereof, or the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract; (viii) the foregoing shall not apply to restrictions imposed by any agreement relating to Indebtedness of a Foreign Subsidiary (other than a Foreign Subsidiary that is a Loan Party) that applies only to such Foreign Subsidiary and its assets (including its subsidiaries); (ix) the foregoing shall not apply to customary provisions in Joint Venture agreements and other similar agreements entered into in the ordinary course of business; (x) the foregoing shall not apply to net worth provisions in lease and other agreements entered into by the Parent Borrower or any Subsidiary in the ordinary course of business; and (xi) the foregoing shall not apply to restrictions imposed by the Senior First Lien Note Documents, the Senior Second Lien Note Documents and the Senior Subordinated Note Documents.

SECTION 6.12.  Amendment of Material Documents.  The Parent Borrower will not, and will not permit any Subsidiary to, amend, modify or waive any of its rights under (a) its certificate of incorporation, by-laws or other organizational documents, including the terms related to the Existing Preferred Stock (other than amendments and modifications that are not adverse to the interests of the Lenders and do not impair the exercise of remedies under any Security Document or the Intercreditor Agreement) or (b) the Senior First Lien Note Documents, the Senior Second Lien Note Documents or the Senior Subordinated Note Documents (other than amendments to the Senior First Lien Security Documents or the Senior Second Lien Security Documents permitted by the Intercreditor Agreement, amendments to the Senior First Lien Note Documents in respect of the 2004 Notes that are expressly contemplated by the 2004 Notes Restatement and other amendments and modifications that are not adverse to the interests of the Lenders and do not impair the exercise of remedies under any Security Document or the Intercreditor Agreement).

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SECTION 6.13.  Designated Senior Debt.  The Parent Borrower shall not designate any Indebtedness (other than indebtedness under the Loan Documents, indebtedness in respect of the Senior First Lien Notes incurred in compliance with Section 6.01(vi) and indebtedness in respect of the Senior Second Lien Notes incurred in compliance with Section 6.01(x)) as “Designated Senior Debt” for purposes of and as defined in the Senior Subordinated Note Documents.

SECTION 6.14.  Cash Held by Foreign Subsidiaries.  The Parent Borrower will not permit at any time on any day (a) the aggregate amount of “cash and cash equivalents” and “marketable securities” of the Foreign Subsidiaries (other than Foreign Subsidiaries that are Loan Parties), in each case that would be required to be reflected on a consolidated balance sheet of the Parent Borrower and the Subsidiaries prepared as of such time in accordance with GAAP, minus (b) the aggregate amount of payments in such cash and cash equivalents that the Parent Borrower reasonably and in good faith determines will be made by the Foreign Subsidiaries that are not Loan Parties (and will reduce such cash and cash equivalents) on such day to exceed $10,000,000.

SECTION 6.15.  ERISA.  The Parent Borrower will not, and will not permit any Subsidiary to, cause or permit any ERISA Affiliate to, cause or permit to occur (i) an event that could result in the imposition of a Lien under Section 412 of the Code or Section 302 or 4068 of ERISA or (ii) an ERISA Event to the extent such ERISA Event would reasonably be expected to result in taxes, penalties and other liabilities in an aggregate amount in excess of $250,000 in the aggregate.

SECTION 6.16.  Cancellation of Indebtedness.  The Parent Borrower will not, and will not permit any Subsidiary to, cancel any claim or debt owing to it, except for reasonable consideration negotiated on an arm’s length basis and in the ordinary course of its business consistent with past practices.

SECTION 6.17.  Change in Fiscal Year; Accounting Policies.  The Parent Borrower will not, and will not permit any Subsidiary to, change its fiscal year from a year ending December 31 unless required by law, in which case such Loan Party will give the Administrative Agent at least thirty (30) days prior written notice thereof.  Subject to Section 1.04, the Parent Borrower will not, and will not permit any Subsidiary to, change its accounting policies from those used to prepare the financial statements delivered pursuant to Section 4.01(i) without the prior written consent of the Administrative Agent

SECTION 6.18.  Financial Covenants.  The Parent Borrower shall have at the end of each fiscal month set forth below, a Fixed Charge Coverage Ratio for the 12-month period then ended of not less than:

Fiscal Month Ending	Minimum Fixed Charge Coverage Ratio
December 31, 2005	0.78:1.00
January 31, 2006	0.75:1.00
February 28, 2006	0.74:1.00
March 31, 2006	0.74:1.00
April 30, 2006	0.74:1.00

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May 31, 2006	0.76:1.00
June 30, 2006	0.90:1.00
July 31, 2006	0.94:1.00
August 31, 2006	0.96:1.00
September 30, 2006	0.96:1.00
October 31, 2006	1.00:1.00
November 30, 2006	1.02:1.00
December 31, 2006	1.09:1.00
each fiscal month thereafter	1.10:1.00

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SECTION 6.19.  No Additional Deposit Accounts.  No Loan Party shall open, maintain or otherwise have any deposit accounts at any bank or other financial institution, or any other account where money is or may be deposited or maintained with any Person, other than (a) the accounts set forth on Schedule 6.19, each of which shall (i) on the Effective Date, be subject to a deposit account control agreement in form and substance reasonably satisfactory to the Collateral Agent or (ii) (A) within 30 days of the Effective Date (subject to extension as provided in Section 4.02(c)), be subject to a deposit account control agreement in form and substance reasonably satisfactory to the Collateral Agent, and (B) until such time as a deposit account control agreement has been executed by the relevant Loan Party pursuant to Section 4.02(c), the applicable Depository Bank and the Collateral Agent, shall not at any time have (1) with respect to account number 5800949322 in the name of the Parent Borrower at LaSalle, a balance in such account which exceeds $100,000 and (2) with respect to account number 92312-0001414 in the name of the Canadian Borrower at BONS, a balance in such account which exceeds $100,000, (b) deposit accounts established after the Effective Date that are subject to a deposit account control agreement, in form and substance reasonably satisfactory to the Collateral Agent, (c) other deposit accounts established solely as payroll and other zero balance accounts.

SECTION 6.20.  Pliant Investment, Inc. and Alliant Company LLC.  (a) Pliant Investment, Inc. shall not hold any assets other than the membership interest of Alliant Company LLC and may not have any liabilities other than (i) if Pliant Investment, Inc. becomes a Borrower or a Guarantor pursuant Section 5.12, the liabilities under the Loan Documents and (ii) tax and routine administrative liabilities in the ordinary course of business and (b) Alliant Company LLC shall not hold any assets and may not have any liabilities other than (i) tax and routine administrative liabilities in the ordinary course of business and (ii) assets and liabilities related to the indemnity escrow established in connection with the sale of its assets; provided, that to the extent Alliant Company LLC receives and recovery from such indemnity escrow, such proceeds shall be promptly transferred to the Parent Borrower.

ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a)  any Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become

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due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b)  any Borrower shall fail to (i) pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, or (ii) fail to deliver any Borrowing Base Certificate required to be delivered pursuant to the terms of this Agreement, and, in the case of clause (ii), such failure shall continue unremedied for a period of three Business Days;

(c)  any representation or warranty made or deemed made by or on behalf of the Parent Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall have been incorrect in any material respect when made or deemed made;

(d)  any Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 4.02, 5.02, 5.04 (with respect to the existence of such Borrower) or 5.11 or in Article VI;

(e)  any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and if such failure is capable of being cured, such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Parent Borrower (which notice will be given at the request of any Lender);

(f)  the Parent Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable, including any applicable grace period;

(g)  any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale, transfer or other disposition (including as a result of a casualty or condemnation event) of the property or assets securing such Indebtedness in a manner not prohibited by this Agreement;

(h)  an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Parent Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent Borrower or any Subsidiary or for a substantial part of its assets, and, in any such

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case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i)  the Parent Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any proceeding described in clause (h) of this Article, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j)  the Parent Borrower or any Subsidiary (other than Immaterial Subsidiaries) shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k)  one or more judgments for the payment of money in an aggregate amount in excess of $5,000,000 (net of amounts covered by insurance as to which the insurer has not denied liability) shall be rendered against the Parent Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Parent Borrower or any Subsidiary to enforce any such judgment;

(l)  an ERISA Event shall have occurred that, in the reasonable opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Parent Borrower and the Subsidiaries in an aggregate amount exceeding (i) $7,000,000 in any year or (ii) $10,000,000 for all periods;

(m)  (i) any Loan Document shall for any reason be asserted by the Parent Borrower or any of the Subsidiaries (or, in the case of the Intercreditor Agreement, any of the other parties thereto) not to be a legal, valid and binding obligation of any party thereto, (ii) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, with the priority required by the Loan Documents, except (A) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents, (B) as a result of (1) the Collateral Agent’s failure to take any action reasonably requested by the Parent Borrower in order to maintain a valid and perfected Lien on any Collateral or (2) any action taken by the Collateral Agent to release any Lien on any Collateral or (C) Liens on any item of Collateral with a fair market value not exceeding $500,000, (iii) the Guarantees pursuant to the Guarantee Agreements by the Loan Parties of any of the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof), or shall be asserted by any Loan Party not to be in effect or not to be legal, valid and binding obligations, (iv) the Obligations of any Borrower or the Guarantees thereof by the Loan Parties pursuant to the Security Documents, shall cease to constitute “Senior Indebtedness” under the subordination provisions of the Senior

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Subordinated Note Documents, or such subordination provisions shall be invalidated or otherwise cease, or shall be asserted by any Loan Party to be invalid or to cease, to be legal, valid and binding obligations of the parties thereto or (v) the Intercreditor Agreement shall cease to be a legal, valid and binding agreement of the parties thereto;

(n)  a Change in Control shall occur; or

(o)  any information contained in any Borrowing Base Certificate is untrue or incorrect in any respect (other than (i) inadvertent, immaterial errors not exceeding $250,000 in the aggregate in any Borrowing Base Certificate) and (ii) errors understating the Borrowing Bases);

then, and in every such event (other than an event with respect to any Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders (or such other Lenders as and when provided in the Security Documents) shall, by notice to the Parent Borrower, take either or both of the following actions, at the same or different times:  (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable (the “remaining Loans”) may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations (other than any remaining Loans) of each Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower; and in case of any event with respect to any Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of each Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower. If any Event of Default has occurred and is continuing under clause (a) or (b) of this Article then the Administrative Agent shall, or if any other Event of Default has occurred and is continuing, the Administrative Agent may (and at the written request of the Required Lenders shall), increase the rate of interest applicable to the Loans and any fee or other amount payable by any Borrower hereunder to the rate set forth in Section 2.12(d).

ARTICLE VIII

The Agents

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto.

The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as

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though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Parent Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents.  Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circum­stances as provided in Section 10.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Parent Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity.  The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own gross negligence or willful misconduct.  The Administrative Agent shall not be deemed to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Parent Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforce­ability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon.  The Administrative Agent may consult with legal counsel (who may be counsel for any of the Borrowers), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent.  The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties.  The exculpatory

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provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor to the Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the other Agents, the Lenders, the Issuing Bank and the Parent Borrower.  Upon any such resignation, the Required Lenders shall have the right, with the consent of the Parent Borrower (such consent not to be unreasonably withheld), to appoint a successor.  If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent that shall be a bank with an office in New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Parent Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Parent Borrower and such successor.  After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder.

The provisions of this Article shall apply to the Collateral Agent, the Domestic A Agent and the Domestic B Agent as though named herein as the Administrative Agent.    Notwithstanding any other provision contained herein, neither Arranger shall, in its capacity as such, have any responsibilities under this Agreement or the other Loan Documents.

ARTICLE IX

Collection Allocation Mechanism

SECTION 9.01.  Implementation of CAM.  (a)  On the CAM Exchange Date, (i) the Commitments shall automatically and without further act be terminated as provided in Article VII, (ii) each Domestic A Lender shall immediately be deemed to have acquired (and shall promptly make payment therefor to the Administrative Agent in accordance with

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Section 2.04(c)) participations in the Swingline Loans in an amount equal to such Lender’s ratable share (based on the respective Domestic A Commitments of the Lenders immediately prior to the CAM Exchange Date) of each Swingline Loan outstanding on such date and (iii) the Lenders shall automatically and without further act (and without regard to the provisions of Section 10.04) be deemed to have exchanged interests in the Loans (other than the Swingline Loans) and, in the case of a Domestic A Lender or Canadian Lender, participations in Swingline Loans and Letters of Credit, such that in lieu of the interest of each Lender in each Loan and, as applicable, Letter of Credit in which it shall participate as of such date (including the Obligations of each Loan Party in respect of each such Loan and Letter of Credit), such Lender shall hold an interest in every one of the Loans (other than the Swingline Loans) and, in the case of a Domestic A Lender or Canadian Lender, a participation in every one of the Swingline Loans and Letters of Credit (including the Obligations of each Loan Party in respect of each such Loan and each Reserve Account established pursuant to Section 9.02), whether or not such Lender shall previously have participated therein, equal to such Lender’s CAM Percentage thereof.  Each Lender and each Loan Party hereby consents and agrees to the CAM Exchange, and each Lender agrees that the CAM Exchange shall be binding upon its successors and assigns and any person that acquires a participation in its interests in any Loan.  Each Loan Party agrees from time to time to execute and deliver to the Administrative Agent all such promissory notes and other instruments and documents as the Administrative Agent shall reasonably request to evidence and confirm the respective interests of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally received by it in connection with its Loans hereunder to the Administrative Agent against delivery of any promissory notes evidencing its interests in the Loans so executed and delivered; provided, however, that the failure of any Loan Party to execute or deliver or of any Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange.

(b)  As a result of the CAM Exchange, upon and after the CAM Exchange Date, each payment received by any Agent pursuant to any Loan Document in respect of the Obligations, and each distribution made by the Collateral Agent pursuant to any Security Document in respect of the Obligations, shall, subject to the terms of the Intercreditor Agreement, be distributed to the Lenders pro rata in accordance with their respective CAM Percentages.  Any direct payment received by a Lender upon or after the CAM Exchange Date, including by way of set-off, in respect of an Obligation shall be paid over to the Administrative Agent for distribution to the Lenders in accordance herewith.

SECTION 9.02.  Letters of Credit.  (a)  In the event that on the CAM Exchange Date any Letter of Credit shall be outstanding and undrawn in whole or in part, or any LC Disbursement shall not have been reimbursed either by the Parent Borrower or with the proceeds of a Revolving Borrowing or Swingline Loan, each Domestic A Lender shall promptly pay over to the Administrative Agent, in immediately available funds, an amount in dollars equal to such Domestic A Lender’s Applicable Percentage of such undrawn face amount or (to the extent it has not already done so) such unreimbursed drawing, as applicable, together with interest thereon from the CAM Exchange Date to the date on which such amount shall be paid to the Administrative Agent at the rate that would be applicable at the time to an ABR Revolving Loan in a principal amount equal to such undrawn face amount or unreimbursed drawing, as applicable.  The Administrative Agent shall establish a separate account (each, a “Reserve Account”) or accounts for each Lender for the amounts received with respect to each such Letter

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of Credit pursuant to the preceding sentence.  The Administrative Agent shall deposit in each Domestic A Lender’s and Canadian Lender’s Reserve Account such Lender’s CAM Percentage of the amounts received from the Lenders as provided above.  The Administrative Agent shall have sole dominion and control over each Reserve Account, and the amounts deposited in each Reserve Account shall be held in such Reserve Account until withdrawn as provided in paragraph (b), (c), (d) or (e) below.  The Administrative Agent shall maintain records enabling it to determine the amounts paid over to it and deposited in the Reserve Accounts in respect of each Letter of Credit and the amounts on deposit in respect of each Letter of Credit attributable to each Lender’s CAM Percentage.  The amounts held in each Lender’s Reserve Account shall be held as a reserve against the LC Exposures, shall be the property of such Lender, shall not constitute Loans to or give rise to any claim of or against any Loan Party and shall not give rise to any obligation on the part of any Borrower to pay interest to such Lender, it being agreed that the reimbursement obligations in respect of Letters of Credit shall arise only at such times as drawings are made thereunder, as provided in Section 2.05.

(b)  In the event that after the CAM Exchange Date any drawing shall be made in respect of a Letter of Credit, the Administrative Agent shall, at the request of the applicable Issuing Bank, withdraw from the Reserve Account of each Domestic A Lender and Canadian Lender any amounts, up to the amount of such Lender’s CAM Percentage of such drawing or payment, deposited in respect of such Letter of Credit and remaining on deposit and deliver such amounts to such Issuing Bank in satisfaction of the reimbursement obligations of the Lenders under Section 2.05(d) (but not of the Parent Borrower under Section 2.05(e)).  In the event that any Domestic A Lender or Canadian Lender shall default on its obligation to pay over any amount to the Administrative Agent as provided in this Section 9.02, the applicable Issuing Bank shall have a claim against such Lender to the same extent as if such Lender had defaulted on its obligations under Section 2.05(d), but shall have no claim against any other Lender in respect of such defaulted amount, notwithstanding the exchange of interests in the Parent Borrower’s reimbursement obligations pursuant to Section 9.01.  Each other Domestic A Lender and Canadian Lender shall have a claim against such defaulting Lender for any damages sustained by it as a result of such default, including, in the event that such Letter of Credit shall expire undrawn, its CAM Percentage of the defaulted amount.

(c)  In the event that after the CAM Exchange Date any Letter of Credit shall expire undrawn, the Administrative Agent shall withdraw from the Reserve Account of each Domestic A Lender and Canadian Lender the amount remaining on deposit therein in respect of such Letter of Credit and distribute such amount to such Lender.

(d)  With the prior written approval of the Administrative Agent (not to be unreasonably withheld), any Domestic A Lender or Canadian Lender may withdraw the amount held in its Reserve Account in respect of the undrawn amount of any Letter of Credit.  Any Domestic A Lender or Canadian Lender making such a withdrawal shall be unconditionally obligated, in the event there shall subsequently be a drawing under such Letter of Credit, to pay over to the Administrative Agent, for the account of the applicable Issuing Bank, on demand, its CAM Percentage of such drawing or payment.

(e)  Pending the withdrawal by any Domestic A Lender or Canadian Lender of any amounts from its Reserve Account as contemplated by the above paragraphs, the

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Administrative Agent will, at the direction of such Lender and subject to such rules as the Administrative Agent may prescribe for the avoidance of inconvenience, invest such amounts in Permitted Investments.  Each Domestic A Lender or Canadian Lender that has not withdrawn its amounts in its Reserve Account as provided in paragraph (d) above shall have the right, at intervals reasonably specified by the Administrative Agent, to withdraw the earnings on investments so made by the Administrative Agent with amounts in its Reserve Account and to retain such earnings for its own account.

ARTICLE X

Miscellaneous

SECTION 10.01.  Notices.  (a)  Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(i) if to any Borrower, to the Parent Borrower at 1475 Woodfield Road, Suite 700, Schaumberg, Illinois 60173, Attention: Chief Financial Officer (Telecopy No. (847) 969-3338), with a copy to Sidley, Austin, Brown & Wood LLP, Bank One Plaza, 10 South Dearborn Street, Chicago, Illinois 60603, Attention: Michael L. Gold, (Telecopy No. (312) 853-7036);

(ii) if to the Administrative Agent, the Collateral Agent, the Domestic A Agent or the Swingline Lender, to General Electric Capital Corporation, 500 West Monroe Street, Chicago, Illinois 60661, Attention: Account Manager - Pliant Corporation (Telecopy No. (312) 463-3840), with copies to General Electric Capital Corporation, 201 Merritt 7, Norwalk, Connecticut 06856, Attention: Corporate Counsel — Commercial Finance (Telecopy No. (203) 956-4001) and Paul, Hastings, Janofsky & Walker LLP, 600 Peachtree Street, Suite 2400, Atlanta, Georgia 30308, Attention: Jesse H. Austin, III (Telecopy No. (404) 815-2424);

(iii) if to the Issuing Bank, c/o General Electric Capital Corporation, 500 West Monroe Street, Chicago, Illinois 60661, Attention: Account Manager - Pliant Corporation (Telecopy No. (312) 463-3840), with a copy to General Electric Capital Corporation, 201 Merritt 7, Norwalk, Connecticut 06856, Attention: Corporate Counsel — Commercial Finance (Telecopy No. (203) 956-4001);

(iv) if to the Domestic B Agent, to Morgan Stanley Senior Funding, Inc., 1585 Broadway, New York, New York 10036, Attention: Jason Colodne (Telecopy No.  (212) 507-3444), with a copy to Sullivan & Cromwell LLP, 125 Broad Street, New York, New York 10004, Attention: Erik D. Lindauer (Telecopy No. (212) 558-3588); and

(v) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b)  Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the

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Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender or Issuing Bank.  The Administrative Agent or the Parent Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c)  Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.  All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 10.02.  Waivers; Amendments.  (a)  No failure or delay by any Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.  The rights and remedies of Agents, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  Without limiting the generality of the foregoing, the making of a Loan or issuance or a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.

(b)  Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Parent Borrower and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent or Collateral Agent, as applicable, and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall have the effect of:

(i)  increasing the Commitment of any Lender without the consent of each Lender (provided that the Administrative Agent may make Protective Advances as set forth in Section 2.15);

(ii) reducing the principal amount of any Loan or LC Disbursement or reducing the rate of interest thereon, or reducing any fees payable hereunder, without the written consent of each Lender affected thereby and the Agents;

(iii) postponing the maturity of any Loan, or any scheduled date of payment of the principal amount of any Loan, or the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest thereon, or any fees payable hereunder, or reducing the amount of, waiving or excusing any such payment, or

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postponing the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby and the Agents;

(iv) changing Section 2.17(b), (c) or (d) in a manner that would alter the way that payments are shared, without the written consent of each Lender;

(v) changing any of the provisions of this Section or the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class, including as contemplated by the term “Required Domestic A Lenders”, “Required Domestic B Lenders” or the term “Required Canadian Lenders”) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be);

(vi) releasing any Loan Party from its Guarantee under any Guarantee Agreement (except with respect to the dissolution, consolidation or merger of such Guarantor in accordance with the terms of Section 6.04 or as expressly provided in the applicable Guarantee Agreement), or limiting its liability in respect of such Guarantee, without the written consent of each Lender; provided, however, that if the Required Lenders have approved the sale of the Equity Interests of such Loan Party, the consent of the Required Lenders (and not each Lender) shall be required for such release;

(vii) releasing all or substantially all the Collateral from the Liens of the Security Documents (except as expressly provided therein or required by the Intercreditor Agreement), without the written consent of each Lender;

(viii) changing any provision of any Loan Document to permit the Parent Borrower or any of the Subsidiaries to enter into any accounts receivable or inventory securitization transaction or other similar financing arrangement, including any sale of, or any grant of a security interest in, accounts receivable or inventory in connection with any asset securitization or other similar financing arrangement, without the written consent of Lenders having Commitments representing in the aggregate more than 66-²/₃% of the total amount of the Commitments at such time;

(ix) changing any provision of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class;

(x) amending, modifying or otherwise altering the eligibility standards, advance rates or reserves used in determining the Borrowing Bases in a manner that would increase the amount of the Borrowing Bases, without the written consent of the Agents and Required Lenders;

(xi) amending, modifying or otherwise altering the definition of “Fixed Charge Coverage Ratio” or the amounts set forth in Section 6.18, without the written consent of the Agents and Required Lenders;

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(xii) amending, modifying or otherwise altering Section 4.03 or waiving compliance with Section 4.03(a) (with respect to the representation and warranty that the Borrowing Base Certificate is true, correct and complete), (b), (c) or (d), without the written consent of the Agents and Required Lenders (provided that the Administrative Agent may make Protective Advances as set forth in Section 2.15);

(xiii) amending, modifying or otherwise altering Section 6.03, 6.04, 6.09, 6.12(b), or 6.13, or 6.19 or the requirement the Collateral Agent have full dominion over the Loan Parties’ accounts, without the written consent of the Agents and Required Lenders;

(xiv) releasing, substituting, modifying or altering the Liens of the Security Documents (except as expressly provided therein on the Effective Date or required by the Intercreditor Agreement) on (1) Accounts or Inventory of the Loan Parties not sold or disposed of in the ordinary course of business, (2) the Pledged Stock (as defined in the Security Agreements) or (3) cash in the Collateral Proceeds Account, in each case, without the written consent of the Agents and the Required Lenders; or

(xv) amending, modifying, waiving or otherwise altering Article XII, without the written consent of the Required Domestic B Lenders; and

provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent, the Issuing Bank or the Swingline Lender without the prior written consent of such Agent, the Issuing Bank or the Swingline Lender, as the case may be.

(c)  If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then so long as no Agent is a Non-Consenting Lender, the Administrative Agent may elect to replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Parent Borrower and the Administrative Agent shall agree, as of such date, to purchase for cash the Loans and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 10.04, and (ii) the Borrowers shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Sections 2.14 and 2.16, and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 2.15 had the Loans of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.

SECTION 10.03.  Expenses; Indemnity; Damage Waiver; Joint and Several Obligations.  (a)  The Borrowers shall pay (i) all reasonable out-of-pocket expenses incurred by

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the Agents, the Arrangers and their respective Affiliates (other than the Sponsor or any Person Controlled by the Sponsor), including the reasonable fees, charges and disbursements of counsel for the Agents and the Arrangers, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reason­able out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Agents, the Issuing Bank, the Arrangers or any Lender, including the fees, charges and disbursements of any counsel for the Agents, the Issuing Bank, the Arrangers or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b)  The Borrowers shall indemnify each Agent, the Issuing Bank, each Arranger and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any Mortgaged Property or any other property currently or formerly owned or operated by the Parent Borrower or any of the Subsidiaries, or any Environmental Liability related in any way to the Parent Borrower or any of the Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or any Affiliate of such Indemnitee (or of any officer, director, employee, advisor or agent of such Indemnitee or any such Indemnitee’s Affiliates) or to the extent such damages constitute special, indirect or consequential damages (as opposed to direct or actual damages).

(c)  To the extent that the Borrowers fail to pay any amount required to be paid by it to any Agent, the Issuing Bank, either Arranger or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to such Agent, the Issuing Bank, such Arranger or the Swingline Lender, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage,

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liability or related expense, as the case may be, was incurred by or asserted against such Agent, the Issuing Bank or the Swingline Lender in its capacity as such; and provided, further, that no Domestic B Lender shall have any reimbursement or indemnity obligations in respect of any of the Issuing Bank, the Swingline Lender or the Domestic A Agent in their capacities as such.  For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the sum of the total Revolving Exposures and unused Commitments at the time.

(d)  To the extent permitted by applicable law, the Borrowers shall not assert, and each of them hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

(e)  All amounts due under this Section shall be payable promptly after written demand therefor.  Each Borrower shall be jointly liable for all expense reimbursement and indemnification obligations under this Section 10.03, and all other Obligations of the Borrowers under this Agreement.

SECTION 10.04.  Successors and Assigns.  (a)  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Issuing Bank, the Arrangers and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)  (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

(A) the Parent Borrower; provided that no consent of the Parent Borrower shall be required (1) for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or (2) if an Event of Default has occurred and is continuing;

(B) the Administrative Agent or, in the case of any assignment of Domestic B Commitments or Domestic B Loans, the Domestic B Agent; and

(C) with respect to any assignment of a Domestic A Commitment or a Domestic A Revolving Loan, the Swingline Lender.

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(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000 unless each of the Parent Borrower and the Administrative Agent otherwise consents; provided that no such consent of the Parent Borrower shall be required if an Event of Default has occurred and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, except that this clause (B) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;

(C) the parties to each such assignment relating to the assignment of any Domestic A Commitments, Domestic A Revolving Loans, Canadian Commitments or Canadian Revolving Loans shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500;

(D) the assignee, if it shall not be a Lender, shall (1) deliver to the Administrative Agent an Administrative Questionnaire and all applicable tax documentation and (2) in the event of an assignment of Canadian Commitments and Canadian Revolving Loans, notify the Administrative Agent of such assignee’s Canadian Lending Office and US Lending Office; and

(E) such assignee shall have consented to the GECC-Led Dip Agreement.

For the purposes of this Section 10.04(b), the term “Approved Fund” has the following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered, managed or controlled by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers, manages or controls a Lender.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption

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covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 10.03).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

(iv) The Administrative Agent, acting for this purpose as an agent of the Parent Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Parent Borrower, each Domestic Subsidiary Borrower, the Canadian Subsidiary Borrower, the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Parent Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(v) Upon its receipt of a duly completed Assignment and Assumption and all applicable tax documentation executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in this Section and any written consent to such assignment required by this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register.  No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c)  (i)  Any Lender may, without the consent of any Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment of any Class and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) each Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clauses (i) through (vii) of the first proviso to Section 10.02(b) that affects such Participant.  Subject to paragraph (c)(ii) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment

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pursuant to paragraph (b) of this Section.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender; provided such Participant agrees to be subject to Section 2.17(d) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Parent Borrower’s prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless the Parent Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 2.16(e) as though it were a Lender.

(d)  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(e)  Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Parent Borrower, the option to provide to the Borrowers all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrowers pursuant to this Agreement; provided, however, that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof.  The making of a Loan by an SPC hereunder shall utilize the applicable Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender.  Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender).  In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof, or the laws of Canada or any province or territory thereof.  In addition, notwithstanding anything to the contrary contained in this Section 10.04, any SPC may (i) with notice to, but without the prior written consent of, the Parent Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Parent Borrower and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.

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SECTION 10.05.  Survival.  All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and not­with­standing that any Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.  The provisions of Sections 2.14, 2.15, 2.16, 10.03 and 10.13 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 10.06.  Counterparts; Integration; Effectiveness.  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, the other Loan Document and any separate letter agreements with respect to fees payable to the Agents, the Arrangers or the Issuing Bank constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and under­standings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counter­part of a signature page of this Agreement by telecopy or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 10.07.  Severability.  Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 10.08.  Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the obligations of the Borrowers now or hereafter existing under this Agreement or any other Loan Document held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations

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may be unmatured.  The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender may have.

SECTION 10.09.  Governing Law; Jurisdiction; Consent to Service of Process.  (a)  This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b)  Each of the Borrowers hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Borrower or its properties in the courts of any jurisdiction.

(c)  Each of the Borrowers hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d)  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01.  Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 10.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,

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AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 10.11.  Headings.  Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 10.12.  Confidentiality.  Each of the Agents, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ investment advisors, directors, officers, employees and agents, including accountants, legal counsel and other advisors (the “Representatives”) and any direct or indirect contractual counterparty in swap agreements entered into in connection with a Lender’s outstanding Loans from time to time or to such contractual counterparty’s professional advisor (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential and, in the case of any such contractual counterparty or its professional advisor, such persons shall agree in writing to be bound by the provisions of this Section 10.12), (b) to the extent requested or demanded by any Governmental Authority or any self-regulatory organization (including the National Association of Insurance Commissioners or other similar organization), (c) to the extent required by applicable laws or regulations or by any subpoena, order or similar legal process; provided that, to the extent reasonably practicable and not prohibited by applicable laws or regulations or by any judicial or administrative order, such Person will provide the Parent Borrower with prior notice of such disclosure, (d) any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender, (e) to any other party to this Agreement, (f) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (g) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Parent Borrower and its obligations, (h) with the consent of the Parent Borrower or (i) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Parent Borrower, any Subsidiary or any of their Representatives that is not known to such Person to be subject to any obligation of confidentiality to the Parent Borrower or any Subsidiary.  For the purposes of this Section, “Information” means all information received from the Parent Borrower, any Subsidiary or any of their Representatives relating to the Parent Borrower, the Subsidiaries or their businesses, other than any such information that is available to any Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Parent Borrower or any Subsidiary.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

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SECTION 10.13.  Conversion of Currencies.  (a)  If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.

(b)  The obligations of the Borrowers in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than the currency in which such sum is stated to be due hereunder (the “Agreement Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, each of the Borrowers agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss.  The obligations of the Borrowers contained in this Section 10.13 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.

SECTION 10.14.  Interest Rate Limitation.  Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 10.15.  Reaffirmation.  This Agreement constitutes an amendment and restatement of the Existing Credit Agreement.  Each of the parties hereto acknowledges and agrees that the Obligations represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the obligations of the Borrowers under the Existing Credit Agreement.  Each of the Parties hereto further acknowledges and agrees that this Agreement supercedes and replaces the Existing Credit Agreement but does not extinguish the obligations thereunder and that by entering into and performing its obligations hereunder, this transaction shall not constitute a novation.  Each of the parties hereto further acknowledges and agrees that the security interests granted to Prior Collateral Agent for the benefit of itself and the parties entitled to the benefits of Existing Credit Agreement (including, without limitation, the Issuing Bank or the Administrative Agent, Collateral Agent, and each Lender party to the Existing Credit Agreement, and their respective successors and assigns) shall remain outstanding

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and in full force and effect in accordance with the terms hereof and the other Loan Documents and shall continue to secure the Obligations without interruption or impairment of any kind and all such security interests are hereby ratified, confirmed and continued.

ARTICLE XI

Cross-Guaranty, Subrogation, Contribution and Subordination

SECTION 11.01.  Cross-Guaranty.  Each Borrower hereby agrees that such Borrower is jointly and severally liable for, and hereby absolutely and unconditionally guarantees to the Agents and Lenders and their respective successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of, all Obligations owed or hereafter owing to the Agents and the Lenders by each other Borrower.  Each Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, that its obligations under this Article XI shall not be discharged until payment and performance, in full, of the Obligations has occurred, and that its obligations under this Article XI shall be absolute and unconditional, irrespective of, and unaffected by,

(a)  the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Loan Document or any other agreement, document or instrument to which any Borrower is or may become a party;

(b)  the absence of any action to enforce this Agreement (including this Article XI) or any other Loan Document or the waiver or consent by the Agents and the Lenders with respect to any of the provisions thereof;

(c)  the existence, value or condition of, or failure to perfect its Lien against, any security for the Obligations or any action, or the absence of any action, by the Agents and Lenders in respect thereof (including the release of any such security);

(d)  the insolvency of any Loan Party; or

(e)  any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor.

Each Borrower shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder.

SECTION 11.02.  Waivers by the Borrowers.  Each Borrower expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel the Agents or the Lenders to marshal assets or to proceed in respect of the Obligations guaranteed hereunder against any other Loan Party, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Borrower.  It is agreed among each Borrower, the Agents and the Lenders that the foregoing waivers are of the essence of the transaction contemplated by this Agreement and the other Loan Documents and that, but for the

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provisions of this Article XI and such waivers, the Agents and the Lenders would decline to enter into this Agreement.

SECTION 11.03.  Benefit of Guaranty.  Each Borrower agrees that the provisions of this Article XI are for the benefit of the Agents and Lenders and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Borrower and the Agents or the Lenders, the obligations of such other Borrower under the Loan Documents.

SECTION 11.04.  Waiver of Subrogation, Etc.  Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, and except as set forth in Section 11.07, each Borrower hereby expressly and irrevocably waives any and all rights at law or in equity to subrogation, reimbursement,  exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor.  Each Borrower acknowledges and agrees that this waiver is intended to benefit the Agents and the Lenders and shall not limit or otherwise affect such Borrower’s liability hereunder or the enforceability of this Article XI, and that the Agents, the Lenders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 11.04.

SECTION 11.05.  Election of Remedies.  If any Agent or any Lender may, under applicable law, proceed to realize its benefits under any of the Loan Documents giving such Agent or such Lender a Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non judicial sale or enforcement, any Agent or any Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Article XI.  If, in the exercise of any of its rights and remedies, any Agent or any Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Borrower or any other Person, whether because of any applicable laws pertaining to “election of remedies” or the like, each Borrower hereby consents to such action by such Agent or such Lender and waives any claim based upon such action, even if such action by such Agent or such Lender shall result in a full or partial loss of any rights of subrogation that each Borrower might otherwise have had but for such action by such Agent or such Lender.  Any election of remedies that results in the denial or impairment of the right of any Agent or any Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower’s obligation to pay the full amount of the Obligations.  In the event any Agent or any Lender shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law or the Loan Documents, such Agent or such Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by such Agent or such Lender but shall be credited against the Obligations.  The amount of the successful bid at any such sale, whether any Agent, any Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Article XI, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which any Agent or any Lender might otherwise be entitled but for such bidding at any such sale.

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SECTION 11.06.  Limitation.  Notwithstanding any provision herein contained to the contrary, each Borrower’s liability under this Article XI (which liability is in any event in addition to amounts for which such Borrower is primarily liable under Article II) shall be limited to an amount not to exceed as of any date of determination the greater of:

(a)  the net amount of all Loans advanced to any other Borrower under this Agreement and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower; and

(b)  the amount that could be claimed by the Agents and the Lenders from such Borrower under this Article XI without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, such Borrower’s right of contribution and indemnification from each other Borrower under Section 11.07.

SECTION 11.07.  Contribution with Respect to Guaranty Obligations.

(a)  To the extent that any Borrower shall make a payment under this Article XI of all or any of the Obligations (other than Loans made to that Borrower for which it is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments then previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payment in the same proportion that such Borrower’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Borrowers as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Obligations and termination of the Commitments, such Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.

(b)  As of any date of determination, the “Allocable Amount” of any Borrower shall be equal to the maximum amount of the claim that could then be recovered from such Borrower under this Article XI without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.

(c)  This Section 11.07 is intended only to define the relative rights of the Borrowers and nothing set forth in this Section 11.07 is intended to or shall impair the obligations of the Borrowers, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including Section 11.01.  Nothing contained in this Section 11.07 shall limit the liability of any Borrower to pay the Loans made directly or indirectly to that Borrower and accrued interest, fees and expenses with respect thereto for which such Borrower shall be primarily liable.

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(d)  The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Borrower to which such contribution and indemnification is owing.

(e)  The rights of the indemnifying Borrowers against other Loan Parties under this Section 11.07 shall be exercisable upon the full and indefeasible payment of the Obligations and the termination of the Commitments.

SECTION 11.08.  Liability Cumulative.  The liability of the Borrowers under this Article XI is in addition to and shall be cumulative with all liabilities of each Borrower to the Agents and the Lenders under this Agreement and the other Loan Documents to which such Borrower is a party or in respect of any Obligations or obligation of the other Borrower, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.

SECTION 11.09.  Subordination.

(a)  Each Loan Party covenants and agrees that the payment of any indebtedness and all obligations and liabilities owing by any Loan Party in favor of any other Loan Party, whether now existing or hereafter incurred (collectively, the “Intercompany Obligations”) is subordinated, to the extent and in the manner provided in this Section 11.09, to the prior payment in full of all Obligations owed or hereafter owing to the Agents and the Lenders by the Borrowers and that such subordination is for the benefit of the Agents for themselves and the Lenders.

(b)  Each Loan Party hereby (i) authorizes the Agents on behalf of the Lenders to demand specific performance of the terms of this Section 11.09 at any time when any Loan Party shall have failed to comply with any provisions of this Section 11.09 which are applicable to it and (ii) irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance.

(c)  Upon any distribution of assets of any Loan Party in any dissolution, winding up, liquidation or reorganization (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise):

(i) The Agents and Lenders shall first be entitled to receive payment in full in cash of the Obligations before any Loan Party is entitled to receive any payment on account of the Intercompany Obligations.

(ii) Any payment or distribution of assets of any Loan Party of any kind or character, whether in cash, property or securities, to which any other Loan Party would be entitled except for the provisions of this Section 11.09(c), shall be paid by the liquidating trustee or agent or other Person making such payment or distribution directly to the Administrative Agent for the benefit of the Lenders in the manner set forth herein, to the extent necessary to make payment in full of all Obligations remaining unpaid after giving effect to any concurrent payment or distribution or provisions therefor to the Administrative Agent for itself and Lenders.

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(iii) In the event that notwithstanding the foregoing provisions of this Section 11.09(c), any payment or distribution of assets of any Loan Party of any kind or character, whether in cash, property or securities, shall be received by any other Loan Party on account of any Intercompany Obligations before all Obligations are paid in full, such payment or distribution shall be received and held in trust for and shall be paid over to the Administrative Agent for itself and Lenders for application to the payment of the Obligations until all of the Obligations shall have been paid in full, after giving effect to any concurrent payment or distribution or provision therefor to the Administrative Agent for itself and Lenders.

(d)  No right of the Administrative Agent, any Lender or any other present or future holders of the Obligations to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Loan Party or by any act or failure to act, in good faith, by any Loan Party, or by any noncompliance by any Loan Party with the terms of the Intercompany Obligations, regardless of any knowledge thereof which any Loan Party may have or be otherwise charged with.

ARTICLE XII

Purchase Right and Certain Intercreditor and Agency Matters

SECTION 12.01.  Delay of Acceleration and Enforcement.  The Administrative Agent and each Lender (other than the Domestic B Lenders) agrees that it shall not declare any Loan to be due and payable or terminate any Commitment as a result of an Event of Default (other than as a result of an Event of Default described under Article VII(h) or (i)) unless (a) the Administrative Agent has received the prior written consent of Required B Lenders or (b) (i) the Administrative Agent has delivered to the Domestic B Agent written notice (a “Trigger Notice”) signed by Required Lenders stating the intention of the Required Lenders to declare the Loans immediately due and payable and/or to terminate Commitments, (ii) the Domestic B Agent has not delivered a Purchase Notice to the Administrative Agent on or prior to 5:00 New York City time on the fifth Business Day following the date of the Trigger Notice and (iii) all Loans are declared due and payable and all Commitments are terminated simultaneously.

SECTION 12.02.  Purchase Election of Domestic B Lenders.

(a)  At any time on or after the date of delivery of a Trigger Notice or the earlier acceleration of the Loans, the Required Domestic B Lenders shall have the right, exercisable by written notice to the Administrative Agent (a “Purchase Notice”), to purchase all, but not part, of the right, title and interest of each Domestic A Lender and each Canadian Lender (the “Sellers”) in the Loans, any Letter of Credit and the Loan Documents (the “Purchased Interests”).  The Purchase Notice shall specify the Domestic B Lenders that are committing to purchase the Purchased Interests (the “Purchasers”), the percentage portion of the Purchased Interests to be acquired by each Purchaser, and the date for consummation of the purchase (the “Settlement Date”), which shall be a Business Day not less than two nor more than five Business Days from the date of the Purchase Notice.

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(b)  The delivery of the Purchase Notice, together with this Agreement, shall constitute a contract of sale pursuant to which each Purchaser (severally but not jointly) agrees to acquire from the Sellers, and each Seller (severally but not jointly) agrees to sell to the Purchasers, the applicable Purchased Interests on the Settlement Date.  On the Settlement Date, as part of a simultaneous transaction:

(i) the Domestic B Agent, on behalf of the Purchasers, shall pay in cash to the Administrative Agent, on behalf of the Sellers, an amount equal to the sum, without duplication, of: (A) 100% of the outstanding balance of the Loans constituting the Purchased Interests then outstanding and unpaid, (B) 105% of the aggregate undrawn amount of Letters of Credit provided by any Domestic A Lender or Canadian Lender under the Loan Documents to be held as cash collateral for the LC Exposure, (C) all accrued and unpaid interest on the Loans constituting the Purchased Interests and (D) all accrued and unpaid expenses under the Loan Documents due and payable to the other Agents or the Domestic A Lenders or the Canadian Lenders (the sum of clauses (A), (B), (C) and (D) are referred to herein as the “Purchase Price”); and

(ii) each Seller shall deliver to each Purchaser a completed Assignment and Assumption and any other evidence of its right, title and interest in the Purchased Interests as such Purchaser may reasonably request;

(c)  The Purchase Price shall be remitted by wire transfer in federal funds to such account as the Administrative Agent shall designate in writing to the Domestic B Agent for such purpose.  Interest shall be calculated to but excluding the Business Day on which the Settlement Date occurs if the Purchase Price is received prior to 2:00 p.m., New York City time, and interest shall be calculated to and including the Settlement Date if the Purchase Price is received later than 2:00 p.m., New York City time.

(d)  The purchase under this Article XII shall be expressly made without representation or warranty of any kind by, and without recourse to, the Administrative Agent, the Collateral Agent, the Domestic A Agent, the Domestic A Lenders and the Canadian Lenders, except that each Domestic A Lender and Canadian Lender shall represent and warrant:  (i) as to the amount of the Purchased Interests being purchased from it, (ii) that such Lender owns its portion of the Purchased Interests so purchased free and clear of any Liens or encumbrances and (iii) such Lender has the right to assign such Purchased Interests and the assignment is duly authorized by such Lender free and clear of liens and adverse claims.

(e)  If Loans constituting part of the Purchased Interests are prepaid within 90 days of the Settlement Date and any Purchaser receives a Prepayment Fee, each such Purchaser agrees to pay to the Administrative Agent for the ratable benefit of the Sellers the amount of such Prepayment Fee within three Business Days after receipt thereof.

SECTION 12.03.  Rights After Purchase or Standstill.  Notwithstanding any contrary provision of any Loan Document, at all times on and after the delivery of a Purchase Notice:

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(a)  the Administrative Agent and Collateral Agent shall have no authority to take, and shall not take, any action that requires the consent of any Lender without the written consent of Required Domestic B Lenders;

(b)  where this Agreement or any Loan Document provides that Required Lenders have any right or power to direct, instruct, appoint, replace or remove the Administrative Agent and Collateral Agent, such right or power may be exercised by Required Domestic B Lenders in the place of Required Lenders to the same extent and subject to the same terms, qualifications and conditions; and

(c)  upon payment of the Purchase Price, either the Administrative Agent or the Collateral Agent may be removed and replaced (in respect of all or an appropriate portion of their respective duties) by written notice from Required Domestic B Lenders appointing a successor in accordance with Article VIII, and such successor (which may be a Required Domestic B Lender or any affiliate thereof) shall be entitled to all of the rights and benefits provided to the Administrative Agent or Collateral Agent, as applicable, under the Loan Documents.

SECTION 12.04.  Non-Discrimination by Agent.  In the performance of its duties and exercise of its discretion under the Loan Documents, the Administrative Agent and Collateral Agent will act in the interests of all Lenders and will not take any action that would reasonably be expected to have a disproportionate effect on the interests of any Lenders or any Class of Lenders in light of the terms of their Loans and the calculation of the Borrowing Base A and Borrowing Base B.

SECTION 12.05.  Intercreditor Agreement.  Notwithstanding any contrary provision of the Loan Documents, the Administrative Agent and Collateral Agent hereby agree that they will not agree to any amendment, modification, waiver or consent with respect to the Intercreditor Agreement without the prior written consent of Required Domestic B Lenders.

SECTION 12.06.  Further Assurances.  Each Loan Party, Lender and Agent agrees to take such actions and to execute such other or different writings as may be requested by the Required B Lenders as may be necessary to evidence, perfect and assure the Required B Lenders’ acquisition of the Purchased Interests, including all security interests relating thereto.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

BORROWERS:	PLIANT CORPORATION
	By:
		Name:
		Title:
	UNIPLAST HOLDINGS, INC.
	By:
		Name:
		Title:
	UNIPLAST U.S., INC.
	By:
		Name:
		Title:
	UNIPLAST INDUSTRIES CO.
	By:
		Name:
		Title:
	PLIANT PACKAGING OF CANADA, LLC
	By:
		Name:
		Title:

AMENDED AND RESTATED CREDIT AGREEMENT

S-1

AGENTS AND LENDERS:	GENERAL ELECTRIC CAPITAL
	CORPORATION, individually, as Domestic A
	Agent, Administrative Agent, Collateral Agent,
	Swingline Lender and as a Lender
	By:
			Name:
			Title:  Duly Authorized Signatory
	MORGAN STANLEY SENIOR FUNDING, INC.,
	individually, as Domestic B Agent and as a
	Lender
	By:
		Name:
		Title:
	GE CANADA FINANCE HOLDING COMPANY,
	as a Lender
	By:
		Name:
		Title:

S-2

EX-10.20

Exhibit 10.20

REAFFIRMATION AGREEMENT

REAFFIRMATION AGREEMENT dated as of November 21, 2005 (as it may be amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), among PLIANT CORPORATION, a Utah corporation (the “Parent Borrower”) and GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent (in such capacity, the “Collateral Agent”).

W I T N E S S E T H:

WHEREAS, Parent Borrower and the Domestic Subsidiary Borrowers (as defined in the Prior Credit Agreement described below) are parties to that certain Credit Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Credit Agreement”) among the Parent Borrower, Uniplast Industries Co., a Nova Scotia corporation (the “Canadian Subsidiary Borrower”), certain Domestic Subsidiary Borrowers party thereto, the Lenders party thereto (the “Prior Lenders”), Credit Suisse First Boston, acting through its Cayman Islands Branch, as Administrative Agent and Documentation Agent (the “Prior Administrative Agent”), Deutsche Bank Trust Company Americas, as Collateral Agent (the “Prior Collateral Agent”), General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent; and

WHEREAS, in connection with the Prior Credit Agreement, the Parent Borrower executed and delivered one or more Mortgages in favor of the Prior Collateral Agent (as amended, restated, supplemented or otherwise modified from time to time, the “Mortgages”) to secure the payment and performance of all obligations of the Loan Parties (as defined in the Prior Credit Agreement) under the Prior Credit Agreement and the other Loan Documents (as defined in the Prior Credit Agreement); and

WHEREAS, prior to the execution of this Agreement, the Prior Collateral Agent resigned as “Collateral Agent” under the Prior Credit Agreement, the Security Documents (as defined in the Prior Credit Agreement) and the other Loan Documents (as defined in the Prior Credit Agreement) and the Collateral Agent succeeded the Prior Collateral Agent as the “Collateral Agent” thereunder, all pursuant to that certain Consent and Amendment dated as of March 8, 2004 by and among the Prior Administrative Agent, the Prior Collateral Agent, the Collateral Agent, Deutsche Bank Trust Company Americas, as replaced Issuing Bank, LaSalle Business Credit, LLC, as replacement Issuing Bank, the Borrowers and the Prior Lenders; and

WHEREAS, the parties wish to amend and restate the Prior Credit Agreement in the form of that certain Amended and Restated Credit Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Parent Borrower, the Canadian Subsidiary Borrower, the Domestic Subsidiary Borrowers party thereto, the Lenders Party thereto, Morgan Stanley Senior Funding, Inc., as Domestic B Agent, the Collateral Agent and General Electric Capital Corporation, as Domestic A Agent and Administrative Agent.

ACCORDINGLY, in connection with the amendment and restatement of the Prior Credit Agreement, the parties hereto agree as follows:

1.             The Parent Borrower acknowledges that the Mortgages have been assigned to the Collateral Agent. The Mortgages executed by the Parent Borrower and the security interests created thereby given in favor of the Prior Collateral Agent in connection with the Prior Credit Agreement are, and shall remain, outstanding and in full force and effect without interruption or impairment of any kind, and shall secure and guarantee, and shall continue to secure and guarantee, the Obligations (as defined in the Credit Agreement) and all other obligations expressed to be secured by the Mortgages to which the Parent Borrower is a party.

2.             All Liens (as defined in the Prior Credit Agreement) created or evidenced by the Mortgages are hereby ratified, confirmed and continued.

3.             The Parent Borrower hereby acknowledges (i) that all references to the “Credit Agreement” contained in any of the Mortgages and other agreements to which it is a party shall be references to the Credit Agreement as defined herein, (ii) that all references to the “Administrative Agent” shall be references to the Administrative Agent as defined herein and (iii) that all references to the “Collateral Agent” shall be references to the Collateral Agent as defined herein.

4.             This Agreement may be executed in any number of counterparts, each of which shall constitute an original but all of which taken together shall constitute one agreement. Delivery of an executed signature page to this Agreement by facsimile transmission or other electronic transmission shall be effective as a manually executed counterpart hereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

PARENT BORROWER:	PLIANT CORPORATION
	By:
		Name:
		Title:
COLLATERAL AGENT:	GENERAL ELECTRIC CAPITAL
	CORPORATION, as Collateral Agent
	By:
		Name:
		Title:

REAFFIRMATION AGREEMENT

EX-10.21

Exhibit 10.21

AMENDED AND RESTATED GUARANTEE AGREEMENT

This AMENDED AND RESTATED GUARANTEE AGREEMENT dated as of November 21, 2005 (as it may be amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), among the entities listed on the signature page hereof (each individually, a “Subsidiary Guarantor” and, collectively, the “Subsidiary Guarantors”) and GENERAL ELECTRIC CAPITAL CORPORATION, as administrative agent (the “Administrative Agent”) for the Lenders under the Credit Agreement referred to below.

W I T N E S S E T H:

WHEREAS, Pliant Corporation, a Utah corporation (the “Parent Borrower”), Uniplast Industries Co., a Nova Scotia company (the “Canadian Subsidiary Borrower”) and the Domestic Subsidiary Borrowers (as defined in the Prior Credit Agreement described below) are parties to that certain Credit Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Credit Agreement”) among Parent Borrower, Canadian Subsidiary Borrower, certain Domestic Subsidiary Borrowers party thereto, the Lenders party thereto (the “Prior Lenders”), Credit Suisse First Boston, acting through its Cayman Islands Branch, as Administrative Agent and Documentation Agent (the “Prior Administrative Agent”), Deutsche Bank Trust Company Americas, as Collateral Agent (the “Prior Collateral Agent”), General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent; and

WHEREAS, certain Domestic Subsidiary Borrowers, the Subsidiary Guarantors and the Prior Administrative Agent are parties to that certain Guarantee Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Guarantee Agreement”), pursuant to which such Domestic Subsidiary Borrowers and the Subsidiary Guarantors guaranteed the Obligations (as defined in the Prior Guarantee Agreement); and

WHEREAS, the Prior Collateral Agent and the trustees for the holders of the Senior Secured Discount Notes and the Existing Senior Secured Notes entered into an Intercreditor Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), which confirms the relative priority of the security interests of the Secured Parties, the holders of the Senior Secured Discount Notes and the holders of the Existing Senior Secured Notes in the Collateral; and

WHEREAS, prior to the execution of this Agreement, the Prior Collateral Agent resigned as “Collateral Agent” under the Prior Credit Agreement, the Security Documents (as defined in the Prior Credit Agreement) and the other Loan Documents (as defined in the Prior Credit Agreement) and the Collateral Agent succeeded the Prior Collateral Agent as the “Collateral Agent” thereunder, all pursuant to that certain Consent and Amendment, dated as of March 8, 2004, by and among the Prior Administrative Agent, the Prior Collateral Agent, the Collateral Agent, Deutsche Bank Trust Company Americas, as

replaced Issuing Bank, LaSalle Business Credit, LLC, as replacement Issuing Bank, the Borrowers and the Prior Lenders; and

WHEREAS, the parties wish to amend and restate the Prior Credit Agreement in the form of  that certain Amended and Restated Credit Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Parent Borrower, the Canadian Subsidiary Borrower, the Domestic Subsidiary Borrowers party thereto, the Lenders party thereto, Morgan Stanley Senior Funding, Inc., as Domestic B Agent, the Collateral Agent, and General Electric Capital Corporation, as Domestic A Agent and the Administrative Agent; and

WHEREAS, in connection with the amendment and restatement of the Prior Credit Agreement, the parties hereto desire to amend and restate the Prior Guarantee Agreement in its entirety as set forth herein; and

WHEREAS, 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; and

WHEREAS, the Borrowers have requested that the Subsidiary Guarantors guarantee the Obligations (as defined below) by entering into this Agreement and each of the Subsidiary Guarantors is a Subsidiary of the Parent Borrower and an affiliate of the Domestic Subsidiary Borrowers and the Canadian Subsidiary Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders and the issuance of the Letters of Credit by the Issuing Bank; and

WHEREAS, 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 Subsidiary Guarantors of a Guarantee Agreement in the form hereof; and

WHEREAS, as consideration for the foregoing and in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Subsidiary Guarantors are willing to execute this Agreement;

ACCORDINGLY, the parties hereto agree that capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement and agree to amend and restate the Prior Guarantee Agreement in its entirety as follows:

1.             Guarantee.  Each Subsidiary Guarantor unconditionally guarantees, jointly with the other Subsidiary Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrowers under the Credit Agreement in respect of any Letter of

Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of each Loan Party to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to the Credit Agreement and the other Loan Documents, (c) [the due and punctual payment and performance of all obligations of each Loan Party, monetary or otherwise, under each Swap Agreement that (i) is effective on the Effective Date with a counterparty that is a Lender (or an affiliate of a Lender) as of the Effective Date or (ii) is entered into after the Effective Date with anycounterparty that is a Lender(or an Affiliate thereof) at the time such Swap Agreement is entered into] and (d) the due and punctual payment and performance of all monetary obligations of each Loan Party in respect of overdrafts and related liabilities owed to any of the Lenders (or any Affiliates thereof) or Wachovia Bank, National Association (or any Affiliates thereof) arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds (all the monetary and other obligations referred to in the preceding clauses (a) through (d) being collectively called the “Obligations”).  Each Subsidiary Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation.

2.             Obligations Not Waived.  To the fullest extent permitted by applicable law, each Subsidiary Guarantor waives presentment to, demand of payment from and protest to each of the Borrowers of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.  To the fullest extent permitted by applicable law, the obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of the Administrative Agent, the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce or exercise any right or remedy against any of the Borrowers or any other Subsidiary Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other Subsidiary Guarantor under this Agreement, or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any other Secured Party.

3.             Security.  Each of the Subsidiary Guarantors authorizes the Collateral Agent and each of the other Secured Parties to (a) take and hold security pursuant to the Security Documents for the payment of this Guarantee and the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may determine and (c) release or substitute any one or more endorsees, other Subsidiary Guarantors or other obligors.

4.             Guarantee of Payment.  Each Subsidiary Guarantor further agrees that its guarantee constitutes a guarantee of payment in dollars when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any other Secured Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent or any other Secured Party in favor of any of the Borrowers or any other Person.

5.             No Discharge or Diminishment of Guarantee.  The obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise.  Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent, the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Subsidiary Guarantor or that would otherwise operate as a discharge of any Subsidiary Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations).

6.             Defenses of the Borrowers Waived.  To the fullest extent permitted by applicable law, each of the Subsidiary Guarantors waives any defense based on or arising out of any defense of any of the Borrowers or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any of the Borrowers, other than the final and indefeasible payment in full in cash of the Obligations.  The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any of the Borrowers or any other guarantor or exercise any other right or remedy available to them against any of the Borrowers or any other guarantor, without affecting or impairing in any way the liability of any Subsidiary Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash.  Pursuant to applicable law, each of the Subsidiary Guarantors waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Subsidiary Guarantor against any of the Borrowers or any other Subsidiary Guarantor or guarantor, as the case may be, or any security.

Each of the Subsidiary Guarantors agrees that its guarantee hereunder 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 the

Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of any of the Borrowers, any other Loan Party or otherwise.

7.             Agreement to Pay; Subordination.

(a)           In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Secured Party has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of any of the Borrowers or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Subsidiary Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent or such other Secured Party as designated thereby in same day funds the amount of such unpaid Obligations.

(b)           Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, each Subsidiary Guarantor:

(1)           expressly and irrevocably waives, on behalf of itself and its successors and assigns (including any surety), any and all rights at law or in equity to subrogation, to reimbursement, to exoneration, to contribution, to indemnification, to set off or to any other rights that could accrue to a surety against a principal, to a guarantor against a principal, to a guarantor against a maker or obligor, to an accommodation party against the party accommodated, to a holder or transferee against a maker, or to the holder of any claim against any Person, and which such Subsidiary Guarantor may have or hereafter acquire against any Secured Party in connection with or as a result of such Subsidiary Guarantor’s execution, delivery and/or performance of this Agreement, or any other documents to which such Subsidiary Guarantor is a party or otherwise; and

(2)           acknowledges and agrees (A) that this waiver is intended to benefit the Administrative Agent and Lenders and shall not limit or otherwise affect any Subsidiary Guarantor’s liability hereunder or the enforceability of this Agreement, and (B) that Administrative Agent, Lenders and their respective successors and assigns are intended third party beneficiaries of waivers and agreements set forth in this Section 7 and their rights under this Section 7 shall survive payment in full of the Obligations.

(c)           Any indebtedness of any of the Borrowers now or hereafter held by any Subsidiary Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations.

(d)           If any amount shall erroneously be paid to any Subsidiary Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any of the Borrowers, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents.

8.             Information.  Each of the Subsidiary Guarantors assumes all responsibility for being and keeping itself informed of the financial condition and assets of each of the Borrowers, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Subsidiary Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the other Secured Parties will have any duty to advise any of the Subsidiary Guarantors of information known to it or any of them regarding such circumstances or risks.

9.             Representations and Warranties.  Each of the Subsidiary Guarantors represents and warrants as to itself that all representations and warranties relating to it contained in the Credit Agreement are true and correct in all material respects.

10.           Termination.

(a)           This Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Obligations outstanding) until (i) the Credit Agreement has been terminated pursuant to its express terms and (ii) all of the Obligations (other than contingent obligations for which no claim has been made) have been indefeasibly paid and performed in full (or with respect to any outstanding Letters of Credit, a cash deposit has been delivered to the Administrative Agent as required by the Credit Agreement) and no commitments of the Agents or the Lender which would give rise to any Obligations are outstanding. Upon payment in full in cash of the outstanding Obligations and the expiration or termination of the Commitments, the guarantee granted hereby shall terminate.

(b)           A Subsidiary Guarantor shall be automatically released from its obligations hereunder in the event that all capital stock of such Subsidiary Guarantor shall be sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Parent Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer or other disposition (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise.

11.           Binding Effect; Several 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 Subsidiary Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns.  This Agreement shall become effective as to any Subsidiary Guarantor when a counterpart hereof executed on behalf of such Subsidiary Guarantor shall have been delivered to the Administrative Agent, and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Subsidiary Guarantor and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Subsidiary Guarantor, the Administrative Agent and the other Secured Parties, and their respective successors and assigns, except that no Subsidiary Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void).  If all of the capital stock of a Subsidiary Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by Section 6.06 of the Credit Agreement, such Subsidiary Guarantor shall be released from its

obligations under this Agreement without further action.  This Agreement shall be construed as a separate agreement with respect to each Subsidiary Guarantor and may be amended, modified, supplemented, waived or released with respect to any Subsidiary Guarantor without the approval of any other Subsidiary Guarantor and without affecting the obligations of any other Subsidiary Guarantor hereunder.

12.           Waivers; Amendment.  (a)  No failure or delay of the Administrative Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance  of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.  The rights and remedies of the Administrative Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of this Agreement or consent to any departure by any Subsidiary Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in similar or other circumstances.

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

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

14.           Notices.  All communications and notices hereunder shall be in writing and given as provided in Section 10.01 of the Credit Agreement.  All communications and notices hereunder to each Subsidiary Guarantor shall be given to it at its address set forth in Schedule I.

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

(b)           In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction).  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.

16.           Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 11.  Delivery of an executed signature page to this Agreement by facsimile transmission or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

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

18.           Jurisdiction; Consent to Service of Process.  (a)  Each Subsidiary Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement shall affect any right that the Administrative Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Subsidiary Guarantor or its properties in the courts of any jurisdiction.

(b)           Each Subsidiary Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c)           Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14.  Nothing in this Agreement will

affect the right of any party to this Agreement to serve process in any other manner permitted by law.

19.           Waiver of Jury Trial.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.

20.           Additional Subsidiary 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 this Agreement as a Subsidiary Guarantor upon becoming a Subsidiary Loan Party.  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, such Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor herein.  The execution and delivery of any instrument adding an additional Subsidiary Guarantor as a party to this Agreement shall not require the consent of any other Subsidiary Guarantor hereunder.  The rights and obligations of each Subsidiary Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Guarantor as a party to this Agreement.

21.           Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender or Affiliate to or for the credit or the account of any Subsidiary Guarantor against any or all the obligations of such Subsidiary Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured.  The rights of each Lender under this Section 21 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

22.           Taxes.  Any and all payments by or on account of any obligation of the Borrowers hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if any Subsidiary Guarantor shall be

required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Subsidiary Guarantor shall make such deductions and (iii) such Subsidiary Guarantor shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

23.           Conversion of Currencies.  (a)  If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.

(b)           The obligations of the Subsidiary Guarantors in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than the currency in which such sum is stated to be due hereunder (the “Agreement Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, each of the Subsidiary Guarantors agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss.  The obligations of the Subsidiary Guarantors contained in this Section 23 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.

24.           Reaffirmation of Subsidiary Guarantor Obligations. This Agreement constitutes an amendment and restatement of the Prior Guarantee Agreement. Each of the parties hereto acknowledges and agrees that the Obligations represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the obligations of the Subsidiary Guarantors under the Prior Guarantee Agreement. Each of the parties hereto further acknowledges and agrees that this Agreement supercedes and replaces the Prior Guarantee Agreement but does not extinguish the obligations thereunder and that by entering into and performing its obligations hereunder, this transaction shall not constitute a novation. Each of the parties hereto further acknowledges and agrees that the guarantee granted to the Prior Administrative Agent for the benefit of itself and the parties entitled to benefits of the Prior Guarantee Agreement (including, without limitation, each Lender, Issuing Bank or Agent party to the Prior Credit Agreement, and their respective successors and assigns) shall remain outstanding and in full force and effect in accordance with the terms hereof and the other Loan Documents and shall continue to secure the Obligations without interruption or impairment of any kind and all such security interests are hereby ratified, confirmed and continued.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

SUBSIDIARY GUARANTORS:	PLIANT CORPORATION
	INTERNATIONAL
	By:
				Name:
				Title:
	PLIANT FILM PRODUCTS OF MEXICO, INC.
	By:
			Name:
			Title:
	PLIANT SOLUTIONS CORPORATION
	By:
			Name:
			Title:
ADMINISTRATIVE AGENT:	GENERAL ELECTRIC CAPITAL
	CORPORATION, as Administrative Agent
	By:
		Name:
		Title:

AMENDED AND RESTATED GUARANTEE AGREEMENT

SCHEDULE I TO THE
AMENDED AND RESTATED GUARANTEE AGREEMENT

Subsidiary Guarantor	[Address]
Pliant Corporation International	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Film Products of Mexico, Inc.	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Packaging of Canada, LLC	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173

ANNEX 1 TO THE
AMENDED AND RESTATED GUARANTEE AGREEMENT

SUPPLEMENT NO.  dated as of                          , 20      , to the Amended and Restated Guarantee Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Guarantee Agreement”) dated as of November 21, 2005, among each of the parties listed on the signature page thereto and those additional entities that thereafter become parties thereto (each, individually, a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”), and GENERAL ELECTRIC CAPITAL CORPORATION, as administrative agent (the “Administrative Agent”) for the Lenders under the Credit Agreement referred to below.

A. Reference is made to the Amended and Restated Credit Agreement dated as of November 21, 2005, (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Parent Borrower, the domestic subsidiary borrowers party thereto, Uniplast Industries Co., a Nova Scotia company (the “Canadian Subsidiary Borrower”), the lenders from time to time party thereto (the “Lenders”), Morgan Stanley Senior Funding, Inc., as Domestic B Agent, General Electric Capital Corporation, as Domestic A Agent and the Administrative Agent and the Collateral Agents.

B. The Parent Borrower and the Subsidiary Guarantors have entered into the Guarantee 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 Subsidiary Guarantor upon becoming a Subsidiary Loan Party.  Section 20 of the Guarantee Agreement provides that additional Subsidiaries of the Parent Borrower may become Subsidiary Guarantors under the Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement.  The undersigned Subsidiary of the Parent Borrower (the “New Subsidiary Guarantor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Guarantor under the Guarantee 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 Subsidiary Guarantor agree as follows:

SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the New Subsidiary Guarantor by its signature below becomes a Subsidiary Guarantor under the Guarantee Agreement with the same force and effect as if originally named therein as a Subsidiary Guarantor and the New Subsidiary Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee Agreement applicable to it as a Subsidiary Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Subsidiary Guarantor thereunder are true and correct on and as of the date hereof.  Each reference to a “Subsidiary Guarantor” or “Guarantor” in the Guarantee Agreement shall be

deemed to include the New Subsidiary Guarantor.  The Guarantee Agreement is hereby incorporated herein by reference.

SECTION 2. The New Subsidiary 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, 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 Subsidiary Guarantor and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile transmission or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Supplement.

SECTION 4. Except as expressly supplemented hereby, the Guarantee 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, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction).  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 14 of the Guarantee Agreement.  All communications and notices hereunder to the New Subsidiary Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Parent Borrower.

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

[NAME OF NEW SUBSIDIARY GUARANTOR],
		by
			Name:
			Title:
			Address:
GENERAL ELECTRIC CAPITAL CORPORATION, as the Administrative Agent,
	By
			Name:
			Title:

EX-10.22

Exhibit 10.22

AMENDED AND RESTATED DOMESTIC SECURITY AGREEMENT

AMENDED AND RESTATED DOMESTIC SECURITY AGREEMENT dated as of November 21, 2005 (as it may be amended, restated, supplemented or modified from time to time, this “Agreement”), among the entities listed on the signature page hereof (collectively referred to as the “Grantors” and individually as a “Grantor”) and GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined herein).

W I T N E S S E T H:

WHEREAS, the Parent Borrower and the Domestic Subsidiary Borrowers (as defined in the Prior Credit Agreement described below) are parties to that certain Credit Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Credit Agreement”) among Parent Borrower, Uniplast Industries Co., a Nova Scotia corporation (the “Canadian Subsidiary Borrower”), certain Domestic Subsidiary Borrowers party thereto, the Lenders party thereto (the “Prior Lenders”), Credit Suisse First Boston, acting through its Cayman Islands Branch, as Administrative Agent and Documentation Agent (the “Prior Administrative Agent”), Deutsche Bank Trust Company Americas, as Collateral Agent (the “Prior Collateral Agent”), General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent; and

WHEREAS, the Grantors and the Prior Administrative Agent are parties to that certain Domestic Security Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Security Agreement”), pursuant to which each Grantor granted to the Collateral Agent a security interest in the Collateral (as defined in the Prior Security Agreement) to secure the prompt and complete payment and performance when due (whether at stated maturity by acceleration or otherwise) of the Obligations; and

WHEREAS, the Prior Collateral Agent and the trustees for the holders of the Senior Secured Discount Notes and the Existing Senior Secured Notes entered into an Intercreditor Agreement dated as of February 17, 2004  (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), which confirms the relative priority of the security interests of the Secured Parties, the holders of the Senior Secured Discount Notes and the holders of the Existing Senior Secured Notes in the Collateral; and

WHEREAS, prior to the execution of this Agreement, the Prior Collateral Agent resigned as “Collateral Agent” under the Prior Credit Agreement, the Security Documents (as defined in the Prior Credit Agreement) and the other Loan Documents (as defined in the Prior Credit Agreement) and the Collateral Agent succeeded the Prior Collateral Agent as the “Collateral Agent” thereunder, all pursuant to that certain Consent and Amendment dated as of March 8, 2004 by and among the Prior Administrative Agent, the Prior Collateral Agent, the Collateral Agent, Deutsche Bank Trust Company Americas, as replaced Issuing Bank, LaSalle Business Credit, LLC, as replacement Issuing Bank, the Borrowers and the Prior Lenders; and

WHEREAS, the parties wish to amend and restate the Prior Credit Agreement in the form of that certain Amended and Restated Credit Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Parent Borrower, the Canadian Subsidiary Borrower, the Domestic Subsidiary Borrowers party thereto, the Lenders party thereto, Morgan Stanley Senior Funding, Inc., as Domestic B Agent, the Collateral Agent and General Electric Capital Corporation, as Domestic A Agent and Administrative Agent; and

WHEREAS, in connection with the amendment and restatement of the Prior Credit Agreement, the parties hereto desire to amend and restate the Prior Security Agreement in its entirety as set forth herein; and

WHEREAS, 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, in an amount up to $140,000,000, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement; and

WHEREAS, pursuant to the Amended and Restated Guarantee Agreement dated as of even date herewith (as amended, restated supplemented or otherwise modified from time to time, the “Guarantee Agreement”), certain of the Grantors have agreed to guarantee, among other things, all the obligations of the Borrowers under the Credit Agreement; and

WHEREAS, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit under the Credit Agreement are conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to secure (a) the due and punctual payment by the Borrowers of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment, or otherwise, (ii) each payment required to be made by the Borrowers under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of each Loan Party to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of each Loan Party, monetary or otherwise, under each Swap Agreement that (i) is effective on the Effective Date with a counterparty that is a Lender (or an Affiliate of a Lender) as of the Effective Date or (ii) is entered into after the Effective Date with any counterparty that is a Lender (or an Affiliate thereof) at the time such Swap Agreement is entered into and (d) the due and punctual payment and performance of all monetary obligations of each Loan Party in respect of overdrafts and related liabilities owed to any of the Lenders (or any Affiliates thereof) or Wachovia Bank, National Association (or any Affiliates thereof) arising from treasury, depositary and cash

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management services or in connection with any automated clearinghouse transfers of funds (all the monetary and other obligations described in the preceding clauses (a) through (d) being collectively called the “Obligations”); and

ACCORDINGLY, each of the Grantors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree to amend and restate the Prior Security Agreement in its entirety as follows:

ARTICLE I

Definitions

SECTION 1.01.      Definition of Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement and all terms defined in the Uniform Commercial Code from time to time in effect in the State of New York (the “NY UCC”) and not defined herein shall have the meaning specified in Article 9 of the NY UCC.

SECTION 1.02.      Definition of Certain Terms Used Herein.  As used herein, the following terms shall have the following meanings:

“Account Debtor” shall mean any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.

“Accounts Receivable” shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired.

 “Cash Concentration Account” shall mean, with respect to any Grantor, the cash concentration account maintained by such Grantor with the Collateral Agent, to which such Grantor will cause to be transferred, on each Business Day, amounts deposited in the Collection Deposit Accounts on such Business Day, as provided in Section 5.01.

“Collateral” shall have the meaning assigned to such term in Section 2.

“Collateral Proceeds Account” shall mean an account maintained by and in the name of the Administrative Agent, for purposes of this Agreement and the Credit Agreement.

“Collection Deposit Accounts” shall mean the respective collection accounts maintained by the Collection Deposit Banks pursuant to the Collection Deposit Letter Agreements and into which the Grantors will deposit or cause to be deposited all Daily Receipts, as provided in Section 5.01.

“Collection Deposit Bank” shall mean, at any time, any financial institution then serving as a “Collection Deposit Bank” as provided in Section 5.01.

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“Collection Deposit Letter Agreement” shall mean an agreement among the applicable Grantor, a Collection Deposit Bank and the Collateral Agent, in form and substance reasonably satisfactory to the Collateral Agent, pursuant to which such Collection Deposit Bank shall maintain one or more Collection Deposit Accounts, as such Collection Deposit Letter Agreement may be amended, modified or supplemented from time to time.

“Commodity Account” shall mean an account maintained by a Commodity Intermediary in which a Commodity Contract is carried out for a Commodity Customer.

“Commodity Contract” shall mean a commodity futures contract, an option on a commodity futures contract, a commodity option or any other contract that, in each case, is (a) traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to the federal commodities laws or (b) traded on a foreign commodity board of trade, exchange or market, and is carried on the books of a Commodity Intermediary for a Commodity Customer.

“Commodity Customer” shall mean a Person for whom a Commodity Intermediary carries a Commodity Contract on its books.

“Commodity Intermediary” shall mean (a) a Person who is registered as a futures commission merchant under the federal commodities laws or (b) a Person who in the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities laws.

“Consumer Goods” shall mean goods that are used or bought for use primarily for personal, family or household purposes.

“Copyright License”  shall mean any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by any Grantor or which such Grantor otherwise has the right to license, or granting any right to such Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.

“Copyrights” shall mean all of the following now owned or hereafter acquired by any Person:  (a) all copyright rights in any work subject to the copyright laws of the United States or Canada, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or Canada, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office or any similar office in Canada, including those listed on Schedule II.

“Credit Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“Credit Card Payments” shall mean all payments received or receivable by or on behalf of any Grantor in respect of sales of Inventory paid for by credit card charges, including payments from financial institutions that process credit card transactions for any of the Grantors.

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“Daily Receipts” shall mean all amounts received by the Grantors, whether in the form of cash, checks, any moneys received or receivable in respect of charges made by means of credit cards, and other negotiable instruments, in each case as a result of the sale of Inventory or in respect of Accounts Receivable.

“Documents” shall mean all instruments, files, records, ledger sheets and documents covering or relating to any of the Collateral.

“Entitlement Holder” shall mean a Person identified in the records of a Security Intermediary as the Person having a Security Entitlement against the Security Intermediary.  If a Person acquires a Security Entitlement by virtue of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such Person is the Entitlement Holder.

“Equipment” shall mean all equipment, furniture and furnishings, including tools, parts and supplies of every kind and description, and all improvements, accessions or appurtenances thereto, that are now or hereafter owned by any Grantor.

“Exigent Circumstances” shall mean (a) a fraud has been committed by any Loan Party in connection with the Obligations, including any withholding of collections of accounts receivable or other proceeds of Collateral in violation of the terms of the Loan Documents, or (b) an event or circumstance that, in the commercially reasonable judgment of any Agent is reasonably likely to cause a material and imminent diminution in the value of the Collateral or materially and imminently threatens the ability of such Agent to realize upon all or any material portion of the Collateral

“Farm Products” shall mean goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are: (a) crops grown, growing or to be grown, including: (i) crops produced on trees, vines and bushes; and (ii) aquatic goods produced in aquacultural operations; (b) livestock, born or unborn, including aquatic goods produced in aquacultural operations; (c) supplies used or produced in a farming operation; and (d) products of crops or livestock in their unmanufactured states.

“Financial Asset” shall mean (a) a Security, (b) an obligation of a Person or a share, participation or other interest in a Person or in property or an enterprise of a Person,  which is, or is of a type, dealt with in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment or (c) any property that is held by a Security Intermediary for another Person in a Securities Account if the Security Intermediary has expressly agreed with the other Person that the property is to be treated as a Financial Asset under Article 8 of the Uniform Commercial Code.  As the context requires, the term Financial Asset shall mean either the interest itself or the means by which a Person’s claim to it is evidenced, including a certificated or uncertificated Security, a certificate representing a Security or a Security Entitlement.

“General Funds Account” shall mean an account maintained by the Parent Borrower, to which the Administrative Agent will, subject to the terms and conditions set forth herein, cause to be transferred certain amounts on deposit in the Collateral Proceeds Account.

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“General Intangibles” shall mean all “general intangibles” as such term is defined in the NY UCC, and in any event, with respect to any Grantor, all choses in action and causes of action and all other assignable intangible personal property of any Grantor of every kind and nature (other than Accounts Receivable) now owned or hereafter acquired by any Grantor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, [Swap Agreements] and other agreements but excluding contract rights in contracts which contain an enforceable prohibition on assignment or the granting of a security interest), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts Receivable.

“Goods” shall mean all “goods” as such term is defined in Article 9 of the NY UCC

“Intellectual Property” shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation and registrations, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

“Inventory” shall mean all goods of any Grantor, whether now owned or hereafter acquired, held for sale or lease, or furnished or to be furnished by any Grantor under contracts of service, or consumed in any Grantor’s business, including raw materials, intermediates, work in process, packaging materials, finished goods, semi-finished inventory, scrap inventory, manufacturing supplies and spare parts, and all such goods that have been returned to or repossessed by or on behalf of any Grantor.

“Investment Property” shall mean all Securities (whether certificated or uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts and Commodity Accounts of any Grantor,  whether now owned or hereafter acquired by any Grantor.

“License” shall mean any Patent License, Trademark License, Copyright License or other franchise agreement, license or sublicense to which any Grantor is a party, including those listed on Schedule III.

“Lien Enforcement Action” means (a) any action by any Agent or Lender to foreclose on the Lien of such Person in any of the Collateral or exercise any right of repossession, levy, attachment, setoff or liquidation against such Collateral, (b) any action by any Agent or Lender to take possession of, sell or otherwise realize (judicially or non-judicially) upon any of the Collateral (including by setoff or notification of account debtors, but excluding any Ordinary Course Collections), or (c) the commencement by any Agent or Lender of any legal proceedings against or with respect to any of the Collateral to facilitate the actions described in (a) and (b) above.

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“Obligations” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“Patent License” shall mean any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

“Patents” shall mean all of the following now owned or hereafter acquired by any Person:  (a) all letters patent of the United States or Canada, all registrations and recordings thereof, and all applications for letters patent of the United States or Canada, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar office in Canada, including those listed on Schedule IV, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

“Perfection Certificate” shall mean a certificate substantially in the form of Annex 1 (or any other form approved by the Collateral Agent), completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer and the chief legal officer of the Parent Borrower.

“Proceeds” shall mean all “proceeds” as such term is defined in Article 9 of the NY UCC and, in any event, shall include with respect to any Grantor any consideration received from the sale, exchange, license, lease or other disposition of any asset or property that constitutes Collateral, any value received as a consequence of the possession of any Collateral and any payment received from any insurer or other person or entity as a result of the destruction, loss, theft, damage or other involuntary conversion of whatever nature of any asset or property which constitutes Collateral, and shall include, (a) any claim of any Grantor against any third party for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) (i) past, present or future infringement of any Patent now or hereafter owned by any Grantor, or licensed under a Patent License, (ii) past, present or future infringement or dilution of any Trademark now or hereafter owned by any Grantor or licensed under a Trademark License or injury to the goodwill associated with or symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past, present or future breach of any License and (iv) past, present or future infringement of any Copyright now or hereafter owned by any Grantor or licensed under a Copyright License and (b) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

“Secured Parties” shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent and each of the other Agents, (d) the Issuing Bank, (e) each counterparty to a Swap Agreement with a Loan Party the obligations under which constitute Obligations, (f) the beneficiaries of each indemnification obligation undertaken by any Grantor under any Loan Document, (g) each lender in respect of overdrafts and related liabilities owed to any of the

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Lenders (or any Affiliates thereof) and arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds, (h) Wachovia Bank, National Association (or any Affiliates thereof) in respect of overdrafts and related liabilities owed to Wachovia Bank, National Association (or any Affiliates thereof) and arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds and (i) the permitted successors and assigns of each of the foregoing.

“Securities” shall mean any obligations of an issuer or any shares, participations or other interests in an issuer or in property or an enterprise of an issuer which (a) are represented by a certificate representing a security in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer, (b) are one of a class or series or by its terms is divisible into a class or series of shares, participations, interests or obligations and (c)(i) are, or are of a type, dealt with or traded on securities exchanges or securities markets or (ii) are a medium for investment and by their terms expressly provide that they are a security governed by Article 8 of the Uniform Commercial Code.

“Securities Account” shall mean an account to which a Financial Asset  is or may be credited in accordance with an agreement under which the Person  maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise rights that comprise the Financial Asset.

“Security Entitlements” shall mean the rights and property interests of an Entitlement Holder with respect to a Financial Asset.

“Security Interest” shall have the meaning assigned to such term in Section 2.01.

“Security Intermediary” shall mean (a) a clearing corporation or (b) a Person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity.

“Senior Collateral Agent” shall have the meaning assigned to such term in the Intercreditor Agreement.

“Trademark License” shall mean any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

“Trademarks” shall mean all of the following now owned or hereafter acquired by any Person:  (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United States, Canada or any Province of Canada, and all extensions or renewals thereof, including those listed on Schedule V,

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(b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

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

ARTICLE II

Security Interest

SECTION 2.01.      Security Interest.

(a)           Each Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to the Collateral Agent, and hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest (the “Security Interest”) in all of the following property now owned or hereafter acquired by such Grantor or in which such Grantor now has or at any time in future may acquire any right, title or interest (collectively, the “Collateral”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations:

(i)            all Accounts Receivable;

(ii)           all Chattel Paper;

(iii)          all Deposit Accounts;

(iv)          all Documents;

(v)           all Equipment;

(vi)          all General Intangibles;

(vii)         all Instruments;

(viii)        all Inventory;

(ix)           all cash and cash accounts;

(x)            all Investment Property;

(xi)           all books and records pertaining to the Collateral;

(xii)          all Fixtures;

(xiii)         all Letter-of-credit rights;

(xiv)        all commercial tort claims listed on Schedule VI;

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(xv)         all Goods (other than Consumer Goods and Farm Products); and

(xvi)        to the extent not otherwise included, all Proceeds and products of any and all of the foregoing, provided, however, that Collateral shall not include with respect to any Grantor, any item of property to the extent the grant by such Grantor of a security interest pursuant to this Agreement in such Grantor’s right, title and interest in such item of property is prohibited by an applicable enforceable contractual obligation (including but not limited to a Capital Lease Obligation) or requirement of law or would give any other Person the enforceable right to terminate its obligations with respect to such item of property and provided, further, that the limitation in the foregoing proviso shall not affect, limit, restrict or impair the grant by any Grantor of a security interest pursuant to this Agreement in any money or other amounts due or to become due under any Account, contract, agreement or General Intangible.

(b)           Each Grantor hereby irrevocably authorizes the Collateral Agent, in accordance with, and to the extent consistent with, the Intercreditor Agreement, at any time and from time to time to file in any relevant jurisdiction any initial financing statements with respect to the Collateral or any part thereof and amendments thereto that indicate the Collateral as all assets of such Grantor, or words of similar effect, or as being of an equal or lesser scope or with greater detail, and that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor.  Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in Canada) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor (but, prior to the occurrence of any Event of Default or Default, the Collateral Agent shall provide notice of such filing to such Grantor), and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

SECTION 2.02.      No Assumption of Liability.  The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral.

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ARTICLE III

Representations and Warranties

The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that:

SECTION 3.01.      Title and Authority.  Each Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval which has been obtained or the failure of which to obtain could not reasonably be expected to have a Material Adverse Effect.

SECTION 3.02.      Filings.

(a)           The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete.  Uniform Commercial Code financing statements, as applicable, or other appropriate filings, recordings or registrations containing a description of the Collateral have been delivered to the Collateral Agent for filing in each governmental, municipal or other office specified in Schedule 6 to the Perfection Certificate, which are all the filings, recordings and registrations (other than filings, recordings and registrations required to be made in the United States Patent and Trademark Office and the United States Copyright Office (or any similar office in Canada) in order to perfect the Security Interest in Collateral consisting of United States (or Canadian) Patents, United States Trademarks and United States Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof), and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements and such filings, recordings and registrations as may be necessary to perfect the Security Interest as a result of any event described in Section 5.03 of the Credit Agreement.

(b)           Each Grantor represents and warrants that fully executed security agreements in the form hereof (or a fully executed short-form agreement in form and substance reasonably satisfactory to the Collateral Agent) and containing a description of all Collateral consisting of Intellectual Property shall have been received and recorded (i) on or before the date of execution of this Agreement with respect to United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights owned by the Grantors prior to November 21, 2005 by the United States Patent and Trademark Office and the United States Copyright Office and (ii) within 10 days of the after the execution of this Agreement with respect to United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights by the United States Patent and Trademark

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Office and the United States Copyright Office acquired by the Grantors after November 21, 2005, in each case pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder (or in any similar office in Canada within the time period prescribed by applicable law and regulations), as applicable, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States or Canada (or any political subdivision of either) and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof).

SECTION 3.03.      Validity of Security Interest.  The Security Interest constitutes (a) a legal and valid security interest in all the Collateral securing the payment and performance of the Obligations, (b) subject to the filings described in Section 3.02, a perfected security interest in all Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States or Canada (or any political subdivision of either) pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (c) a security interest that shall be perfected in all Collateral in which a security interest may be perfected in the United States Patent and Trademark Office and the United States Copyright Office upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the period provided in Section 3.02(b) pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction.  The Security Interest is and shall be prior to any other Lien on any of the Collateral, other than Liens expressly permitted to be prior to the Security Interest pursuant to Section 6.03 of the Credit Agreement.

SECTION 3.04.      Absence of Other Liens.  The Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.03 of the Credit Agreement.  No Grantor has filed or consented to the filing of (a) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Collateral, (b) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral in the United States Patent and Trademark Office or the United States Copyright Office or (c) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.03 of the Credit Agreement.

ARTICLE IV

Covenants

SECTION 4.01.      Records.  Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Collateral owned by it as is

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consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Collateral.

SECTION 4.02.      Protection of Security.  Each Grantor shall, at its own cost and expense, take any and all actions necessary to defend title to the Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.03 of the Credit Agreement.

SECTION 4.03.      Further Assurances.  Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements or other documents in connection herewith or therewith.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent.

Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule II, III, IV or V or adding additional schedules hereto to specifically identify any registered asset or item that may constitute Copyrights, Patents or Trademarks; provided, however, that any Grantor shall have the right, exercisable within 30 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral.  Each Grantor agrees that it will use its best efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral.

SECTION 4.04.      Inspection and Verification.  Subject to the limitations set forth in Section 5.09 of the Credit Agreement, any Agent  and such Persons as such Agent may reasonably designate shall have the right, at the Grantors’ own cost and expense, to inspect the Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Collateral is located, to discuss the Grantors’ affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other

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matter relating to, the Collateral, including, in the case of Accounts or Collateral in the possession of any third party, by contacting Account Debtors or the third person possessing such Collateral for the purpose of making such a verification.  The Agents shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party (it being understood that any such information shall be deemed to be “Information” subject to the provisions of Section 10.12 of the Credit Agreement).

SECTION 4.05.      Taxes; Encumbrances.  In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, at its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral and not permitted pursuant to Section 6.03 of the Credit Agreement, and may pay for the maintenance and preservation of the Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this Section 4.05 shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

SECTION 4.06.      Assignment of Security Interest.  If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent.  Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

SECTION 4.07.      Continuing Obligations of the Grantors.  Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

SECTION 4.08.      Use and Disposition of Collateral.  None of the Grantors shall make or permit to be made an assignment, pledge or hypothecation of the Collateral or shall grant any other Lien in respect of the Collateral, except as expressly permitted by Section 6.03 of the Credit Agreement.  Unless and (in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement) until the Collateral Agent shall notify the Grantors that (i) an Event of Default shall have occurred and be continuing and (ii) during the continuance thereof the Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Collateral (which notice may be given by telephone if promptly confirmed in writing), the Grantors may use and dispose of the Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Credit Agreement or any other Loan Document.  Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit any Inventory to be in the possession or control of any warehouseman, bailee, agent or processor at any time,

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other than Inventory that is in transit by any means, unless such warehouseman, bailee, agent or processor shall have been notified of the Security Interest and each Grantor shall use its best efforts to obtain a written agreement in form and substance reasonably satisfactory to the Collateral Agent to hold the Inventory subject to the Security Interest and the instructions of the Collateral Agent and to waive and release any Lien held by it with respect to such Inventory, whether arising by operation of law or otherwise.

SECTION 4.09.      Limitation on Modification of Accounts.  None of the Grantors will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any of the Accounts Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged.

SECTION 4.10.      Insurance.  The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with Section 5.07 of the Credit Agreement.  Subject to the Intercreditor Agreement, each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto.  Subject to the Intercreditor Agreement, in the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems reasonably advisable.  Subject to the Intercreditor Agreement, all sums disbursed by the Collateral Agent in connection with this Section 4.10, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent  and shall be additional Obligations secured hereby.

SECTION 4.11.      Legend.  Each Grantor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, its Accounts Receivable and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts Receivable have been assigned to the Collateral Agent for the benefit of the Secured Parties and that the Collateral Agent has a security interest therein.

SECTION 4.12.      Covenants Regarding Patent, Trademark and Copyright Collateral.

(a)           Each Grantor agrees that it will not, nor will it permit any of its licensees to, do any act, or omit to do any act, whereby any Patent which is material to the conduct of such

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Grantor’s business may become invalidated or dedicated to the public, and agrees, to the extent practicable, that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

(b)           Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

(c)           Each Grantor (either itself or through licensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

(d)           Each Grantor shall notify the Collateral Agent promptly if it knows that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or United States Copyright Office or any similar office in Canada) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same.

(e)           In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or any similar office in Canada, unless it (i) in the case of any Patent or Trademark, promptly informs the Collateral Agent and (ii) in the case of any Copyright, gives five (5) Business Days prior written notice thereof to the Collateral Agent, and, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent’s security interest in such Patent, Trademark or Copyright, and, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes (and, prior to the occurrence of any Event of Default or Default, such Grantor shall be notified of such filing), all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

(f)            Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or any

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similar office in Canada, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancelation proceedings against third parties.

(g)           In the event that any Grantor has reason to believe that any Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Collateral.

(h)           Upon and during the continuance of an Event of Default, each Grantor shall use its reasonable best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all of such Grantor’s right, title and interest thereunder to the Collateral Agent or their designees for the benefit of the Secured Parties in accordance with the Intercreditor Agreement.

SECTION 4.13.      Deposit Accounts.  Each Grantor will, on or before the Effective Date, enter into control agreements in form and substance reasonably satisfactory to the Collateral Agent with each depository bank (other than the Collateral Agent) with which it maintains any deposit accounts (other than, prior to the 2004 Notes First Lien Transition Date, the Notes Collateral Account (each as defined in the Intercreditor Agreement)) and thereafter shall cause all cash held by such Grantor (other than, prior to the 2004 Notes First Lien Transition Date, cash held by such Grantor in a Notes Collateral Account in accordance with the terms of the 2004 Indenture (as in effect on the date hereof) to be maintained in such accounts.

SECTION 4.14.      Commercial Tort Claims.  If any Grantor shall at any time hold or acquire a commercial tort claim in an amount reasonably estimated to exceed $1,000,000, the Grantor shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor including a summary description of such claim and grant to the Collateral Agent in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Collateral Agent.

SECTION 4.15.      Electronic Chattel Paper and Transferable Records.  If any Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, in an amount exceeding $1,000,000 such Grantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent  may reasonably request to vest in the Collateral Agent control under NY UCC Section 9-105 of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the

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case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Grantor to make alterations to the electronic chattel paper or transferable record permitted under NY UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record.

SECTION 4.16.      Letter-of-Credit Rights.  If any Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of such Grantor in an amount exceeding $1,000,000, such Grantor shall promptly notify the Collateral Agent thereof and, at the request and option of the Collateral Agent, such Grantor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

ARTICLE V

Collections

SECTION 5.01.      Cash Management Accounts.   (a)  Each Grantor will establish and maintain, on or before the Effective Date, (i) one Cash Concentration Account and (ii) one or more Collection Deposit Accounts, in the case of this clause (ii), with the Collateral Agent or with any financial institution selected by such Grantor that (A) is reasonably satisfactory to the Collateral Agent and (B) enters into a Collection Deposit Letter Agreement with respect to the Collection Deposit Accounts of such Grantor with such financial institution.  Each financial institution with which a Collection Deposit Account is maintained is referred to herein as a “Collection Deposit Bank”.

 (b)          Each Grantor, commencing on the Effective Date, will deposit on each Business Day all Daily Receipts into either (i) a Collection Deposit Account or (ii) a Cash Concentration Account.  Each Grantor shall use all reasonable efforts to prevent any funds that are not Daily Receipts from being deposited into, or otherwise commingled with, the funds held in the Collection Deposit Accounts or the Cash Concentration Accounts.

(c)           On each Business Day, all collected funds on deposit in each Collection Deposit Account will be transferred to the applicable Cash Concentration Account to the extent provided in the applicable Collection Deposit Letter Agreement.

(d)           On each Business Day, all collected funds on deposit in the Cash Concentration Accounts will be transferred to the Collateral Proceeds Account to be applied by

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the Administrative Agent, on behalf of the Borrowers, to prepay Revolving Loans, Swingline Loans and Protective Advances in the manner provided in Section 2.10 of the Credit Agreement, until all outstanding Swingline Loans and Revolving Borrowings have been repaid, and thereafter to be transferred to the General Funds Account, subject to paragraph (f) below.

 (e)          No Grantor shall have any control over, or any right or power to withdraw any funds on deposit in, any Collection Deposit Account or Cash Concentration Account; provided, however, that any Grantor may instruct any Collection Deposit Bank to withdraw funds from its Collection Deposit Account to honor ACH instructions of such Grantor to transfer funds to the Cash Concentration Account.  The Parent Borrower may at any time withdraw any funds contained in the General Funds Account for use, subject to the provisions of the Credit Agreement, for general corporate purposes.

(f)            Upon the occurrence and during the continuance of an Event of Default, any funds held in the Collection Deposit Accounts, the Cash Concentration Accounts or the Collateral Proceeds Account may be applied as provided in Section 2.17(b) of the Credit Agreement so long as an Event of Default is continuing.  The Collateral Agent will not be required to transfer any funds from the Collateral Proceeds Account to the General Funds Account until all Events of Default are cured or waived.

(g)           All payments by any Grantor into any Collection Deposit Account or Cash Concentration Account pursuant to this Article V, whether in the form of cash, checks, notes, drafts, bills of exchange, money orders or otherwise, shall be deposited in the relevant Collection Deposit Account or Cash Concentration Account in precisely the form in which received (but with any endorsements of such Grantor necessary for deposit or collection), and until they are so deposited such payments shall be held in trust by such Grantor for and as the property of the Collateral Agent.

SECTION 5.02.      Collections.   (a)  Each Grantor agrees promptly to notify and direct each Account Debtor and every other Person obligated to make payments with respect to the Accounts Receivable or Inventory to make all such payments directly to a Collection Deposit Account or the applicable Cash Concentration Account (subject to the proviso in the following sentence).  Each Grantor shall use all reasonable efforts to cause each Account Debtor and every other Person identified in the preceding sentence to make all payments with respect to the Accounts Receivable or Inventory either directly to a Collection Deposit Account or a Cash Concentration Account; provided that Credit Card Payments shall be made directly to the Cash Concentration Account.

(b)           In the event that a Grantor directly receives any Daily Receipts, notwithstanding the arrangements for payment directly into the Collection Deposit Accounts pursuant to Section 5.02, such remittances shall be held for the benefit of the Collateral Agent and the Secured Parties and shall be segregated from other funds of such Grantor, subject to the Security Interest granted hereby, and such Grantor shall cause such remittances and payments to be deposited into a Collection Deposit Account or a Cash Concentration Account, as applicable, as soon as practicable after such Grantor’s receipt thereof.

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(c)           Without the prior written consent of the Collateral Agent, no Grantor shall, under any circumstances whatsoever, change the general instructions given to Account Debtors and other Persons obligated to make payments with respect to the Accounts Receivable or Inventory regarding the deposit of payments with respect to the Accounts Receivable or Inventory in a Collection Deposit Account or a Cash Concentration Account, as applicable.  Each Grantor shall, and the Collateral Agent hereby authorizes each Grantor to, enforce and collect all amounts owing with respect to the Accounts Receivable or Inventory for the benefit and on behalf of the Collateral Agent and the other Secured Parties; provided, however, that such privilege may at the option of the Collateral Agent be terminated upon the occurrence and during the continuance of an Event of Default.

ARTICLE VI

Power of Attorney

Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent ) as such Grantor’s true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for each Grantor and in each Grantor’s name or otherwise, for the use and benefit of the Collateral Agent and the Secured Parties, upon the occurrence and during the continuance of an Event of Default (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any Secured Party, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by the Collateral Agent or any Secured Party with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Grantor or (unless such action is the result of gross negligence or willful misconduct) to any claim or action against the Collateral Agent or any Secured Party.  It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Grantors for the purposes set forth above is coupled with an interest and is irrevocable.  The provisions of this Section shall in no event relieve any Grantor of any of its obligations hereunder or under any other Loan Document with

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respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any Secured Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any Secured Party of any other or further right which it may have on the date of this Agreement or hereafter, whether hereunder, under any other Loan Document, by law or otherwise.

Notwithstanding anything in this Article VI to the contrary, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this Article VI unless it does so in accordance with, and to the extent consistent with, the Intercreditor Agreement.

ARTICLE VII

Remedies

SECTION 7.01.      Remedies upon Default.  In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times:  (a) with respect to any Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any such Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing or contractual arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Collateral and without liability for trespass to enter any premises where the Collateral may be located for the purpose of taking possession of or removing the Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law.  Without limiting the generality of the foregoing, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate.  The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold.  Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

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The Collateral Agent shall give the Grantors 10 days’ prior written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the NY UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral.  Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange.  Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale.  At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine.  The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given.  The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned.  In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice.  At any public (or, to the extent permitted by law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor.  For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full.  As an alternative to exercising the power of sale herein conferred upon it, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver.

SECTION 7.02.      Standstill and Enforcement Rights of the Domestic B Agent and the Domestic B Lenders.  Notwithstanding any rights or remedies available to the Secured Parties, under any of the Loan Documents, applicable law or otherwise, prior to the Maturity Date, the Domestic B Agent and the Domestic B Lenders shall not exercise any Lien Enforcement Action with respect to any Collateral or exercise any remedies with respect thereto (including, by setoff or notification of account debtors) or commence any legal proceedings against or with respect to any Collateral to facilitate a Lien Enforcement Action; provided, that

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(i) if the Domestic B Agent determines in its commercially reasonable judgment that Exigent Circumstances exist with respect to the Obligations owing to the Domestic B Lenders or the Collateral, the Domestic B Agent may instruct the Collateral Agent to take any action to enforce its Liens on the Collateral, or (ii) absent the existence of any Exigent Circumstances, upon the occurrence of an Event of Default under the Credit Agreement (A) the Domestic B Agent may instruct the Administrative  Agent to accelerate (to the extent not already due) all indebtedness of the Borrowers thereunder and (B) commencing 120 days after the receipt by the Administrative Agent of the demand to so accelerate (or the earlier acceleration of the Loans), the Domestic B Agent may instruct the Collateral Agent to take any action to enforce its Liens on the Collateral, but in any such case, the Domestic B Agent may only make such demand to the Collateral Agent if the Collateral Agent is not itself diligently pursuing in good faith the exercise of its enforcement rights or remedies against, or diligently in good faith attempting to vacate any stay or enforcement of its Liens on such Collateral.  Nothing contained in this Section 7.02 shall restrict the Domestic B Agent from engaging consultants and performing audits, examinations, and appraisals of the Collateral in advance of taking any Lien Enforcement Action.

SECTION 7.03.      Grant of License to Use Intellectual Property.  In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, for the purpose of enabling the Collateral Agent to exercise rights and remedies under this Article at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Grantors) to the extent that such license does not violate any then existing licensing arrangements (to the extent that waivers cannot be obtained) to use, license or sub-license any of the Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof and sufficient rights of quality control in favor of Grantor to avoid the invalidation of the Trademarks subject to the license.  The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sub-license or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default.

ARTICLE VIII

Miscellaneous

SECTION 8.01.      Notices.  All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 10.01 of the Credit Agreement.  All communications and notices hereunder to any Grantor shall be given to it at its address or telecopy number set forth on Schedule I, with a copy to the Parent Borrower.

SECTION 8.02.      Security Interest Absolute.  All rights of the Collateral Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit

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Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.

SECTION 8.03.      Survival of Agreement.  All covenants, agreements, representations and warranties made by any Grantor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, and the execution and delivery to the Lenders of any notes evidencing such Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect until this Agreement shall terminate.

SECTION 8.04.      Binding Effect; Several Agreement.  This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement.  This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.

SECTION 8.05.      Successors and Assigns.  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 any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

SECTION 8.06.      Collateral Agent’s Expenses; Indemnification.  In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement,  (a)  each Grantor jointly and severally agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, disbursements and other charges of its counsel and of any experts or agents, which the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to perform or observe any of the provisions hereof.

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(b)           Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees against, and hold each of them harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable fees, disbursements and other charges of counsel, incurred by or asserted against any of them arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating hereto or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses have resulted from the gross negligence or willful misconduct of such Indemnitee.

(c)           Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents.  The provisions of this Section 8.06 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any Lender.  All amounts due under this Section 8.06 shall be payable on written demand therefor.

SECTION 8.07.      GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 8.08.      Waivers; Amendment.   (a)  No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.  The rights and remedies of the Collateral Agent hereunder and of the Collateral Agent, the Issuing Bank, the Administrative Agent, the other Agents and the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice to or demand on any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances.

(b)           Neither this Agreement nor any provision hereof may be waived, amended or modified except (i) pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to (A) any consent required in accordance with Section 10.02 of the Credit Agreement and (B) to the limitations in the Intercreditor Agreement or (ii) as provided in the Intercreditor Agreement.

SECTION 8.09.      WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE

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LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.09.

SECTION 8.10.      Severability.  In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction).  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 8.11.      Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract (subject to Section 8.04), and shall become effective as provided in Section 8.04.  Delivery of an executed signature page to this Agreement by facsimile transmission or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof.

SECTION 8.12.      Headings.  Article and Section headings used herein are for the purpose of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 8.13.      Jurisdiction; Consent to Service of Process.   (a)  Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement shall affect any right that the Collateral Agent, the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Grantor or its properties in the courts of any jurisdiction.

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(b)           Each Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State court or Federal court of the United States of America sitting in New York City.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c)           Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.01.  Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 8.14.      Termination.   (a)  This Agreement and the Security Interest shall continue in effect (notwithstanding the fact that from time to time there may be no Obligations outstanding) until (i) the Credit Agreement has terminated pursuant to its express terms and (ii) all of the Obligations (other than contingent obligations for which no claim has been made) have been indefeasibly paid and performed in full (or with respect to any outstanding Letters of Credit, a cash deposit has been delivered to the Administrative Agent as required by the Credit Agreement) and no commitments of the Agents or the Lenders which would give rise to any Obligations are outstanding.  Upon payment in full in cash of the outstanding Obligations and the expiration or termination of the Commitments, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantors or any other Person entitled thereto.  Upon such termination, the Administrative Agent will authorize the filing of appropriate UCC termination statements to terminate such security interests and shall, at the expense of the Grantors, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the termination of such security interests or the release of such Collateral, as applicable.

(b)           A Grantor shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Grantor shall be automatically released in the event that all the capital stock of such Grantor shall be sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Parent Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer or other disposition (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise.

(c)           Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement, provided that the Required Lenders shall have consented to such transaction (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 10.02 of the Credit Agreement, the security interest in such Collateral shall be automatically released.

(d)           If any of the 2004 Notes First Lien Collateral (as defined in the Intercreditor Agreement) shall become subject to the release provisions set forth in Section 5.1(c) of the Intercreditor Agreement, such Collateral shall be automatically released from the Security Interest to the extent provided in Section 5.1(c) of the Intercreditor Agreement.

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(e)           In connection with any termination or release pursuant to paragraph (a), (b), (c) or (d) above, the Collateral Agent shall execute and deliver to the Grantors, at the Grantors’ expense, all UCC termination statements and similar documents which the Grantor shall reasonably request to evidence such termination or release.  Any execution and delivery of termination statements or release documents pursuant to this Section 8.14 shall be without recourse to or warranty by the Collateral Agent.

SECTION 8.15.      Additional Grantors.  Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 2, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein.  The execution and delivery of any such instrument shall not require the consent of any Grantor hereunder.  The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.

SECTION 8.16.      Subject to Intercreditor Agreement.    Notwithstanding anything herein to the contrary, the Lien and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement.  In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.

SECTION 8.17.      2004 Indenture.  The Collateral Agent acknowledges and agrees, on behalf of itself and the Secured Parties, that, any provision of this Agreement to the contrary notwithstanding, until the 2004 Notes First Lien Transition Date (as defined in the Intercreditor Agreement), the Grantors shall not be required to act or refrain from acting with respect to any 2004 Notes First Lien Collateral on which the 2004 Trustee (as defined in the Intercreditor Agreement) has a Lien superior in priority to the Collateral Agent’s Lien thereon in any manner that would result in a default under the terms and provisions of the 2004 Indenture (as defined in the Intercreditor Agreement).

SECTION 8.18.  Reaffirmation of Grantor Obligations.  This Agreement constitutes an amendment and restatement of the Prior Security Agreement.  Each of the parties hereto acknowledges and agrees that the Obligations represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the obligations of Grantors under the Prior Security Agreement.  Each of the parties hereto further acknowledges and agrees that this Agreement supercedes and replaces the Prior Security Agreement but does not extinguish the obligations thereunder and that by entering into and performing its obligations hereunder, this transaction shall not constitute a novation.  Each of the parties hereto further acknowledges and agrees that the security interest granted to the Prior Administrative Agent for the benefit of itself and the parties entitled to the benefit of the Prior Security Agreement (including, without limitation, each Lender, the Issuing Bank or any Agent party to the Prior Credit Agreement, and their respective successors and assigns) shall remain outstanding and in full force and effect in accordance with the terms hereof and the other Loan Documents and shall continue to secure the Obligations without interruption or impairment of any kind and all such security interests are hereby ratified, confirmed and continued.

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

GRANTORS:	PLIANT CORPORATION
	By:
		Name:
		Title:
	PLIANT CORPORATION INTERNATIONAL
	By:
		Name:
		Title:
	PLIANT FILM PRODUCTS OF MEXICO, INC.
	By:
		Name:
		Title:
	PLIANT PACKAGING OF CANADA, LLC
	By:
		Name:
		Title:
	PLIANT SOLUTIONS CORPORATION
	By:
		Name:
		Title:

AMENDED AND RESTATED DOMESTIC SECURITY AGREEMENT

	UNIPLAST HOLDINGS, INC.
	By:
		Name:
		Title:
	UNIPLAST U.S., INC.
	By:
		Name:
		Title:
COLLATERAL AGENT:	GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent
	By:
		Name:
		Title:

Schedule I to the

Amended and Restated Domestic Security Agreement

GRANTORS

Name	Address
Pliant Corporation	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Solutions Corporation	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Corporation International	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Film Products of Mexico, Inc.	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Packaging of Canada, LLC	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Uniplast Holdings, Inc.	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Uniplast U.S., Inc.	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173

Schedule II to the

Amended and Restated Domestic Security Agreement

COPYRIGHTS

[see attached]

Schedule III to the

Amended and Restated Domestic Security Agreement

LICENSES

[see attached]

Schedule IV to the

Amended and Restated Domestic Security Agreement

PATENTS

[see attached]

Schedule V to the

Amended and Restated Domestic Security Agreement

TRADEMARKS

[see attached]

Schedule VI to the

Amended and Restated Domestic Security Agreement

COMMERCIAL TORT CLAIMS

[see attached]

Annex I

To the Amended and Restated Domestic Security Agreement

[Form Of]

PERFECTION CERTIFICATE

Reference is made to the Amended and Restated Credit Agreement dated as of November 21, 2005 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Pliant Corporation, a Utah corporation (the “Parent Borrower”), the subsidiaries of the Parent Borrower party thereto as domestic subsidiary borrowers,  Uniplast Industries Co., a Nova Scotia company,  the lenders from time to time party thereto (the “Lenders”), Morgan Stanley Senior Funding, Inc., as Domestic B Agent, and General Electric Capital Corporation, as Domestic A Agent and Administrative Agent Collateral Agent.  Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreement.

The undersigned, a Financial Officer and a Legal Officer, respectively, of the Parent Borrower, hereby certify to the Collateral Agent and each other Secured Party as follows:

SECTION 1.           Names.  (a)  Set forth below is (i) the exact legal name of each Grantor, as such name appears in its document of formation, (ii) each other legal name each Grantor has had in the past five years and (iii) the date of the relevant change:

Legal Name Former Name Date of Change

(b)           Except as set forth in Schedule 1 hereto, no Grantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions, as well as any change in the form, nature or jurisdiction of corporate organization.  If any such change has occurred, include in Schedule 1 the information required by Sections 1 and 2 of this certificate as to each acquiree or constituent party to a merger or consolidation.

(c)           Set forth below is a list of all other names (including trade names or similar appellations) used by each Grantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years:

Legal Name Other Name

(d)           Set forth below is (i) the organizational identification number, if any, issued by the jurisdiction of formation of each Grantor that is a registered organization and (ii) the Federal Taxpayer Identification Number of each Grantor:

Legal Name Organizational No. Federal Taxpayer No.

SECTION 2.           Locations.  (a)  Set forth below opposite the name of each Grantor that is a registered organization is the jurisdiction of formation of such Grantor:

Legal Name Jurisdiction of Formation

(b)           Set forth below opposite the name of each Grantor is the address and county of the chief executive office of such Grantor:

Legal Name Address of Chief Executive Office County

(c)           Set forth below opposite the name of each Grantor is the address and county of all locations where such Grantor maintains any books or records relating to any Accounts Receivable and/or General Intangibles (with each location at which chattel paper, if any, is kept being indicated by an “*”):

Legal Name Address of Accounts Receivableand/or General Intangibles County

(d)           Set forth below opposite the name of each Grantor is the address and county of all locations where such Grantor maintains any Inventory, Equipment and/or other Collateral not identified above:

Legal Name Address of Inventory,Equipment and/or Other Collateral Zip Code

(e)           Set forth below opposite the name of each Grantor is the address and county of all the places of business of such Grantor not identified in paragraph (a), (b), (c) or (d) above:

Legal Name Other Business Addresses Zip Code

(f)            Set forth below opposite the name of each Grantor are the names, addresses and counties of all Persons other than such Grantor that have possession of any of the Collateral of such Grantor (with each such Person that holds such Collateral subject to a Lien (including, but not limited to, warehousemen’s, mechanics’ and other statutory liens) indicated by an “*”):

Legal Name Other Collateral Addresses Zip Code

SECTION 3.           Unusual Transactions.  All Accounts have been originated by the Grantors and all Inventory has been acquired by the Grantors in the ordinary course of business.

SECTION 4.           File Search Reports.  File search reports have been obtained from each Uniform Commercial Code filing office identified with respect to such Grantor in Section 2 hereof, and such search reports reflect no liens against any of the Collateral other than those permitted under the Credit Agreement.

SECTION 5.           UCC Filings.  UCC financing statements in substantially the form of Schedule 5 hereto have been prepared for filing in the UCC filing office and, in the case of fixture filings, the applicable County recorder’s office, in each jurisdiction identified with respect to such Grantor in Section 2 and Section 10, as applicable, hereof.

SECTION 6.           Schedule of Filings.  Attached hereto as Schedule 6 is a true and correct list, with respect to the filings described in Section 5 above, of each filing and the UCC filing office or, in the case of fixture filings, the applicable County recorder’s office, in which such filing is to be made.

SECTION 7.           Stock Ownership and Other Equity Interests.  Attached hereto as Schedule 7 is a true and correct list of all the Equity Interests of each Grantor and the record and beneficial owners of such Equity Interests.  Also set forth on Schedule 7 is each equity

investment of the Parent Borrower and each Grantor that represents 50% or less of the equity of the entity in which such investment was made.

SECTION 8.           Debt Instruments.  Attached hereto as Schedule 8 is a true and correct list of all instruments, including any promissory notes, and other evidence of indebtedness held by each Grantor that are required to be pledged under the Domestic Security Agreement, including all intercompany notes between the Parent Borrower and any other Grantor or between any Grantor and any other Grantor.

SECTION 9.           Advances.  Attached hereto as Schedule 9 is (a) a true and correct list of all advances made by the Parent Borrower to any Subsidiary of the Parent Borrower (other than those identified on Schedule 8), which advances will be on and after the date hereof evidenced by one or more intercompany notes pledged to the Collateral Agent under the Amended and Restated Domestic Security Agreement and (b) a true and correct list of all unpaid intercompany transfers of goods sold and delivered by or to the Parent Borrower or any Subsidiary of the Parent Borrower.

SECTION 10.         Mortgage Filings.  Attached hereto as Schedule 10 is a true and correct list, with respect to each Mortgaged Property, of (a) the exact name of the Person that owns such property as such name appears in its certificate of incorporation or other organizational document, (b) if different from the name identified pursuant to clause (a), the exact name of the current record owner of such property reflected in the records of the filing office for such property identified pursuant to the following clause and (c) the filing office in which a Mortgage with respect to such property must be filed or recorded in order for the Collateral Agent to obtain a perfected security interest therein.

SECTION 11.         Intellectual Property.  Attached hereto as Schedule 11(A) in proper form for filing with the United States Patent and Trademark Office or the Canadian Intellectual Property Office, as applicable, is a is a true and correct list of each Grantor’s Patents, Patent Licenses, Trademarks and Trademark Licenses, including the name of the registered owner, registration number and expiration date of each Patent, Patent License, Trademark and Trademark License owned by any Grantor.  Attached hereto as Schedule 11(B) in proper form for filing with the United States Copyright Office or the Canadian Intellectual Property Office, as applicable, is a true and correct list of each Grantor’s Copyrights and Copyright Licenses, including the name of the registered owner, registration number and expiration date of each Copyright or Copyright License owned by any Grantor.

SECTION 12.         Commercial Tort Claims.  Attached hereto as Schedule 12 is a true and correct list of commercial tort claims in excess of $250,000 held by any Grantor, including a brief description thereof.

SECTION 13.         Deposit Accounts.  Attached hereto as Schedule 13 is a true and correct list of deposit accounts maintained by each Grantor, including the name and address of the depositary institution, the type of account, and the account number.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this 21st day of November, 2005.

PLIANT CORPORATION
By:
	Name:
	Title:

Annex 2 to the

Amended and Restated Domestic Security Agreement

SUPPLEMENT NO.     dated as of           , 20       , to the Amended and Restated Domestic Security Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Domestic Security Agreement”) dated as of November 21, 2005, among by each of the parties listed on the signature pages thereto and those additional entities that thereafter become parties thereto (each a “Grantor” and collectively, the “Grantors”) and GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined herein).

A.    Reference is made to (a) the Amended and Restated Credit Agreement dated as of November 21, 2005 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Parent Borrower, the domestic subsidiary borrowers party thereto, Uniplast Industries Co., the lenders from time to time party thereto (the “Lenders”), Morgan Stanley Senior Funding, Inc., as Domestic B Agent, General Electric Capital Corporation, as Domestic A Agent and Administrative Agent, and the Collateral Agent, and (b) the Amended and Restated Guarantee Agreement dated as of November 21, 2005 (as amended, supplemented or otherwise modified from time to time, the “Guarantee Agreement”), among the Parent Borrower, the other Grantors and the Administrative Agent.

B.            Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Domestic Security Agreement and the Credit Agreement.

C.            The Grantors have entered into the Domestic Security Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit.  Section 8.15 of the Domestic Security Agreement provides that additional Subsidiaries of the Parent Borrower may become Grantors under the Domestic Security Agreement by execution and delivery of an instrument in the form of this Supplement.  The undersigned Subsidiary (the “New Grantor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Domestic Security 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 Collateral Agent and the New Grantor agree as follows:

SECTION 1.  In accordance with Section 8.15 of the Domestic Security Agreement, the New Grantor by its signature below becomes a Grantor under the Domestic Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of the Domestic Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof.  In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Obligations (as defined in the Domestic Security Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Grantor’s right, title and interest in and to the Collateral (as defined in the Domestic Security Agreement) of the New Grantor.  Each reference to a “Grantor” in the Domestic Security

Agreement shall be deemed to include the New Grantor. The Domestic Security Agreement is hereby incorporated herein by reference.

SECTION 2.  The New Grantor represents and warrants to the Collateral 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 Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Grantor and the Collateral Agent.  Delivery of an executed signature page to this Supplement by facsimile transmission or other electronic transmission shall be effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4.  The New Grantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Grantor and (b) set forth under or above its signature hereto, is the true and correct legal name of the New Subsidiary, its jurisdiction of formation, its organizational identification number (if any) and the location of the chief executive office of the New Grantor.

SECTION 5.  Except as expressly supplemented hereby, the Domestic Security Agreement shall remain in full force and effect.

SECTION 6.  THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 7.  In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Domestic Security Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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 8.  All communications and notices hereunder shall be in writing and given as provided in Section 10.01 of the Credit Agreement. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature below.

SECTION 9.  The New Grantor agrees to reimburse the Collateral 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 Collateral Agent.

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IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Domestic Security Agreement as of the day and year first above written.

[Name Of New Grantor],
By:
	Name:
	Title:
Address:
Organizational I.D.:
GENERAL ELECTRIC CAPITAL CORPORATION, as the Collateral Agent,
By:
	Name:
	Title:  Duly Authorized Signatory

SCHEDULE I

to Supplement No.       to the

Domestic Security Agreement

LOCATION OF COLLATERAL

Description Location

EX-10.23

Exhibit 10.23

AMENDED AND RESTATED CANADIAN SECURITY AGREEMENT

AMENDED AND RESTATED CANADIAN SECURITY AGREEMENT dated as of November 21, 2005 (as it may be amended, restated, supplemented or modified from time to time, this “Agreement”), among the entities listed on the signature page hereof (collectively referred to as the “Grantors” and individually as a “Grantor”) and GENERAL ELECTRIC CAPITAL CORPORATION, as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined herein).

W I T N E S S E T H:

WHEREAS, the Parent Borrower and the Domestic Subsidiary Borrowers (as defined in the Prior Credit Agreement described below) are parties to that certain Credit Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Credit Agreement”), among the Parent Borrower, the Canadian Subsidiary Borrower, the Lenders party thereto (the “Prior Lenders”), Credit Suisse First Boston, acting through its Cayman Islands Branch, as Administrative Agent and Documentation Agent (the “Prior Administrative Agent”), Deutsche Bank Trust Company Americas, as Collateral Agent (the “Prior Collateral Agent”), General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent;

WHEREAS, the Grantors and the Prior Administrative Agent are parties to that certain Canadian Security Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Canadian Security Agreement”), pursuant to which each Grantor granted to the Collateral Agent a security interest in the Collateral (as defined in the Prior Canadian Security Agreement) to secure the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations; and

WHEREAS, the Prior Collateral Agent and the trustees for the holders of the Senior Secured Discount Notes and the Existing Senior Secured Notes entered into an Intercreditor Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), which confirms the relative priority of the security interests of the Secured Parties, the holders of the Senior Secured Discount Notes and the holders of the Existing Senior Secured Notes in the Collateral;

WHEREAS, prior to the execution of this Agreement, the Prior Collateral Agent resigned as “Collateral Agent” under the Prior Credit Agreement, the Security Documents (as defined in the Prior Credit Agreement) and the other Loan Documents (as defined in the Prior Credit Agreement) and the Collateral Agent succeeded the Prior Collateral Agent as the “Collateral Agent” thereunder, all pursuant to that certain Consent and Amendment dated as of March 8, 2004 by and among the Prior Administrative Agent, the Prior Collateral Agent, the Collateral Agent, Deutsche Bank Trust Company Americas, as replaced Issuing Bank, LaSalle Business Credit, LLC, as replacement Issuing Bank, the Borrowers and the Prior Lenders; and

WHEREAS, the parties wish to amend and restate the Prior Credit Agreement in the form of that certain Amended and Restated Credit Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Parent Borrower, the Canadian Subsidiary Borrower, the Domestic Subsidiary Borrowers party thereto, the Lenders party thereto, Morgan Stanley Senior Funding, Inc., as Domestic B Agent, the Collateral Agent and General Electric Capital Corporation, as Domestic A Agent and Administrative Agent;

WHEREAS, in connection with the amendment and restatement of the Prior Credit Agreement, the parties hereto desire to amend and restate the Prior Canadian Security Agreement in its entirety as set forth herein; and

WHEREAS, 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, in an amount up to $140,000,000, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement; and

WHEREAS, pursuant to the Amended and Restated Guarantee Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Guarantee Agreement”), certain of the Guarantors have agreed to guarantee, among other things, all of the obligations of the Borrowers under the Credit Agreement; and

WHEREAS, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit under the Credit Agreement are conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to secure (a) the due and punctual payment by the Borrowers of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment, or otherwise, (ii) each payment required to be made by the Borrowers under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of each Loan Party to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of each Loan Party, monetary or otherwise, under each Swap Agreement that (i) is effective on the Effective Date with a counterparty that is a Lender (or an Affiliate of a Lender) as of the Effective Date or (ii) is entered into after the Effective Date with any counterparty that is a Lender (or an Affiliate thereof) at the time such Swap Agreement is entered into and (d) the due and punctual payment and performance of all monetary obligations of each Loan Party in respect of overdrafts and related liabilities owed to any of the Lenders (or any Affiliates thereof) or Wachovia Bank, National Association (or any Affiliates thereof) arising from treasury,

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depositary and cash management services or in connection with any automated clearinghouse transfers of funds (all the monetary and other obligations described in the preceding clauses (a) through (d) being collectively called the “Obligations”).

ACCORDINGLY, each of the Grantors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agrees to amend and restate the Prior Canadian Security Agreement as follows:

ARTICLE I

Definitions

SECTION 1.01.      Definition of Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement.

SECTION 1.02.      Definition of Certain Terms Used Herein. As used herein, the following terms shall have the following meanings:

“Account Debtor” shall mean any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.

“Accounts” shall mean any and all right, title and interest of any Grantor to payment for goods and services sold or leased, including any such right evidenced by chattel paper, whether due or to become due, whether or not it has been earned by performance, and whether now or hereafter acquired or arising in the future, including accounts receivable from Affiliates of the Grantors.

“Accounts Receivable” shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired.

“Cash Concentration Account” shall mean, with respect to any Grantor, the cash concentration account maintained by such Grantor with the Collateral Agent, to which such Grantor will cause to be transferred, on each Business Day, amounts deposited in the Collection Deposit Accounts on such Business Day, as and to the extent provided in Section 5.01.

“Chattel Paper” shall mean all “chattel paper” as such term is defined in the PPSA.

“Collateral” means all of the present and future undertaking, personal property (including any personal property that may be described in any Schedule to this Agreement or any schedules, documents or listings that a Grantor may from time to time sign and provide to the Collateral Agent in connection with this Agreement) of the Grantor (including all such property at any time owned, leased or licensed by the Grantor, or in which the Grantor at any time has any interest or to which the Grantor is or may at any time become entitled) and all Proceeds thereof, wherever located including, without limiting the generality of the foregoing, the following:

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(a)           all Accounts Receivable;

(b)           all Chattel Paper;

(c)           all Documents;

(d)           all Equipment;

(e)           all fixtures;

(f)            all General Intangibles;

(g)           all Instruments;

(h)           all Inventory;

(i)            all money, cash and cash accounts;

(j)            all Investment Property;

(k)           all books and records pertaining to the Collateral;

(l)            all letter-of-credit rights; and

(m)          to the extent not otherwise included, all Proceeds and products of any and all of the foregoing.

“Collateral Proceeds Account” shall mean an account maintained by and in the name of the Administrative Agent, for purposes of this Agreement and the Credit Agreement.

“Collection Deposit Accounts” shall mean the respective collection accounts maintained by the Collection Deposit Banks pursuant to the Collection Deposit Letter Agreements and into which the Grantors will deposit or cause to be deposited all Daily Receipts, as and to the extent provided in Section 5.01.

“Collection Deposit Bank” shall mean, at any time, any financial institution then serving as a “Collection Deposit Bank” as provided in Section 5.01.

“Collection Deposit Letter Agreement” shall mean an agreement among the applicable Grantor, a Collection Deposit Bank and the Collateral Agent, in form and substance reasonably satisfactory to the Collateral Agent, pursuant to which such Collection Deposit Bank shall maintain one or more Collection Deposit Accounts, as such Collection Deposit Letter Agreement may be amended, modified or supplemented from time to time.

“Consumer Goods” shall mean goods that are used or bought for use primarily for personal, family or household purposes.

“Copyright License” shall mean any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by any Grantor

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or which such Grantor otherwise has the right to license, or granting any right to such Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.

“Copyrights” shall mean all of the following now owned or hereafter acquired by any Person: (a) all copyright rights in any work subject to the copyright laws of the United States or Canada, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or Canada, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office or the Canadian Intellectual Property Office, including those listed on Schedule II.

“Credit Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“Credit Card Payments” shall mean all payments received or receivable by or on behalf of any Grantor in respect of sales of Inventory paid for by credit card charges, including payments from financial institutions that process credit card transactions for any of the Grantors.

“Daily Receipts” shall mean all amounts received by the Grantors, whether in the form of cash, checks, any moneys received or receivable in respect of charges made by means of credit cards, and other negotiable instruments, in each case as a result of the sale of Inventory or in respect of Accounts Receivable.

“Documents” shall mean all instruments, files, records, ledger sheets and documents covering or relating to any of the Collateral.

“Entitlement Holder” shall mean a Person identified in the records of a Security Intermediary as the Person having a Security Entitlement against the Security Intermediary.

“Equipment” shall mean all “equipment” as such term is defined in the PPSA, and in any event, all equipment, furniture, fixtures and furnishings, including tools, parts and supplies of every kind and description, and all improvements, accessions or appurtenances thereto, that are now or hereafter owned by any Grantor.

“Exigent Circumstances” means (a) a fraud has been committed by any Loan Party in connection with the Obligations, including any withholding of collections of accounts receivable or other proceeds of Collateral in violation of the terms of the Loan Documents, or (b) an event or circumstance that, in the commercially reasonable judgment of any Agent is reasonably likely to cause a material and imminent diminution in the value of the Collateral or materially and imminently threatens the ability of such Agent to realize upon all or any material portion of the Collateral.

“Farm Products” shall mean goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and  which are: (a) crops grown, growing or to be grown, including: (i) crops produced on trees, vines and bushes; and (ii) aquatic goods produced in aquacultural operations; (b) livestock, born or unborn, including aquatic

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goods produced in aquacultural operations; (c) supplies used or produced in a farming operation; and (d) products of crops or livestock in their unmanufactured states.

“Financial Asset” shall mean (a) a Security, (b) an obligation of a Person or a share, participation or other interest in a Person or in property or an enterprise of a Person, which is, or is of a type, dealt with in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment or (c) any property that is held by a Security Intermediary for another Person in a Securities Account. As the context requires, the term Financial Asset shall mean either the interest itself or the means by which a Person’s claim to it is evidenced, including a certificated or uncertificated Security, a certificate representing a Security or a Security Entitlement.

“General Funds Account” shall mean an account maintained by the Parent Borrower, to which the Administrative Agent will, subject to the terms and conditions set forth herein, cause to be transferred certain amounts on deposit in the Collateral Proceeds Account.

“General Intangibles” shall mean all “intangibles” as such term is defined in the PPSA, and in any event, with respect to any Grantor, all choses in action and causes of action and all other assignable intangible personal property of any Grantor of every kind and nature (other than Accounts Receivable) now owned or hereafter acquired by any Grantor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, [Swap Agreements] and other agreements but excluding contract rights in contracts which contain an enforceable prohibition on assignment or the granting of a security interest), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts Receivable.

“Goods” shall mean all things that are movable when a security interest attaches. This term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing or to be grown, evne if the corps are produced on trees, vines, or bushes, and (v) manufactured homes. This term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods in such a manner that is customarily is considered part of the goods, or (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods. The term does not include a computer program embedded in goods that consists solely of the medium in which the program is embedded. The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money or oil, gas, or other minerals before extraction.

“Instrument” shall mean “instrument” as such term is defined in the PPSA.

“Intellectual Property” shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or

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proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation and registrations, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

“Intellectual Property Rights” shall have the meaning assigned to such term in Section 3.01.

“Inventory” shall mean all “inventory” as such term is defined in the PPSA, and in any event, all goods of any Grantor, whether now owned or hereafter acquired, held for sale or lease, or furnished or to be furnished by any Grantor under contracts of service, or consumed in any Grantor’s business, including raw materials, intermediates, work in process, packaging materials, finished goods, semi-finished inventory, scrap inventory, manufacturing supplies and spare parts, and all such goods that have been returned to or repossessed by or on behalf of any Grantor.

“Investment Property” shall mean all Securities (whether certificated or uncertificated), Security Entitlements and Securities Accounts, whether now owned or hereafter acquired by any Grantor.

“License” shall mean any Patent License, Trademark License, Copyright License or other franchise agreement, license or sublicense to which any Grantor is a party, including those listed on Schedule III.

“Lien Enforcement Action” means (a) any action by any Agent or Lender to foreclose on the Lien of such Person in any of the Collateral or exercise any right of repossession, levy, attachment, setoff or liquidation against such Collateral, (b) any action by any Agent or Lender to take possession of, sell or otherwise realize (judicially or non-judicially) upon any of the Collateral (including by setoff or notification of account debtors, but excluding any Ordinary Course Collections), or (c) the commencement by any Agent or Lender of any legal proceedings against or with respect to any of the Collateral to facilitate the actions described in (a) and (b) above.

“Obligations” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“PPSA” shall mean the Personal Property Security Act (Ontario), as such legislation may be amended, renamed or replaced from time to time (and includes all regulations from time to time made under such legislation).

“Patent License” shall mean any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

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“Patents” shall mean all of the following now owned or hereafter acquired by any Person: (a) all letters patent of the United States or Canada, all registrations and recordings thereof, and all applications for letters patent of the United States or Canada, including registrations, recordings and pending applications in the United States Patent and Trademark Office or the Canadian Intellectual Property Office, including those listed on Schedule IV, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

“Perfection Certificate” shall mean a certificate substantially in the form of Annex 1 (or any other form approved by the Collateral Agent), completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer and the chief legal officer of the Parent Borrower.

“Proceeds” shall mean all “proceeds” as such term is defined in the PPSA and, in any event, shall include with respect to any Grantor any consideration received from the sale, exchange, license, lease or other disposition of any asset or property that constitutes Collateral, any value received as a consequence of the possession of any Collateral and any payment received from any insurer or other person or entity as a result of the destruction, loss, theft, damage or other involuntary conversion of whatever nature of any asset or property which constitutes Collateral, and shall include, (a) any claim of any Grantor against any third party for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) (i) past, present or future infringement of any Patent now or hereafter owned by any Grantor, or licensed under a Patent License, (ii) past, present or future infringement or dilution of any Trademark now or hereafter owned by any Grantor or licensed under a Trademark License or injury to the goodwill associated with or symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past, present or future breach of any License and (iv) past, present or future infringement of any Copyright now or hereafter owned by any Grantor or licensed under a Copyright License and (b) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

“Receiver” shall mean a receiver, a manager or a receiver and manager.

“Secured Parties” shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent and each of the other Agents, (d) the Issuing Bank, (e) each counterparty to a Swap Agreement with a Loan Party the obligations under which constitute Obligations, (f)the beneficiaries of each indemnification obligation undertaken by any Grantor under any Loan Document, (g) each lender in respect of overdrafts and related liabilities owed to any of the Lenders (or any Affiliates thereof) and arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds, (h) Wachovia Bank, National Association (or any Affiliates thereof) in respect of overdrafts and related liabilities owed to Wachovia Bank, National Association (or any Affiliates thereof) and arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds and (i) the permitted successors and assigns of each of the foregoing.

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“Securities” shall mean the plural of “security” as such term is defined in the PPSA, and in any event, any obligations of an issuer or any shares, participations or other interests in an issuer or in property or an enterprise of an issuer which (a) are represented by a certificate representing a security in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer, (b) are one of a class or series or by its terms is divisible into a class or series of shares, participations, interests or obligations or (c)(i) are, or are of a type, dealt with or traded on securities exchanges or securities markets or (ii) are a medium for investment.

“Securities Account” shall mean an account to which a Financial Asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise rights that comprise the Financial Asset.

“Security Entitlements” shall mean the rights and property interests of an Entitlement Holder with respect to a Financial Asset.

“Security Interest” shall have the meaning assigned to such term in Section 2.01.

“Security Intermediary” shall mean (a) a clearing corporation or (b) a Person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity.

“Trademark License” shall mean any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

“Trademarks” shall mean all of the following now owned or hereafter acquired by any Person: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United States or the Canadian Intellectual Property Office, and all extensions or renewals thereof, including those listed on Schedule V, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

“U.S.$” refers to the lawful currency of the United States of America.

“U.S. Intellectual Property” shall have the meaning assigned to such term in Section 3.02(b).

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

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ARTICLE II

Security Interest

SECTION 2.01.      Security Interest. (a) As general and continuing collateral security for the due payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all Obligations, each Grantor hereby mortgages, charges and assigns to the Collateral Agent, and grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest (the “Security Interest”) in, the Collateral.

(b)           The grant of any Security Interest in respect of the Collateral shall not include with respect to any Grantor, any item of property to the extent the grant by such Grantor of a security interest pursuant to this Agreement in such Grantor’s right, title and interest in such item of property is prohibited by an applicable enforceable contractual obligation (including but not limited to a Capital Lease Obligation) or requirement of law or would give any other Person the enforceable right to terminate its obligations with respect to such item of property and provided, further, that the limitation in the foregoing proviso shall not affect, limit, restrict or impair the grant by any Grantor of a security interest pursuant to this Agreement in any money or other amounts due or to become due under any Account, contract, agreement or General Intangible. In addition, the Security Interests created by this Agreement do not extend to the last day of the term of any lease or agreement for lease of real property. Such last day shall be held by the Grantor in trust for the Collateral Agent and, on the exercise by the Collateral Agent of any of its rights under this Agreement following the occurrence and during the continuance of an Event of Default, will be assigned by the Grantor as directed by the Collateral Agent.

(c)           Each Grantor confirms that value has been given by the Collateral Agent and the other Secured Parties to the Grantor, that the Grantor has rights in the Collateral (other than after-acquired property) and that the Grantor and the Collateral Agent have not agreed to postpone the time for attachment of the Security Interests created by this Agreement to any of the Collateral.

(d)           Each Grantor hereby irrevocably authorizes the Collateral Agent, in accordance with, and to the extent consistent with, the Intercreditor Agreement, at any time and from time to time to file in any relevant jurisdiction any financing statements with respect to the Collateral or any part thereof and amendments thereto. Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any financing statements or amendments thereto if filed prior to the date hereof.

The Collateral Agent is further authorized to file with the United States Patent and Trademark Office, the United States Copyright Office or the Canadian Intellectual Property Office such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest in and to the Intellectual Property granted by each Grantor, without the signature of any Grantor (but, prior to the occurrence of any Event of Default or Default, the Collateral Agent shall provide notice of such filing to such Grantor), and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

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SECTION 2.02.      No Assumption of Liability. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral.

ARTICLE III

Representations and Warranties

The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that:

SECTION 3.01.      Title and Authority. Each Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval which has been obtained or the failure of which to obtain could not reasonably be expected to have a Material Adverse Effect.

Each Grantor further represents and warrants that all Intellectual Property owned by such Grantor, and all rights of the Grantor pursuant to any Trademark License, Patent License or Copyright License to use any Intellectual Property (collectively, “Intellectual Property Rights”), are described in the attached schedules and the Perfection Certificate. To the best of the Grantor’s knowledge, each such Intellectual Property Right is valid, subsisting, unexpired, enforceable and has not been abandoned. Except as set out in the Perfection Certificate and the schedules hereto, none of such Intellectual Property Rights has been licensed or franchised by the Grantor to any Person.

SECTION 3.02.      Filings. (a) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete. Personal Property Security Act financing statements in each relevant jurisdiction are all the filings, recordings and registrations (other than filings, recordings and registrations required to be made in the United States Patent and Trademark Office, the United States Copyright Office or the Canadian Intellectual Property Office in order to perfect the Security Interest in Collateral consisting of Intellectual Property) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in any relevant jurisdiction, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements and such filings, recordings and registrations as may be necessary to perfect the Security Interest as a result of any event described in Section 5.03 of the Credit Agreement.

(b)           Each Grantor represents and warrants that fully executed security agreements in the form hereof (or a fully executed short-form agreement in form and substance reasonably

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satisfactory to the Collateral Agent) and containing a description of all Collateral consisting of Intellectual Property of such Grantor acquired or developed in the United States (“U.S. Intellectual Property”) shall have been received and recorded (i) on or before the date of execution of this Agreement with respect to United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights owned by the Grantors prior to November 21, 2005 by the United States Patent and Trademark Office and the United States Copyright Office and (ii) within 10 days after the execution of this Agreement with respect to United States Patents, United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights by the United States Patent and Trademark Office and the United States Copyright Office acquired by the Grantors after November 21, 2005, in each case pursuant to 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. §205 and the regulations thereunder, as applicable, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral consisting of U.S. Intellectual Property in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Collateral consisting of U.S. Intellectual Property (or registration or application for registration thereof) acquired or developed after the date hereof).

SECTION 3.03.      Validity of Security Interest. The Security Interest constitutes (a) a legal and valid security interest in all the Collateral securing the payment and performance of the Obligations, (b) subject to the filings described in Section 3.02, a perfected security interest in all Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States or Canada (or any political subdivision of either) pursuant to the Uniform Commercial Code, the PPSA or other applicable law in such jurisdictions and (c) a security interest that shall be perfected in all Collateral in which a security interest may be perfected in the United States Patent and Trademark Office and the United States Copyright Office upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the period provided in Section 3.02(b) pursuant to 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. § 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction. The Security Interest is and shall be prior to any other Lien on any of the Collateral, other than Liens expressly permitted to be prior to the Security Interest pursuant to Section 6.03 of the Credit Agreement.

SECTION 3.04.      Absence of Other Liens. Except for the Security Interest created by this Agreement and other Liens expressly permitted pursuant to Section 6.03 of the Credit Agreement, the Grantors own (or, with respect to any leased or licensed property forming part of the Collateral, hold a valid leasehold or licensed interest in) the Collateral free and clear of any Liens. No security agreement, financing statement or other notice with respect to any or all of the Collateral is on file or on record in any public office, except for filings in favour of the Collateral Agent or with respect to Liens expressly permitted pursuant to Section 6.03 of the Credit Agreement.

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ARTICLE IV

Covenants

SECTION 4.01.      Records. Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Collateral owned by it as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Collateral.

SECTION 4.02.      Protection of Security. Each Grantor shall, at its own cost and expense, take any and all actions necessary to defend title to the Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.03 of the Credit Agreement.

SECTION 4.03.      Further Assurances. Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent.

Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule II, III, IV or V or adding additional schedules hereto to specifically identify any registered asset or item that may constitute Copyrights, Patents or Trademarks; provided, however, that any Grantor shall have the right, exercisable within [30 days] after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its best efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Collateral within [30 days] after the date it has been notified by the Collateral Agent of the specific identification of such Collateral.

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SECTION 4.04.      Inspection and Verification. Subject to the limitations set forth in Section 5.09 of the Credit Agreement, any Agent and such Persons as such Agent may reasonably designate shall have the right, at the Grantors’ own cost and expense, to inspect the Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Collateral is located, to discuss the Grantors’ affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral, including, in the case of Accounts or Collateral in the possession of any third party, by contacting Account Debtors or the third person possessing such Collateral for the purpose of making such a verification. The Agents shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party (it being understood that any such information shall be deemed to be “Information” subject to the provisions of Section 10.12 of the Credit Agreement).

SECTION 4.05.      Taxes; Encumbrances. In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, at its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral and not permitted pursuant to Section 6.03 of the Credit Agreement, and may pay for the maintenance and preservation of the Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this Section 4.05 shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

SECTION 4.06.      Assignment of Security Interest. If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

SECTION 4.07.      Continuing Obligations of the Grantors. Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

SECTION 4.08.      Use and Disposition of Collateral. None of the Grantors shall make or permit to be made an assignment, pledge or hypothecation of the Collateral or shall grant any other Lien in respect of the Collateral, except as expressly permitted by Section 6.03 of the Credit Agreement. Unless and (in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement) until the Collateral Agent shall notify the Grantors that (i) an

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Event of Default shall have occurred and be continuing and (ii) during the continuance thereof the Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Collateral (which notice may be given by telephone if promptly confirmed in writing), the Grantors may use and dispose of the Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Credit Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit any Inventory to be in the possession or control of any warehouseman, bailee, agent or processor at any time, other than Inventory that is in transit by any means, unless such warehouseman, bailee, agent or processor shall have been notified of the Security Interest and each Grantor shall use its best efforts to obtain a written agreement in form and substance reasonably satisfactory to the Collateral Agent to hold the Inventory subject to the Security Interest and the instructions of the Collateral Agent and to waive and release any Lien held by it with respect to such Inventory, whether arising by operation of law or otherwise.

SECTION 4.09.      Limitation on Modification of Accounts. None of the Grantors will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any of the Accounts Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged.

SECTION 4.10.      Insurance. The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with Section 5.07 of the Credit Agreement. Subject to the Intercreditor Agreement, each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. Subject to the Intercreditor Agreement, in the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems reasonably advisable. Subject to the Intercreditor Agreement, all sums disbursed by the Collateral Agent in connection with this Section 4.10, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby.

SECTION 4.11.      Legend. Each Grantor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, its Accounts Receivable and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such

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Accounts Receivable have been assigned to the Collateral Agent for the benefit of the Secured Parties and that the Collateral Agent has a security interest therein.

SECTION 4.12.      Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of its licensees to, do any act, or omit to do any act, whereby any Patent which is material to the conduct of such Grantor’s business may become invalidated or dedicated to the public, and agrees, to the extent practicable, that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

(b)           Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for nonuse, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

(c)           Each Grantor (either itself or through licensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

(d)           Each Grantor shall notify the Collateral Agent promptly if it knows that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or United States Copyright Office for U.S. Intellectual Property, or the Canadian Intellectual Property Office for Intellectual Property) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same.

(e)           In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office for U.S. Intellectual Property or the Canadian Intellectual Property Office for Intellectual Property, unless it (i) in the case of any Patent or Trademark, promptly informs the Collateral Agent and (ii) in the case of any Copyright, gives five (5) Business Days prior written notice thereof to the Collateral Agent, and, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent’s security interest in such Patent, Trademark or Copyright, and, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes (and, prior to the occurrence of any Event of Default or Default, such Grantor shall be notified of such filing), all

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acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

(f)            Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office for U.S. Intellectual Property or the Canadian Intellectual Property Office for Intellectual Property, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

(g)           In the event that any Grantor has reason to believe that any Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Collateral.

(h)           Upon and during the continuance of an Event of Default, each Grantor shall use its reasonable best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all of such Grantor’s right, title and interest thereunder to the Collateral Agent or their designees for the benefit of the Secured Parties in accordance with the Intercreditor Agreement.

SECTION 4.13.      Deposit Accounts. Each Grantor will, on or before the Effective Date, enter into control agreements in form and substance reasonably satisfactory to the Collateral Agent with each depository bank (other than the Collateral Agent) with which it maintains any deposit accounts (other than, prior to the 2004 Notes First Lien Transition Date, the Notes Collateral Account (each as defined in the Intercreditor Agreement)) and thereafter shall cause all cash held by such Grantor (other than, prior to the 2004 Notes First Lien Transition Date, cash held by such Grantor in a Notes Collateral Account in accordance with the terms of the 2004 Indenture (as in effect on the date hereof) to be maintained in such accounts.

SECTION 4.14.      Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of such Grantor in an amount exceeding U.S.$1,000,000, such Grantor shall promptly notify the Collateral Agent thereof and, at the request and option of the Collateral Agent, such Grantor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

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ARTICLE V

Collections

SECTION 5.01.      Cash Management Accounts. (a) Each Grantor will establish and maintain, on or before the Effective Date, (i) one Cash Concentration Account and (ii) one or more Collection Deposit Accounts, in the case of this clause (ii), with the Collateral Agent or with any financial institution selected by such Grantor that (A) is reasonably satisfactory to the Collateral Agent and (B) enters into a Collection Deposit Letter Agreement with respect to the Collection Deposit Accounts of such Grantor with such financial institution. Each financial institution with which a Collection Deposit Account is maintained is referred to herein as a “Collection Deposit Bank”.

(b)           Each Grantor, commencing on the Effective Date, will deposit on each Business Day all Daily Receipts into either (i) a Collection Deposit Account or (ii) a Cash Concentration Account. Each Grantor shall use all reasonable efforts to prevent any funds that are not Daily Receipts from being deposited into, or otherwise commingled with, the funds held in the Collection Deposit Accounts or the Cash Concentration Accounts.

(c)           On each Business Day, all collected funds on deposit in each Collection Deposit Account will be transferred to the applicable Cash Concentration Account to the extent provided in the applicable Collection Deposit Letter Agreement.

(d)           On each Business Day, all collected funds on deposit in the Cash Concentration Accounts will be transferred to the Collateral Proceeds Account to be applied by the Administrative Agent, on behalf of the Borrowers, to prepay Revolving Loans, Swingline Loans and Protective Advances in the manner provided in Section 2.10 of the Credit Agreement, until all outstanding Swingline Loans and Revolving Borrowings have been repaid, and thereafter to be transferred to the General Funds Account, subject to paragraph (f) below.

(e)           No Grantor shall have any control over, or any right or power to withdraw any funds on deposit in, any Collection Deposit Account or Cash Concentration Account; provided, however, that any Grantor may instruct any Collection Deposit Bank to withdraw funds from its Collection Deposit Account to honor ACH instructions of such Grantor to transfer funds to the Cash Concentration Account. The Parent Borrower may at any time withdraw any funds contained in the General Funds Account for use, subject to the provisions of the Credit Agreement, for general corporate purposes.

(f)            Upon the occurrence and during the continuance of an Event of Default, any funds held in the Collection Deposit Accounts, the Cash Concentration Accounts or the Collateral Proceeds Account may be applied as provided in Section 2.17(b) of the Credit Agreement so long as an Event of Default is continuing. The Collateral Agent will not be required to transfer any funds from the Collateral Proceeds Account to the General Funds Account until all Events of Default are cured or waived.

(g)           All payments by any Grantor into any Collection Deposit Account or Cash Concentration Account pursuant to this Article V, whether in the form of cash, checks, notes,

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drafts, bills of exchange, money orders or otherwise, shall be deposited in the relevant Collection Deposit Account or Cash Concentration Account in precisely the form in which received (but with any endorsements of such Grantor necessary for deposit or collection), and until they are so deposited such payments shall be held in trust by such Grantor for and as the property of the Collateral Agent.

SECTION 5.02.      Collections. (a) Each Grantor agrees promptly to notify and direct each Account Debtor and every other Person obligated to make payments with respect to the Accounts Receivable or Inventory to make all such payments directly to a Collection Deposit Account or the applicable Cash Concentration Account (subject to the proviso in the following sentence). Each Grantor shall use all reasonable efforts to cause each Account Debtor and every other Person identified in the preceding sentence to make all payments with respect to the Accounts Receivable or Inventory either directly to a Collection Deposit Account or a Cash Concentration Account; provided that Credit Card Payments shall be made directly to the Cash Concentration Account.

(b)           In the event that a Grantor directly receives any Daily Receipts, notwithstanding the arrangements for payment directly into the Collection Deposit Accounts pursuant to Section 5.02, such remittances shall be held for the benefit of the Collateral Agent and the Secured Parties and shall be segregated from other funds of such Grantor, subject to the Security Interest granted hereby, and such Grantor shall cause such remittances and payments to be deposited into a Collection Deposit Account or a Cash Concentration Account, as applicable, as soon as practicable after such Grantor’s receipt thereof.

(c)           Without the prior written consent of the Collateral Agent, no Grantor shall, under any circumstances whatsoever, change the general instructions given to Account Debtors and other Persons obligated to make payments with respect to the Accounts Receivable or Inventory regarding the deposit of payments with respect to the Accounts Receivable or Inventory in a Collection Deposit Account or a Cash Concentration Account, as applicable. Each Grantor shall, and the Collateral Agent hereby authorizes each Grantor to, enforce and collect all amounts owing with respect to the Accounts Receivable or Inventory for the benefit and on behalf of the Collateral Agent and the other Secured Parties; provided, however, that such privilege may at the option of the Collateral Agent be terminated upon the occurrence and during the continuance of an Event of Default.

ARTICLE VI

Power of Attorney

SECTION 6.01.      Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for each Grantor and in each Grantor’s name or otherwise, for the use and benefit of the Collateral Agent and the Secured Parties, upon the occurrence and during the continuance of an Event of Default (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of,

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give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any Secured Party, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by the Collateral Agent or any Secured Party with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Grantor or (unless such action is the result of gross negligence or willful misconduct) to any claim or action against the Collateral Agent or any Secured Party. It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Grantors for the purposes set forth above is coupled with an interest and is irrevocable. The provisions of this Section shall in no event relieve any Grantor of any of its obligations hereunder or under any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any Secured Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any Secured Party of any other or further right which it may have on the date of this Agreement or hereafter, whether hereunder, under any other Loan Document, by law or otherwise.

Notwithstanding anything in this Article VI to the contrary, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this Article VI unless it does so in accordance with, and to the extent consistent with, the Intercreditor Agreement.

ARTICLE VII

Remedies

SECTION 7.01.      Remedies upon Default. In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or

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otherwise, and whether on an exclusive or nonexclusive basis, any such Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing or contractual arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Collateral and without liability for trespass to enter any premises where the Collateral may be located for the purpose of taking possession of or removing the Collateral and, generally, to exercise any and all rights afforded to a secured party under the PPSA and any other applicable statute, or otherwise available to the Collateral Agent at law or in equity. Without limiting the generality of the foregoing, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Collateral Agent shall give the Grantors such prior written notice of the Collateral Agent’s intention to make any sale of Collateral as may be required by the PPSA or other applicable law. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and

21

released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, the Collateral Agent may (i) proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver or (ii) appoint by instrument in writing one or more Receivers of any Grantor or any or all of the Collateral with such rights, powers and authority (including any or all of the rights, powers and authority of the Collateral Agent under this Agreement) as may be provided for in the instrument of appointment or any supplemental instrument, and remove and replace any such Receiver from time to time to the extent permitted by applicable law. Any Receiver appointed by the Collateral Agent will (for purposes relating to responsibility for the Receiver’s acts or omissions) be considered to be the agent of such Grantor and not of the Collateral Agent.

SECTION 7.02.      Standstill and Enforcement Rights of the Domestic B Agent and the Domestic B Lenders. Notwithstanding any rights or remedies available to the Secured Parties, under any of the Loan Documents, applicable law or otherwise, prior to the Maturity Date, the Domestic B Agent and the Domestic B Lenders shall not exercise any Lien Enforcement Action with respect to any Collateral or exercise any remedies with respect thereto (including, by setoff or notification of account debtors) or commence any legal proceedings against or with respect to any Collateral to facilitate a Lien Enforcement Action; provided, that (i) if the Domestic B Agent determines in its commercially reasonable judgment that Exigent Circumstances exist with respect to the Obligations owing to the Domestic B Lenders or the Collateral, the Domestic B Agent may instruct the Collateral Agent to take any action to enforce its Liens on the Collateral, or (ii) absent the existence of any Exigent Circumstances, upon the occurrence of an Event of Default under the Credit Agreement (A) the Domestic B Agent may instruct the Administrative Agent to accelerate (to the extent not already due) all indebtedness of the Borrowers thereunder and (B) commencing 120 days after the receipt by the Administrative Agent of the demand to so accelerate (or the earlier acceleration of the Loans), the Domestic B Agent may instruct the Collateral Agent to take any action to enforce its Liens on the Collateral, but in any such case, the Domestic B Agent may only make such demand to the Collateral Agent if the Collateral Agent is not itself diligently pursuing in good faith the exercise of its enforcement rights or remedies against, or diligently in good faith attempting to vacate any stay or enforcement of its Lien on such Collateral. Nothing contained in this Section 7.02 shall restrict the Domestic B Agent from engaging consultants and performing audits, examinations, and appraisals of the Collateral in advance of taking any Lien Enforcement Action.

22

SECTION 7.03.      Grant of License to Use Intellectual Property. In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, for the purpose of enabling the Collateral Agent to exercise rights and remedies under this Article at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Grantors) to the extent that such license does not violate any then existing licensing arrangements (to the extent that waivers cannot be obtained) to use, license or sub-license any of the Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof and sufficient rights of quality control in favor of Grantor to avoid the invalidation of the Trademarks subject to the license. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sub-license or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default.

ARTICLE VIII

Miscellaneous

SECTION 8.01.      Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 10.01 of the Credit Agreement. All communications and notices hereunder to any Grantor shall be given to it at its address or telecopy number set forth on Schedule I, with a copy to the Parent Borrower.

SECTION 8.02.      Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.

SECTION 8.03.      Survival of Agreement. All covenants, agreements, representations and warranties made by any Grantor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, and the execution and delivery to the Lenders of any notes evidencing such Loans, regardless of any

23

investigation made by the Lenders or on their behalf, and shall continue in full force and effect until this Agreement shall terminate.

SECTION 8.04.      Binding Effect; Several Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.

SECTION 8.05.      Successors and Assigns. 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 any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

SECTION 8.06.      Collateral Agent’s Expenses; Indemnification. In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, (a) each Grantor jointly and severally agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, disbursements and other charges of its counsel and of any experts or agents, which the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to perform or observe any of the provisions hereof.

(b)           Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees against, and hold each of them harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable fees, disbursements and other charges of counsel, incurred by or asserted against any of them arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating hereto or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses have resulted from the gross negligence or willful misconduct of such Indemnitee.

(c)           Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 8.06shall remain operative and in full force and effect regardless of the termination of this Agreement or

24

any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any Lender. All amounts due under this Section 8.06shall be payable on written demand therefor.

SECTION 8.07.      GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

SECTION 8.08.      Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the Collateral Agent, the Issuing Bank, the Administrative Agent, the other Agents and the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances.

(b)           Neither this Agreement nor any provision hereof may be waived, amended or modified except (i) pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to (A) any consent required in accordance with Section 10.02 of the Credit Agreement and (B) to the limitations in the Intercreditor Agreement or (ii) as provided in the Intercreditor Agreement.

SECTION 8.09.      WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.09.

25

SECTION 8.10.      Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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 8.11.      Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract (subject to Section 8.04), and shall become effective as provided in Section 8.04. Delivery of an executed signature page to this Agreement by facsimile transmission or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof,

SECTION 8.12.      Headings. Article and Section headings used herein are for the purpose of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 8.13.      Jurisdiction; Consent to Service of Process. (a) Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Ontario court or federal court of Canada sitting in such province, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Ontario court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent, the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Grantor or its properties in the courts of any jurisdiction.

(b)           Each Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any Ontario court or federal court of Canada sitting in such province. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c)           Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 8.14.      Termination. (a) This Agreement and the Security Interest shall continue in effect (notwithstanding the fact that from time to time there may be no Obligations

26

outstanding) until (i) the Credit Agreement has terminated pursuant to its express terms and (ii) all of the Obligations (other than contingent obligations for which no claim has been made) have been indefeasibly paid and performed in full (or with respect to any outstanding Letters of Credit, a cash deposit has been delivered to the Administrative Agent as required by the Credit Agreement) and no commitments of the Agents or the Lenders which would give rise to any Obligations are outstanding. Upon payment in full in cash of the outstanding Obligations and the expiration or termination of the Commitments, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantors or any other Person entitled thereto. Upon such termination, the Administrative Agent will authorize the filing of appropriate UCC termination statements to terminate such security interests and shall, at the expense of the Grantors, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the termination of such security interests or the release of such Collateral, as applicable.

(b)           A Grantor shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Grantor shall be automatically released in the event that all the capital stock of such Grantor shall be sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Parent Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer or other disposition (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise.

(c)           Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement, provided that the Required Lenders shall have consented to such transaction (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 10.02 of the Credit Agreement, the security interest in such Collateral shall be automatically released.

(d)           If any of the 2004 Notes First Lien Collateral (as defined in the Intercreditor Agreement) shall become subject to the release provisions set forth in Section 5.l(c) of the Intercreditor Agreement, such Collateral shall be automatically released from the Security Interest to the extent provided in Section 5.1 (c) of the Intercreditor Agreement.

(e)           In connection with any termination or release pursuant to paragraph (a), (b), (c) or (d) above, the Collateral Agent shall execute and deliver to the Grantors, at the Grantors’ expense, all Personal Property Security Act financing change statements and similar documents which the Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of termination statements or release documents pursuant to this Section 8.14 shall be without recourse to or warranty by the Collateral Agent.

SECTION 8.15.      Additional Grantors. Upon execution and delivery by the Collateral Agent and a Subsidiary organized under the laws of Canada or any province thereof of an instrument in the form of Annex 2, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any Grantor hereunder. The rights and

27

obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.

SECTION 8.16.      Subject to Intercreditor Agreement. Notwithstanding anything herein to the contrary, the Lien and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.

SECTION 8.17.      2004 Indenture. The Collateral Agent acknowledges and agrees, on behalf of itself and the Secured Parties, that, any provision of this Agreement to the contrary notwithstanding, until the 2004 Notes First Lien Transition Date (as defined in the Intercreditor Agreement), the Grantors shall not be required to act or refrain from acting with respect to any 2004 Notes First Lien Collateral on which the 2004 Trustee (as defined in the Intercreditor Agreement) has a Lien superior in priority to the Collateral Agent’s Lien thereon in any manner that would result in a default under the terms and provisions of the 2004 Indenture (as defined in the Intercreditor Agreement).

SECTION 8.18.      Reaffirmation of Grantor Obligations. This Agreement constitutes an amendment and restatement of the Prior Canadian Security Agreement. Each of the parties hereto acknowledges and agrees that the Obligations represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the obligations of Grantors under the Prior Canadian Security Agreement. Each of the parties hereto further acknowledges and agrees that this Agreement supercedes and replaces the Prior Canadian Security Agreement but does not extinguish the obligations thereunder and that by entering into and performing its obligations hereunder, this transaction shall not constitute a novation. Each of the parties hereto further acknowledges and agrees that the security interests granted to the Prior Administrative Agent for the benefit of itself and the parties entitled to benefits of the Prior Canadian Security Agreement (including, without limitation, each Lender, the Issuing Bank or any Agent party to the Prior Credit Agreement, and their respective successors and assigns) shall remain outstanding and in full force and effect in accordance with the terms hereof and the other Loan Documents and shall continue to secure the Obligations without interruption or impairment of any kind and all such security interests are hereby ratified, confirmed and continued.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

28

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

GRANTOR:	UNIPLAST INDUSTRIES CO.
	By:
		Name:
		Title:
	PLIANT CORPORATION
	By:
		Name:
		Title:
	PLIANT PACKAGING OF CANADA, LLC
	By:
		Name:
		Title:
	PLIANT SOLUTIONS CORPORATION
	By:
		Name:
		Title:

AMANDED AND RESTATED CANADIAN SECURITY AGREEMENT

COLLATERAL AGENT:	GENERAL ELECTRIC CAPITAL
	CORPORATION, as Collateral Agent
	By:
		Name:
		Title:

30

Schedule I to the

Amended and Restated Canadian Security Agreement

GRANTORS

Grantor	Address for Notices	Fascimile
Uniplast Industries Co.

Schedule I

PLIANT CORPORATION

Copyright Schedule

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		TX142502	11/13/78
Pliant Corporation	Textual Works;Seria1	TX6172	01/06/78	Baby Talk Magazine
		TX10020	01/23/78
		TX36893	02/16/78
		TX28665	03/22/78
		TX63343	04/14/78
		TX47871	05/19/78

Schedule III to the

Amended and Restated Canadian Security Agreement

LICENSES

NIL

Schedule IV to the

Amended and Restated Canadian Security Agreement

PATENTS

NIL

Schedule V to the

Amended and Restated Canadian Security Agreement

TRADEMARKS

CANADIAN TRADEMARKS

Trademark	Registered Owner	Registration Number	Expiration Date
UNIPLAST FILMS & Design	Uniplast Industries Co.	REGISTERED April 16,2003 TMA579648	April 16, 20 18
AQUAWRAP	Uniplast Industries Co.	ABANDONED (SECTION 36) (Registered May 4, 2000)	Abandoned (June 11,2002)
UNIPLAST	Uniplast Industries Co.	REGISTERED May 10, 1998 TMA49 1 154	March 10,2013
BRYTEC	Uniplast Industries Co.	REGISTERED March 2, 1990 TMA366337	March 2, 2005

Annex 2 to the

Amended and Restated Canadian Security Agreement

SUPPLEMENT NO.          dated as of                     , 20        to the Amended and Restated Canadian Security Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Domestic Security Agreement”) dated as of November 21, 2005, each of the parties listed on the signature pages thereto and those additional entities that thereafter become parties thereto (each a “Grantor” and collectively, the “Grantors”) and GENERAL ELECTRIC CAPITAL CORPORATION, as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined therein).

A             Reference is made to (a) the Amended and Restated Credit Agreement dated as of November 21, 2005 (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”), Morgan Stanley Senior Funding, Inc., as Domestic A Agent, General Electric Capital Corporation, as Domestic A Agent and Administrative Agent, and the Collateral Agent, and (b) the Amended and Restated Guarantee Agreement dated as of November 21, 2004 (as amended, supplemented or otherwise modified from time to time, the “Guarantee Agreement”), among, inter alia, the certain Grantors and the Collateral Agent.

B             Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Canadian Security Agreement and the Credit Agreement.

C             The Grantors have entered into the Canadian Security Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Section 8.15 of the Canadian Security Agreement provides that additional Subsidiaries organized under the laws of Canada or any province thereof may become Grantors under the Canadian Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “New Grantor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Canadian Security 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 Collateral Agent and the New Grantor agree as follows:

SECTION 1.           In accordance with Section 8.15 of the Canadian Security Agreement, the New Grantor by its signature below becomes a Grantor under the Canadian Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of the Canadian Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Obligations (as defined in the Canadian Security Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties,

their successors and assigns, a security interest in and lien on all of the New Grantor’s right, title and interest in and to the Collateral (as defined in the Canadian Security Agreement) of the New Grantor. Each reference to a “Grantor” in the Canadian Security Agreement shall be deemed to include the New Grantor. The Canadian Security Agreement is hereby incorporated herein by reference.

SECTION 2.           The New Grantor represents and warrants to the Collateral 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 Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Grantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission or other electronic transmission shall be effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4.           The New Grantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Grantor and (b) set forth under or above its signature hereto, is the true and correct legal name of the New Subsidiary, its jurisdiction of formation, its organizational identification number (if any) and the location of the chief executive office of the New Grantor.

SECTION 5.           Except as expressly supplemented hereby, the Canadian Security Agreement shall remain in full force and effect.

SECTION 6.           THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

SECTION 7.           In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Canadian Security Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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 8.           All communications and notices hereunder shall be in writing and given as provided in Section 10.01 of the Credit Agreement. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature below.

SECTION 9.           The New Grantor agrees to reimburse the Collateral 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 Collateral Agent.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Canadian Security Agreement as of the day and year first above written.

[Name Of New Grantor],
By:
	Name:
	Title:
	Address:
	Organizational I.D.:
GENERAL ELECTRIC CAPITAL CORPORATION, as the Collateral Agent,
By:
	Name:
	Title:
	Address:
	Organizational ID:

SCHEDULE I

to Supplement No.       to the

Amended and Restated Canadian Security Agreement

LOCATION OF COLLATERAL

Description Location

EX-10.24

Exhibit 10.24

AMENDED AND RESTATED DOMESTIC PLEDGE AGREEMENT

AMENDED AND RESTATED DOMESTIC PLEDGE AGREEMENT dated as of November 21, 2005 (as it may be amended, restated, supplemented or modified from time to time, this “Agreement”), among the entities listed on the signature page hereof (collectively referred to as the “Pledgors” and individually as a “Pledgor”) and GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below).

W I T N E S S E T H:

WHEREAS, the Parent Borrower and certain Subsidiaries of the Parent Borrower are parties to that certain Credit Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Credit Agreement”) among Parent Borrower, Uniplast Industries Co., a Nova Scotia corporation (“Canadian Subsidiary Borrower”), certain Domestic Subsidiary Borrowers party thereto, the Lenders party thereto (the “Prior Lenders”), Credit Suisse First Boston, acting through its Cayman Islands Branch, as Administrative Agent and Documentation Agent (the “Prior Administrative Agent”), Deutsche Bank Trust Company Americas, as Collateral Agent (the “Prior Collateral Agent”), General Electric Capital Corporation, as Co-Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent; and

WHEREAS, the Pledgors and the Prior Administrative Agent are parties to that certain Domestic Pledge Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Pledge Agreement”), pursuant to which the Pledgors pledged to the Collateral Agent the Collateral (as defined therein) in order to secure the due and punctual payment and performance of the Obligations; and

WHEREAS, the Prior Collateral Agent and the trustees for the holders of the Senior Secured Discount Notes and the Existing Senior Secured Notes entered into an Intercreditor Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), which confirms the relative priority of the security interests of the Secured Parties, the holders of the Senior Secured Discount Notes and the holders of the Existing Senior Secured Notes in the Collateral; and

WHEREAS, prior to the execution of this Agreement, the Prior Collateral Agent resigned as “Collateral Agent” under the Prior Credit Agreement, the Security Documents (as defined in the Prior Credit Agreement) and the other Loan Documents (as defined in the Prior Credit Agreement) and the Collateral Agent succeeded the Prior Collateral Agent as the “Collateral Agent” thereunder, all pursuant to that certain Consent and Amendment dated as of March 8, 2004 among the Prior Administrative Agent, the Prior Collateral Agent, Deutsche Bank Trust Company Americas, as replaced Issuing Bank, LaSalle Business Credit, LLC, as replacement Issuing Bank, the Borrowers and the Prior Lenders; and

WHEREAS, the parties wish to amend and restate the Prior Credit Agreement in the form of that certain Amended and Restated Credit Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Credit

Agreement”), among the Parent Borrower, the Canadian Subsidiary Borrower, the Domestic Subsidiary Borrowers party thereto, the Lenders party thereto, Morgan Stanley Senior Funding, Inc., as Domestic B Agent, the Collateral Agent and General Electric Capital Corporation, as Domestic A Agent and Administrative Agent; and

WHEREAS, in connection with the amendment and restatement of the Prior Credit Agreement, the parties hereto desire to amend and restate the Prior Pledge Agreement in its entirety as set forth herein; and

WHEREAS, 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; and

WHEREAS, pursuant to the Amended and Restated Guarantee Agreement dated as of even date herewith (as amended, restated supplemented or otherwise modified from time to time, the “Guarantee Agreement”), certain of the Pledgors have agreed to guarantee, among other things, all the obligations of the Borrowers under the Credit Agreement; and

WHEREAS, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Pledgors of a Pledge Agreement in the form hereof to secure (a) the due and punctual payment by the Borrowers of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrowers under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of each Loan Party to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of the Borrowers, monetary or otherwise, under each Swap Agreement that (i) is effective on the Effective Date with a counterparty that is a Lender (or an affiliate of a Lender) as of the Effective Date or (ii) is entered into after the Effective Date with any counterparty that is a Lender (or an Affiliate thereof) at the time such Swap Agreement is entered into and (d) the due and punctual payment and performance of all monetary obligations of each Loan Party in respect of overdrafts and related liabilities owed to any of the Lenders (or any Affiliates thereof) or Wachovia Bank, National Association (or any Affiliates thereof) arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds (all the monetary and other obligations referred to in the preceding clauses (a) through (d) being referred to collectively as the “Obligations”).

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ACCORDINGLY, each of the Pledgors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agrees that capitalized terms used herein and not defined herein shall have meaning assigned to such terms in the Credit Agreement and agrees to amend and restate the Prior Pledge Agreement in its entirety as follows:

SECTION 1.           Pledge. As security for the payment and performance, as the case may be, in full of the Obligations, each Pledgor hereby transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over and delivers, unto the Collateral Agent, its successors and assigns, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in all of the Pledgor’s right, title and interest in, to and under (a) the shares of capital stock and other Equity Interests owned by it and listed on Schedule II hereto and any Equity Interests obtained in the future by the Pledgor and the certificates representing all such shares (the “Pledged Stock”); (b)(i) the debt securities listed opposite the name of the Pledgor on Schedule II hereto, (ii) any debt securities in the future issued to the Pledgor and (iii) the promissory notes and any other instruments evidencing such debt securities (the “Pledged Debt Securities”); (c) subject to Section 5, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed, in respect of, in exchange for or upon the conversion of the securities referred to in clauses (a) and (b) above; (d) subject to Section 5, all rights and privileges of the Pledgor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above, including any interest of such Pledgor in the entries on the books of the issuer of the Pledged Stock or any financial intermediary pertaining to the Pledged Shares; and (e) all proceeds of any of the foregoing (the items referred to in clauses (a) through (e) above being collectively referred to as the “Collateral”). Notwithstanding any of the foregoing, the Pledged Stock shall not include (i) more than 65% of the issued and outstanding shares of common stock of any Foreign Subsidiary that is not a Loan Party or (ii) to the extent that applicable law requires that a Subsidiary of the Pledgor issue directors’ or nominee’s qualifying shares, such qualifying shares.

Upon delivery to the Collateral Agent, (a) any stock certificates, notes or other securities now or hereafter included in the Collateral (the “Pledged Securities”) shall be accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (b) all other property comprising part of the Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities then being pledged hereunder, which schedule shall be attached hereto as Schedule II and made a part hereof. Each schedule so delivered shall supplement any prior schedules so delivered.

TO HAVE AND TO HOLD the Collateral, in accordance with, and to the extent consistent with, the Intercreditor Agreement, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

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SECTION 2.           Delivery of the Collateral.

(a)  Each Pledgor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Securities and any and all certificates or other instruments or documents representing the Collateral that have not been provided to the Prior Collateral Agent prior to the date hereof.

(b)           Each Pledgor will cause any Indebtedness for borrowed money owed to the Pledgor by the Borrower or any Subsidiary to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent pursuant to the terms hereof.

SECTION 3.           Representations, Warranties and Covenants. Each Pledgor hereby represents, warrants and covenants, as to itself and the Collateral pledged by it hereunder, to and with the Collateral Agent that:

(a)           the Pledged Stock represents that percentage as set forth on Schedule II of the issued and outstanding shares of each class of the capital stock of the issuer with respect thereto;

(b)           except for the security interest granted hereunder and except as permitted by the Credit Agreement, the Pledgor (i) is and will at all times continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Collateral, other than pursuant hereto and (iv) subject to Section 5, will cause any and all Collateral, whether for value paid by the Pledgor or otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder;

(c)           the Pledgor (i) has the power and authority to pledge the Collateral in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than the Lien created by this Agreement), however arising, of all Persons whomsoever;

(d)           no consent which has not been obtained of any other Person (including stockholders or creditors of any Pledgor) and no consent or approval which has not been obtained of any Governmental Authority or any securities exchange is necessary to the validity of the pledge effected hereby;

(e)           by virtue of the execution and delivery by the Pledgors of this Agreement and the Intercreditor Agreement, when the Pledged Securities, certificates or other documents representing or evidencing the Collateral are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a valid and perfected first lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations;

(f)            the pledge effected hereby is effective to vest in the Collateral Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in the Collateral as set forth herein;

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(g)           all of the Pledged Stock has been duly authorized and validly issued and is fully paid and nonassessable;

(h)           all information set forth herein relating to the Pledged Stock is accurate and complete in all material respects as of the date hereof; and

(i)            the pledge of the Pledged Stock pursuant to this Agreement does not violate Regulation U or X of the Federal Reserve Board or any successor thereto as of the date hereof.

SECTION 4.           Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement and the Intercreditor Agreement.

The applicable Pledgor shall, for each interest in any limited liability company or limited partnership controlled by such Pledgor and pledged hereunder that is represented by a certificate, in the organizational documents of such limited liability company or limited partnership, cause the issuer of such interests to elect to treat such interests as a “security” within the meaning of Article 8 of the Uniform Commercial Code of its jurisdiction of organization or formation, as applicable, by including in its organizational documents language substantially similar to the following and, accordingly, such interests shall be governed by Article 8 of the Uniform Commercial Code:

“The Partnership/Company hereby irrevocably elects that all membership interests in the Partnership/Company shall be securities governed by Article 8 of the Uniform Commercial Code of [jurisdiction of organization or formation, as applicable]. Each certificate evidencing partnership/membership interests in the Partnership/Company shall bear the following legend:  “This certificate evidences an interest in [name of Partnership/LLC] and shall be a security for purposes of Article 8 of the Uniform Commercial Code.”  No change to this provision shall be effective until all outstanding certificates have been surrendered for cancelation and any new certificates thereafter issued shall not bear the foregoing legend.

For each interest in any limited liability company or limited partnership controlled by any Pledgor and pledged hereunder that is not represented by a certificate, the applicable Pledgor agrees that it shall not, (a) at any time, elect to treat any such interest as a “security” within the meaning of Article 8 of the Uniform Commercial Code of its jurisdiction of organization or formation, as applicable, or (b) issue any certificate representing such interest, unless (i) in the case of clause (a), such Pledgor provides prior written notification to the Collateral Agent of such election and (ii) in the case of clause (b), such Pledgor immediately complies with the

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requirements of the second paragraph of this Section 4 with respect to such interest and immediately pledges any such certificate to the Collateral Agent pursuant to the terms hereof.

If any securities, whether certificated or uncertificated, or other investment property now or hereafter acquired by any Pledgor (other than Securities or other investment property held in the Notes Collateral Account (as defined in the Intercreditor Agreement)) are held by such Pledgor or its nominee through a securities intermediary or commodity intermediary, such Pledgor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such securities intermediary or (as the case may be) commodity intermediary to agree to comply with entitlement orders or other instructions from the Collateral Agent to such securities intermediary as to such security entitlements, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such commodity intermediary, in each case without further consent of any Pledgor or such nominee, or (ii) in the case of Financial Assets or other Investment Property (each as defined in the NY UCC) held through a securities intermediary, arrange for the Collateral Agent to become the entitlement holder with respect to such investment property, with the Pledgor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such investment property. The Collateral Agent agrees with each Pledgor that the Collateral Agent shall not give any such entitlement orders or instructions or directions to any such issuer, securities intermediary or commodity intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Pledgor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur. The provisions of this paragraph shall not apply to any financial assets credited to a securities account for which the Collateral Agent is the securities intermediary.

SECTION 5.           Voting Rights; Dividends and Interest, etc.  (a)  In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, unless and until an Event of Default shall have occurred and be continuing:

(i)            Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such Pledgor will not be entitled to exercise any such right if the result thereof could materially and adversely affect the rights inuring to a holder of the Pledged Securities or the rights and remedies of any of the Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

(ii)           The Collateral Agent shall execute and deliver to each Pledgor, or cause to be executed and delivered to each Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above and to receive the cash dividends it is entitled to receive pursuant to subparagraph (iii) below.

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(iii)          Each Pledgor shall be entitled to receive and retain any and all cash dividends, interest and principal paid on the Pledged Securities to the extent and only to the extent that such cash dividends, interest and principal are permitted by, and otherwise paid in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws. All noncash dividends, interest and principal, and all dividends, interest and principal paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid-in surplus, and all other distributions (other than distributions referred to in the preceding sentence) made on or in respect of the Pledged Securities, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement).

(b)           In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to dividends, interest or principal that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest or principal. All dividends, interest or principal received by the Pledgor contrary to the provisions of this Section 5 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement).  Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall, subject to the provisions of the Intercreditor Agreement, be retained by the Collateral Agent, in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 7. After all Events of Default have been cured or waived, the Collateral Agent shall, within [five] Business Days after all such Events of Default have been cured or waived, repay to each Pledgor all cash dividends, interest or principal (without interest), that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) above and which remain in such account.

(c)           In accordance with, and to the extent consistent with, the terms of, the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that, and to the extent consistent with the Intercreditor Agreement, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance

7

of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived, such Pledgor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above.

SECTION 6.           Remedies upon Default. In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, subject to applicable regulatory and legal requirements, the Collateral Agent may sell the Collateral, or any part thereof, at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby waive all rights of redemption, stay, valuation and appraisal any Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Collateral Agent shall give a Pledgor 10 days’ prior written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-611 of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of such Pledgor’s Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid in full by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Section 6, any Secured Party may bid for or purchase, free from any right of redemption, stay or appraisal on the part of any Pledgor (all said rights being also hereby waived and released), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to it from

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such Pledgor as a credit against the purchase price, and it may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to such Pledgor therefor. For purposes hereof, (a) a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof, (b) the Collateral Agent shall be free to carry out such sale pursuant to such agreement and (c) such Pledgor shall not be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-611 of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions.

SECTION 7.           Application of Proceeds of Sale. In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, the proceeds of any sale of Collateral pursuant to Section 6, as well as any Collateral consisting of cash, shall be applied by the Collateral Agent pursuant to Section 2.17(b) of the Credit Agreement.

SECTION 8.           Reimbursement of Collateral Agent.

(a)           In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, the Pledgors agree to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, other charges and disbursements of its counsel and of any experts or agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or observe any of the provisions hereof.

(b)           Without limitation of its indemnification obligations under the other Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the Indemnitees (as defined in Section 10.03 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, other charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby or (ii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or wilful misconduct of such Indemnitee.

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(c)           Any amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 8 shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 8 shall be payable on written demand therefor and shall bear interest at the rate specified in Section 2.12(c) of the Credit Agreement.

SECTION 9.           Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor, upon the occurrence and during the continuance of a Default, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral, to endorse checks, drafts, orders and other instruments for the payment of money payable to the Pledgor representing any interest or dividend or other distribution payable in respect of the Collateral or any part thereof or on account thereof and to give full discharge for the same, to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer and to make any agreement respecting, or otherwise deal with, the same; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct.

Notwithstanding anything in this Section 9 to the contrary, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 9 unless it does so in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement.

SECTION 10.         Waivers; Amendment.

(a)           No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under

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the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or consent to any departure by any Pledgor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Pledgor in any case shall entitle such Pledgor to any other or further notice or demand in similar or other circumstances.

(b)           Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Pledgor or Pledgors with respect to which such waiver, amendment or modification is to apply, subject to (i) any consent required in accordance with Section 10.02 of the Credit Agreement and (ii) the limitations in the Intercreditor Agreement.

SECTION 11.         Securities Act, etc. In view of the position of the Pledgors in relation to the Pledged Securities, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Securities, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Securities under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Securities, limit the purchasers to those who will agree, among other things, to acquire such Pledged Securities for their own account, for investment, and not with a view to the distribution or resale thereof. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price that the Collateral Agent, in its discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 11 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

SECTION 12.         Registration, etc. Each Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default, if, in accordance with, and to the extent

11

consistent with, the terms of the Intercreditor Agreement, for any reason the Collateral Agent desires to sell any of the Pledged Securities at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Pledged Securities to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished to such Pledgor or the issuer of such Pledged Securities by the Collateral Agent or any other Secured Party expressly for use therein. Each Pledgor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Pledged Securities to qualify, file or register, any of the Pledged Securities under the Blue Sky or other securities laws of such states as may be requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. The Pledgors will bear all costs and expenses of carrying out their obligations under this Section 12. Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 12 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 12 may be specifically enforced.

SECTION 13.         Security Interest Absolute. All rights of the Collateral Agent hereunder, the grant of a security interest in the Collateral and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to any of the foregoing, (c) any exchange, release or nonperfection of any other collateral, or any release or amendment or waiver of or consent to or departure from any guaranty, for all or any of the Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Obligations or in respect of this Agreement (other than the indefeasible payment in full of all the Obligations).

SECTION 14.         Termination or Release.

(a)           This Agreement and the pledge of Pledged Securities shall continue in effect (notwithstanding the fact that from time to time there may be no Obligations outstanding) until (i) the Credit Agreement has terminated pursuant to its express terms and (ii) all of the

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Obligations (other than contingent obligations for which no claims has been made) have been indefeasibly paid and performed in full (or with respect to any outstanding Letters of Credit, a cash deposit has been delivered to the Administrative Agent as required by the Credit Agreement) and no commitments of the Agents or the Lenders which would give rise to any Obligations are outstanding. Upon payment in full in cash of the outstanding Obligations and the expiration or termination of the Commitments, the security interest granted hereby shall terminate and all right to the Collateral shall revert to the Pledgors or any other Person entitled thereto. Upon such termination, the Administrative Agent will authorize the filing of appropriate UCC termination statements to terminate such security interests and shall, at the expense of the Pledgors, execute and deliver to such Pledgor such documents as such Pledgor shall reasonably request to evidence the termination of such security interests or the release of such Collateral, as applicable.

(b)           A Pledgor shall automatically be released from its obligations hereunder and the pledge of the Collateral of such Pledgor shall be automatically released in the event that all capital stock of such Pledgor shall be sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Parent Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer or other disposition (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise.

(c)           Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement, provided that the Required Lenders shall have consented to such transaction (to the extent required by the Credit agreement) and the terms of such consent did not provide otherwise, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 10.02 of the Credit Agreement, the security interest in such Collateral shall be automatically released.

(d)           If any of the 2004 Notes First Lien Collateral (as defined in the Intercreditor Agreement) shall become subject to the release provisions set forth in Section 5.1(c) of the Intercreditor Agreement, such Collateral shall be automatically released from the Security Interest to the extent provided in Section 5.1(c) of the Intercreditor Agreement.

(e)           In connection with any termination or release pursuant to paragraph (a), (b), (c) or (d) above, the Collateral Agent shall execute and deliver to the Pledgors, at the Pledgors’ expense, all UCC termination statements and similar documents which the Pledgor shall reasonably request to evidence such termination or release. Any execution and delivery of termination statements or release documents pursuant to this Section 14 shall be without recourse to or warranty by the Collateral Agent.

SECTION 15.         Notices. All communications and notices hereunder shall be in writing and given as provided in Section 10.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Pledgor shall be given to it at the address for notices set forth on Schedule I.

SECTION 16.         Further Assurances. Each Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and

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instruments, as the Collateral Agent, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, may at any time reasonably request in connection with the administration and enforcement of this Agreement or with respect to the Collateral or any part thereof or in order better to assure and confirm unto the Collateral Agent its rights and remedies hereunder.

SECTION 17.         Binding Effect; Several 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 any Pledgor that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. This Agreement shall become effective as to any Pledgor when a counterpart hereof executed on behalf of such Pledgor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Pledgor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Pledgor shall have the right to assign its rights hereunder or any interest herein or in the Collateral (and any such attempted assignment shall be void), except as expressly contemplated by this Agreement or the other Loan Documents. If all of the capital stock of a Pledgor is sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Borrower pursuant to a transaction permitted by Section 6.06 of the Credit Agreement, such Pledgor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Pledgor and may be amended, modified, supplemented, waived or released with respect to any Pledgor without the approval of any other Pledgor and without affecting the obligations of any other Pledgor hereunder.

SECTION 18.         Survival of Agreement; Severability.

(a)           All covenants, agreements, representations and warranties made by each Pledgor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated.

(b)           In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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.

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SECTION 19.       Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 20.         Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute a single contract, and shall become effective as provided in Section 17. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 21.         Rules of Interpretation. The rules of interpretation specified in Section 1.03 of the Credit Agreement shall be applicable to this Agreement. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 22.         Jurisdiction; Consent to Service of Process.

(a)           Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Pledgor or its properties in the courts of any jurisdiction.

(b)           Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c)           Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 15. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 23.         Waiver Of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION

15

WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 24.         Additional Pledgors. Pursuant to Section 5.12 of the Credit Agreement, each Loan Party (other than a Foreign Subsidiary) that was not in existence or not a Loan Party on the date of the Credit Agreement is required to enter in this Agreement as a Subsidiary Pledgor upon becoming a Loan Party. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Subsidiary Pledgor hereunder with the same force and effect as if originally named as a Subsidiary Pledgor herein. The execution and delivery of such instrument shall not require the consent of any Pledgor hereunder.

The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Pledgor as a party to this Agreement.

SECTION 25.         Subject to Intercreditor Agreement. Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.

SECTION 26.         Nova Scotia Unlimited Liability Companies. Notwithstanding anything else contained in this Agreement or any other document or agreement among all or some of the parties hereto, Uniplast Holdings Inc. is the sole registered and beneficial owner of all Collateral which is comprised of shares of the Canadian Subsidiary Borrower or any other Person whose securities are the subject hereof and which is an unlimited liability company (a “ULC”) and will remain so until such time as such shares are effectively transferred into the name of the Collateral Agent, any other Secured Party or any other Person on the books and records of such ULC. Accordingly Uniplast Holdings Inc. shall be entitled to receive and retain for its own account any dividend on or other distribution, if any, in respect of such Collateral (except insofar as Uniplast Holdings Inc. has granted a security interest therein) and shall have the right to vote such Collateral and to control the direction, management and policies of the Canadian Subsidiary Borrower to the same extent as Uniplast Holdings Inc. would if such Collateral were not pledged to the Collateral Agent (for its own benefit and for the benefit of the Secured Parties) pursuant hereto. Nothing in this Agreement or any other document or agreement among all or some of the parties hereto is intended to, and nothing in this Agreement or any other document or agreement among all or some of the parties hereto shall, constitute the Collateral Agent, any Secured Party or any Person other than Uniplast Holdings Inc. a member of a ULC for the purposes of the Companies Act (Nova Scotia) until such time as notice is given to Uniplast Holdings Inc. and further steps are taken thereunder so as to register the Collateral

16

Agent , any Secured Party or any other Person as holder of shares of the ULC. To the extent any provision hereof would have the effect of constituting the Collateral Agent or any Secured Party as a member of any ULC prior to such time, such provision shall be severed herefrom and ineffective with respect to Collateral which are shares of a ULC without otherwise invalidating or rendering unenforceable this Agreement or invalidating or rendering unenforceable such provision insofar as it relates to Collateral which are not shares of a ULC.

SECTION 27.         Reaffirmation of Pledgor Obligations. This Agreement constitutes an amendment and restatement of the Prior Pledge Agreement. Each of the parties hereto acknowledges and agrees that the Obligations represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the obligations of Pledgors under the Prior Pledge Agreement. Each of the parties hereto further acknowledges and agrees that this Agreement supercedes and replaces the Prior Pledge Agreement but does not extinguish the obligations thereunder and that by entering into and performing its obligations hereunder, this transaction shall not constitute a novation. Each of the parties hereto further acknowledges and agrees that the pledge granted to the Prior Administrative Agent for the benefit of itself and the parties entitled to benefits of the Prior Pledge Agreement (including, without limitation, each Lender, the Issuing Bank or any Agent party to the Prior Credit Agreement, and their respective successors and assigns) shall remain outstanding and in full force and effect in accordance with the terms hereof and the other Loan Documents and shall continue to secure the Obligations without interruption or impairment of any kind and all such security interests are hereby ratified, confirmed and continued.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

PLEDGORS:	PLIANT CORPORATION
	By:
		Name:
		Title:
	PLIANT SOLUTIONS CORPORATION
	By:
		Name:
		Title:
	PLIANT CORPORATION INTERNATIONAL
	By:
		Name:
		Title:
	PLIANT FILM PRODUCTS OF MEXICO, INC.
	By:
		Name:
		Title:
	PLIANT PACKAGING OF CANADA, LLC
	By:
		Name:
		Title:

AMENDED AND RESTATED DOMESTIC PLEDGE AGREEMENT

	UNIPLAST HOLDINGS, INC.
	By:
		Name:
		Title:
	UNIPLAST U.S., INC.
	By:
		Name:
		Title:
COLLATERAL AGENT:	GENERAL ELECTRIC CAPITAL CORPORATION
	By:
		Name:
		Title:

Schedule I to the

Amended and Restated Domestic Pledge Agreement

SUBSIDIARY PLEDGORS

Name	Address
Pliant Corporation	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Solutions Corporation	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Corporation International	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Film Products of Mexico, Inc.	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Pliant Packaging of Canada, LLC	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Uniplast Holdings, Inc.	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173
Uniplast U.S., Inc.	1475 Woodfield Road, Suite 700 Schaumburg, Illinois 60173

Schedule II to the

Amended and Restated Domestic Pledge Agreement

CAPITAL STOCK

Issuer Number of
Certificate Registered Owner Number
and
Class of
Shares Percentage of
Shares

DEBT SECURITIES

Intercompany Note Date

Annex 1 to the

Amended and Restated Pledge Agreement

SUPPLEMENT NO.      dated as of       , 20   , to the AMENDED AND RESTATED DOMESTIC PLEDGE AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, the “Domestic Pledge Agreement”) dated as of November 21, 2005, among each of the parties listed on the signature pages thereto and those additional entities that thereafter become parties thereto (each a “Pledgor” and collectively, the “Pledgors”) and GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below)

A.            Reference is made to (a) the Amended and Restated Credit Agreement dated as of November 21, 2005 (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, Uniplast Industries Co., a Nova Scotia company, the lenders from time to time party thereto (the “Lenders”), Morgan Stanley Senior Funding, Inc., as Domestic B Agent, General Electric Capital Corporation, as Domestic A Agent and Administrative Agent for the Lenders, and the Collateral Agent and (b) the Amended and Restated Guarantee Agreement dated as of November 21, 2005 (as amended, supplemented or otherwise modified from time to time, the “Guarantee Agreement”), among the certain of the Pledgors and the Administrative Agent.

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

C.            The Pledgors have entered into the Amended and Restated Domestic Pledge 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 Loan Party (other than a Foreign Subsidiary) that was not in existence or not a Loan Party on the date of the Credit Agreement is required to enter into the Amended and Restated Domestic Pledge Agreement as a Subsidiary Pledgor upon becoming a Loan Party. Section 24 of the Domestic Pledge Agreement provides that such Subsidiaries may become Subsidiary Pledgors under the Domestic Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “New Pledgor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Pledgor under the Amended and Restated Domestic Pledge 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 Collateral Agent and the New Pledgor agree as follows:

SECTION 1. In accordance with Section 24 of the Amended and Restated Domestic Pledge Agreement, the New Pledgor by its signature below becomes a Pledgor under the Amended and Restated Domestic Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the New Pledgor hereby agrees (a) to all the terms and

provisions of the Amended and Restated Domestic Pledge Agreement applicable to it as a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Pledgor, as security for the payment and performance in full of the Obligations (as defined in the Amended and Restated Domestic Pledge Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Pledgor’s right, title and interest in and to the Collateral (as defined in the Amended and Restated Domestic Pledge Agreement) of the New Pledgor. Each reference to a “Subsidiary Pledgor” or a “Pledgor” in the Domestic Pledge Agreement shall be deemed to include the New Pledgor. The Domestic Pledge Agreement is hereby incorporated herein by reference.

SECTION 2. The New Pledgor represents and warrants to the Collateral 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, 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 Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission or other electronic transmission shall be effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. The New Pledgor hereby represents and warrants that set forth on Schedule I attached hereto is a true and correct schedule of all its Pledged Securities.

SECTION 5. Except as expressly supplemented hereby, the Amended and Restated Domestic Pledge Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. 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 Amended and Restated Domestic Pledge 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 8. All communications and notices hereunder shall be in writing and given as provided in Section 15 of the Amended and Restated Domestic Pledge Agreement. All

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communications and notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature hereto.

SECTION 9. The New Pledgor agrees to reimburse the Collateral 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 Collateral Agent.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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Annex 1 to the

Amended and Restated Pledge Agreement

IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent  have duly executed this Supplement to the Amended and Restated Domestic Pledge Agreement as of the day and year first above written.

[Name of New Pledgor],
	By
		Name:
		Title:
		Address:

GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent,
	By
		Name:
		Title:

Schedule I to

Supplement No   .

to the Amended and Restated Domestic Pledge Agreement

Pledged Securities of the New Pledgor

CAPITAL STOCK

Issuer Number of
Certificate Registered
Owner Number and
Class of
Shares Percentage
of Shares

DEBT SECURITIES

Issuer Principal
Amount Date of
Note Maturity
Date

EX-10.25

Exhibit 10.25

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT dated as of November 21, 2005 (as it may be amended, restated, supplemented or modified from time to time, this “Agreement”), among the entities listed on the signature page hereof (collectively referred to as the “Pledgors” and individually as a “Pledgor”) and GENERAL ELECTRIC CAPITAL CORPORATION, as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below).

WHEREAS, the Parent Borrower and the Domestic Subsidiary Borrowers (as defined in the Prior Credit Agreement described below) are parties to that certain Credit Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Credit Agreement”), among the Parent Borrower, the Canadian Subsidiary Borrower, certain Domestic Subsidiary Borrowers party thereto, the Lenders party thereto (the “Prior Lenders”), Credit Suisse First Boston, acting through its Cayman Islands Branch, as Administrative Agent and Documentation Agent (the “Prior Administrative Agent”), Deutsche Bank Trust Company Americas, as Collateral Agent (the “Prior Collateral Agent”), General Electric Capital Corporation, as Collateral Agent, and JPMorgan Chase Bank, as Syndication Agent; and

WHEREAS, the Pledgors and the Prior Administrative Agent are parties to that certain Canadian Pledge Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Canadian Pledge Agreement”), pursuant to which each Pledgor pledged to the Collateral Agent the Collateral (as defined therein) to secure the due and punctual payment and performance of the Obligations; and

WHEREAS, the Prior Collateral Agent and the trustees for the holders of the Senior Secured Discount Notes and the Existing Senior Secured Notes entered into an Intercreditor Agreement dated as of February 17, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), which confirms the relative priority of the security interests of the Secured Parties, the holders of the Senior Secured Discount Notes and the holders of the Existing Senior Secured Notes in the Collateral; and

WHEREAS, prior to the execution of this Agreement, the Prior Collateral Agent resigned as “Collateral Agent” under the Prior Credit Agreement, the Security Documents (as defined in the Prior Credit Agreement) and the Collateral Agent succeeded the Prior Collaterla Agent as the “Collateral Agent” thereunder, all pursuant to that certain Consent and Amedment dated as of March 8, 2004 by and among the Prior Administrative Agent, the Prior Collateral Agent, the Collateral Agent, Deutsche Bank Trust Company Americas, as replaced Issuing Bank, LaSalle Business Credit, LLC, as replacement Issuing Bank, the Borrowers and the Prior Lenders; and

WHEREAS, the parties wish to amend and restate the Prior Credit Agreement in the form of that certain Amended and Restated Credit Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Parent Borrower, the Canadian Subsidiary Borrower, the Domestic

Subsidiary Borrowers party thereto, the Lenders party thereto, Morgan Stanley Senior Funding, Inc., as Domestic B Agent, the Collateral Agent and General Electric Capital Corporation, as Domestic A Agent and Administrative Agent; and

WHEREAS, in connection with the amendment and restatement of the Prior Credit Agreement, the parties hereto desire to amen and restate the Prior Canadian Pledge Agreement in its entirety as set forth herein; and

WHEREAS, 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 Pledgors (other than the Canadian Subsidiary Borrower) have agreed to guarantee, among other things, all the obligations of the Borrowers under the Credit Agreement; and the Canadian Subsidiary Borrower has agreed to guarantee, among other things, all the obligations of the Parent Borrower and the Domestic Subsidiary Borrowers under the Credit Agreement; and

WHEREAS, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Pledgors of a Canadian Pledge Agreement in the form hereof to secure (a) the due and punctual payment by the Borrowers of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrowers under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of each Loan Party to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of the Borrowers, monetary or otherwise, under each Swap Agreement that (i) is effective on the Effective Date with a counterparty that is a Lender (or an affiliate of a Lender) as of the Effective Date or (ii) is entered into after the Effective Date with any counterparty that is a Lender (or an Affiliate thereof) at the time such Swap Agreement is entered into and (d) the due and punctual payment and performance of all monetary obligations of each Loan Party in respect of overdrafts and related liabilities owed to any of the Lenders (or any Affiliates thereof) or Wachovia Bank, National Association (or any Affiliates thereof) arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds (all the monetary and other obligations referred to in the preceding clauses (a) through (d) being referred to collectively as the “Obligations”).

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ACCORDINGLY, each of the Pledgors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agrees to amend and restate the Prior Canadian Pledge Agreement as follows:

SECTION 1.           Pledge. As general and continuing collateral security for the payment and performance, as the case may be, in full of the Obligations, each Pledgor hereby transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto the Collateral Agent, its successors and assigns, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a continuing security interest in all of the Pledgor’s right, title and interest in, to and under (a) the shares of capital stock and other Equity Interests owned by it and listed on Schedule II hereto and any Equity Interests obtained in the future by the Pledgor and the certificates representing all such shares (the “Pledged Stock”); (b)(i) the debt securities listed opposite the name of the Pledgor on Schedule II hereto, (ii) any debt securities in the future issued to the Pledgor and (iii) the promissory notes and any other instruments evidencing such debt securities (the “Pledged Debt Securities”); (c) subject to Section 5, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed, in respect of, in exchange for or upon the conversion of the securities referred to in clauses (a) and (b) above; (d) subject to Section 5, all rights and privileges of the Pledgor with respect to the securities and other property referred to in clauses (a), (b), and (c) above, including any interest of such Pledgor in the entries on the books of the issuer of the Pledged Stock or any financial intermediary pertaining to the Pledged Stock; and (e) all proceeds of any of the foregoing (the items referred to in clauses (a) through (e) above being collectively referred to as the “Collateral”). Notwithstanding any of the foregoing, the Pledged Stock shall not include (i) more than 65% of the issued and outstanding shares of common stock of any Foreign Subsidiary that is not a Loan Party, (ii) to the extent that applicable law requires that a Subsidiary of the Pledgor issue directors’ or nominee’s qualifying shares, such qualifying shares, or (iii) any shares or other Equity Interests or debt securities issued by any Excluded Subsidiary.

Any stock certificates, notes or other securities now or hereafter included in the Collateral (the “Pledged Securities”) shall be accompanied by (a) stock powers of attorney duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (b) all other property comprising part of the Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities then being pledged hereunder, which schedule shall be attached hereto as Schedule II and made a part hereof. Each schedule so delivered shall supplement any prior schedules so delivered. If the constating documents of any Person listed under the heading “Issuer” in Schedule II hereto restrict the transfer of the securities of such Issuer, then the Pledgor will also deliver to the Collateral Agent a certified copy of a resolution of the directors or shareholders of such Issuer consenting to the transfer(s) contemplated by this Agreement, including any prospective transfer of the Collateral by the Collateral Agent upon a realization on the security constituted hereby in accordance with this Agreement.

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Each Pledgor confirms that value has been given by the Collateral Agent and the Secured Parties to the Pledgor, that the Pledgor has rights in the Collateral (other than after-acquired property) and that the Pledgor and the Collateral Agent have not agreed to postpone the time for attachment of the security interests created by this Agreement to any of the Collateral. The security interests created by this Agreement will have effect and be deemed to be effective whether or not the Obligations or any part thereof are owing or in existence before or after or upon the date of this Agreement.

TO HAVE AND TO HOLD the Collateral, in accordance with, and to the extent consistent with, the Intercreditor Agreement, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

SECTION 2.           Delivery of the Collateral. (a) Each Pledgor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Securities, and any and all certificates or other instruments or documents representing the Collateral that have not been provided to the Prior Collateral Agent prior to the date hereof.

(b)           Each Pledgor will cause any Indebtedness for borrowed money owed to the Pledgor by the Parent Borrower or any Subsidiary to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent pursuant to the terms hereof.

SECTION 3.           Representations, Warranties and Covenants. Each Pledgor hereby represents, warrants and covenants, as to itself and the Collateral pledged by it hereunder, to and with the Collateral Agent that:

(a)            the Pledged Stock represents that percentage as set forth on Schedule II of the issued and outstanding shares of each class of the capital stock of the issuer with respect thereto:

(b)           except for the security interest granted hereunder and except as permitted by the Credit Agreement, the Pledgor (i) is and will at all times continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Collateral, other than pursuant hereto and (iv) subject to Section 5, will cause any and all Collateral, whether for value paid by the Pledgor or otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder;

(c)           the Pledgor (i) has the power and authority to pledge the Collateral in the manner hereby done or contemplated and to execute, deliver and perform its obligations under this Agreement, and such execution, delivery and performance does not contravene any of the Pledgor’s constating documents or any agreement, instrument or restriction to which the Pledgor is a party or by which the Pledgor or any of the Collateral is bound and (ii) will defend its title or

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interest thereto or therein against any and all Liens (other than the Lien created by this Agreement), however arising, of all Persons whomsoever;

(d)           no consent which has not been obtained of any other Person (including stockholders or creditors of any Pledgor) and no consent or approval which has not been obtained of any Governmental Authority or any securities exchange is necessary to the validity of the pledge effected hereby;

(e)           by virtue of the execution and delivery by the Pledgors of this Agreement and the Intercreditor Agreement, when the Pledged Securities, certificates or other documents representing or evidencing the Collateral are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a valid and perfected first lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations;

(f)             the pledge effected hereby is effective to vest in the Collateral Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in the Collateral as set forth herein;

(g)           all of the Pledged Stock has been duly authorized and validly issued and is fully paid and nonassessable;

(h)           all information set forth herein relating to the Pledged Stock is accurate and complete in all material respects as of the date hereof;

(i)            the pledge of the Pledged Stock pursuant to this Agreement does not violate Regulation U or X of the Federal Reserve Board or any successor thereto as of the date hereof;

(j)             this Agreement had been duly authorized, executed and delivered by the Pledgor and is a valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, subject only to bankruptcy, insolvency, liquidation reorganization, moratorium and other similar laws generally affecting the enforcement of creditor rights, and to the fact that equitable remedies (such as specific performance and injunction) are discretionary remedies; and

(k)           there is no existing agreement, option, right or privilege capable of becoming an agreement or option pursuant to which the Pledgor would be required to sell or otherwise dispose of any of the Pledged Securities.

SECTION 4.           Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. The Collateral Agent shall at all times have the right to exchange the

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certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement and the Intercreditor Agreement.

If any securities, whether certificated or uncertificated, or other investment property now or hereafter acquired by any Pledgor (other than Securities or other investment property held in the Notes Collateral Account (as defined in the Intercreditor Agreement)) are held by such Pledgor or its nominee through a securities intermediary or commodity intermediary, such Pledgor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such securities intermediary or (as the case may be) commodity intermediary to agree to comply with entitlement orders or other instructions from the Collateral Agent to such securities intermediary as to such security entitlements, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such commodity intermediary, in each case without further consent of any Pledgor or such nominee, or (ii) in the case of Financial Assets or other Investment Property (each as defined in the Canadian Security Agreement dated as of the date hereof between the Pledgors and the Collateral Agent) held through a securities intermediary, arrange for the Collateral Agent to become the entitlement holder with respect to such investment property, with the Pledgor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such investment property. The Collateral Agent agrees with each of the Pledgors that the Collateral Agent shall not give any such entitlement orders or instructions or directions to any such issuer, securities intermediary or commodity intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Pledgor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur. The provisions of this paragraph shall not apply to any financial assets credited to a securities account for which the Collateral Agent is the securities intermediary.

SECTION 5.           Voting Rights; Dividends and Interest, etc. (a) In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, unless and until an Event of Default shall have occurred and be continuing:

(i)            Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such Pledgor will not be entitled to exercise any such right if the result thereof could materially and adversely affect the rights inuring to a holder of the Pledged Securities or the rights and remedies of any of the Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

(ii)           The Collateral Agent shall execute and deliver to each Pledgor, or cause to be executed and delivered to each Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above and to receive the cash dividends it is entitled to receive pursuant to subparagraph (iii) below.

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(iii)          Each Pledgor shall be entitled to receive and retain any and all cash dividends, interest and principal paid on the Pledged Securities to the extent and only to the extent that such cash dividends, interest and principal are permitted by, and otherwise paid in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws. All noncash dividends, interest and principal, and all dividends, interest and principal paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid-in surplus, and all other distributions (other than distributions referred to in the preceding sentence) made on or in respect of the Pledged Securities, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement).

(b)            In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to dividends, interest or principal that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest or principal. All dividends, interest or principal received by the Pledgor contrary to the provisions of this Section 5 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall, subject to the provisions of the Intercreditor Agreement, be retained by the Collateral Agent, in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 7. After all Events of Default have been cured or waived, the Collateral Agent shall, within [five] Business Days after all such Events of Default have been cured or waived, repay to each Pledgor all cash dividends, interest or principal (without interest), that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) above and which remain in such account.

(c)           In accordance with, and to the extent consistent with, the terms of, the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that, and to the extent consistent with the Intercreditor Agreement, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance

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of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived, such Pledgor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above.

SECTION 6.           Remedies upon Default. In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, subject to applicable regulatory and legal requirements, the Collateral Agent may exercise all of the rights and remedies granted to secured parties under the Personal Property Security Act (Ontario) (the “PPSA”) and any other applicable statute, or otherwise available to the Collateral Agent at law or in equity. Without limiting the generality of the forgoing, the Collateral Agent may sell the Collateral, or any part thereof, at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby waive all rights of redemption, stay, valuation and appraisal any Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Collateral Agent shall give a Pledgor such prior written notice of the Collateral Agent’s intention to make any sale of such Pledgor’s Collateral as may be required by the PPSA or other applicable law. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid in full by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Section 6, any Secured Party may bid for or purchase, free from any right of redemption, stay or appraisal on the part of any Pledgor (all said rights being also hereby waived and released), the

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Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to it from such Pledgor as a credit against the purchase price, and it may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to such Pledgor therefor. For purposes hereof, (a) a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof, (b) the Collateral Agent shall be free to carry out such sale pursuant to such agreement and (c) such Pledgor shall not be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver.

SECTION 7.           Application of Proceeds of Sale. In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, the proceeds of any sale of Collateral pursuant to Section 6, as well as any Collateral consisting of cash, shall be applied by the Collateral Agent pursuant to Section 2.17(b) of the Credit Agreement.

SECTION 8.           Reimbursement of Collateral Agent. (a) In accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, the Pledgors agree to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, other charges and disbursements of its counsel and of any experts or agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or observe any of the provisions hereof.

(b)           Without limitation of its indemnification obligations under the other Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the Indemnities (as defined in Section 10.03 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, other charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby or (ii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or wilful misconduct of such Indemnitee.

(c)           Any amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 8 shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of

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the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 8 shall be payable on written demand therefor and shall bear interest at the rate specified in Section 2.12(c) of the Credit Agreement.

SECTION 9.           Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor, upon the occurrence and during the continuance of a Default, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral, to endorse checks, drafts, orders and other instruments for the payment of money payable to the Pledgor representing any interest or dividend or other distribution payable in respect of the Collateral or any part thereof or on account thereof and to give full discharge for the same, to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer and to make any agreement respecting, or otherwise deal with, the same; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct.

Notwithstanding anything in this Section 9 to the contrary, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 9 unless it does so in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement.

SECTION 10.         Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or consent to any departure by any Pledgor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No

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notice or demand on any Pledgor in any case shall entitle such Pledgor to any other or further notice or demand in similar or other circumstances.

(b)           Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Pledgor or Pledgors with respect to which such waiver, amendment or modification is to apply, subject to (i) any consent required in accordance with Section 10.02 of the Credit Agreement and (ii) the limitations in the Intercreditor Agreement.

SECTION 11.         Securities Act, etc. In view of the position of the Pledgors in relation to the Pledged Securities, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Securities, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Securities under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Securities, limit the purchasers to those who will agree, among other things, to acquire such Pledged Securities for their own account, for investment, and not with a view to the distribution or resale thereof. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price that the Collateral Agent, in its discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 11 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

SECTION 12.         Registration, etc. Each Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default hereunder, if, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, for any reason the Collateral Agent desires to sell any of the Pledged Securities at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Pledged Securities to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the

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Collateral Agent to permit the public sale of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished to such Pledgor or the issuer of such Pledged Securities by the Collateral Agent or any other Secured Party expressly for use therein. Each Pledgor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Pledged Securities to qualify, file or register, any of the Pledged Securities under the Blue Sky or other securities laws of such states as may be requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. The Pledgors will bear all costs and expenses of carrying out their obligations under this Section 12. Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 12 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 12 may be specifically enforced.

SECTION 13.         Security Interest Absolute. All rights of the Collateral Agent hereunder, the grant of a security interest in the Collateral and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to any of the foregoing, (c) any exchange, release or nonperfection of any other collateral, or any release or amendment or waiver of or consent to or departure from any guaranty, for all or any of the Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Obligations or in respect of this Agreement (other than the indefeasible payment in full of all the Obligations).

SECTION 14.         Termination or Release. (a) This Agreement and the pledge of Pledged Securities shall continue in effect (notwithstanding the fact that from time to time there may be no Obligations outstanding) until (i) the Credit Agreement has terminated pursuant to its express terms and (ii) all of the Obligations (other than contingent obligations for which no claim has been made) have been indefeasibly paid and performed in full (or with respect to any outstanding Letters of Credit, a cash deposit has been delivered to the Administrative Agent as required by the Credit Agreement) and no commitments of the Agents or the Lenders which would give rise to any Obligations are outstanding. Upon payment in full in cash of the outstanding Obligations and the expiration or termination of the Commitments, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Pledgors

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or any other Person entitled thereto. Upon such termination, the Administrative Agent will authorize the filing of appropriate UCC termination statements to terminate such security interests and shall, at the expense of the Pledgors, execute and deliver to such Pledgor such documents as such Pledgor shall reasonably request to evidence the termination of such security interests or the release of such Collateral, as applicable.

(b)           A Pledgor shall automatically be released from its obligations hereunder and the pledge of the Collateral of such Pledgor shall be automatically released in the event that all of the capital stock of such Pledgor shall be sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Parent Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer, or other disposition (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise.

(c)           Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement; provided that the Required Lenders shall have consented to such transaction (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise, or upon the effectiveness of any written consent of the release of the security interest granted hereby in any Collateral pursuant to Section 10.02 of the Credit Agreement, the security interest in such Collateral shall be automatically released.

(d)           If any of the 2004 Notes First Lien Collateral (as defined in the Intercreditor Agreement) shall become subject to the release provisions set forth in Section 5.1(c) of the Intercreditor Agreement, such Collateral shall be automatically released from the Security Interest to the extent provided in Section 5.1(c) of the Intercreditor Agreement.

(e)           In connection with any termination or release pursuant to paragraph (a), (b), (c) or (d) above, the Collateral Agent shall execute and deliver to the Grantors, at the Grantors’ expense, all UCC termination statements and similar documents which the Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of termination statements or release documents pursuant to this Section 14 shall be without recourse to or warranty by the Collateral Agent.

SECTION 15.         Notices. All communications and notices hereunder shall be in writing and given as provided in Section 10.01 of the Credit Agreement. All communications and notices hereunder to any Pledgor shall be given to it at the address for notices set forth on Schedule I.

SECTION 16.         Further Assurances. Each Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments, as the Collateral Agent, in accordance with, and to the extent consistent with, the terms of the Intercreditor Agreement, may at any time reasonably request in connection with the administration and enforcement of this Agreement or with respect to the Collateral or any part thereof or in order better to assure and confirm unto the Collateral Agent its rights and remedies hereunder.

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SECTION 17.         Binding Effect; Several 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 any Pledgor that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. This Agreement shall become effective as to any Pledgor when a counterpart hereof executed on behalf of such Pledgor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Pledgor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Pledgor shall have the right to assign its rights hereunder or any interest herein or in the Collateral (and any such attempted assignment shall be void), except as expressly contemplated by this Agreement or the other Loan Documents. If all of the capital stock of a Pledgor is sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Borrower pursuant to a transaction permitted by Section 6.06 of the Credit Agreement, such Pledgor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Pledgor and may be amended, modified, supplemented, waived or released with respect to any Pledgor without the approval of any other Pledgor and without affecting the obligations of any other Pledgor hereunder.

SECTION 18.         Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by each Pledgor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated.

(b)           In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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 19.         Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

SECTION 20.         Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which, when taken together,

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shall constitute a single contract, and shall become effective as provided in Section 17. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission or other electronic method of transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 21.         Rules of Interpretation. The rules of interpretation specified in Section 1.03 of the Credit Agreement shall be applicable to this Agreement. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 22.         Jurisdiction; Consent to Service of Process. (a) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Ontario court or federal court of Canada sitting in such jurisdiction, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in Ontario or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Pledgor or its properties in the courts of any jurisdiction.

(b)           Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any Ontario or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c)           Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 15. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 23.         Waiver Of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

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SECTION 24.         Additional Pledgors. Pursuant to Section 5.12 of the Credit Agreement, each Loan Party organized under the laws of Canada or any province thereof (a “Canadian Subsidiary”) that was not in existence or not a Loan Party on the date of the Credit Agreement is required to enter in this Agreement as a Pledgor upon becoming a Loan Party. Upon execution and delivery by the Collateral Agent and a Canadian Subsidiary of an instrument in the form of Annex 1, such Canadian Subsidiary shall become a Pledgor hereunder with the same force and effect as if originally named as a Pledgor herein. The execution and delivery of such instrument shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Pledgor as a party to this Agreement.

SECTION 25.         Subject to Intercreditor Agreement. Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.

SECTION 26.         Reaffirmation of Pledgor Obligations. This Agreement constitutes an amendment and restatement of the Prior Canadian Pledge Agreement. Each of the parties hereto acknowledges and agrees that the Obligations represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the obligations of Pledgors under the Prior Canadian Pledge Agreement. Each of the parties hereto further acknowledges and agrees that this Agreement supercedes and replaces the Prior Canadian Pledge Agreement but does not extinguish the obligations thereunder and that by entering into and performing its obligations hereunder, this transaction does not constitute a novation. Each of the parties hereto further acknowledges and agrees that the pledge granted to the Prior Administrative Agent for the benefit of itself and the parties entitled to benefits of the Prior Canadian Pledge Agreement (including, without limitation, each Lender, the Issuing Bank or any Agent party to the Prior Credit Agreement, and their respective successors and assigns) shall remain outstanding and in full force and effect in accordance with the terms hereof and the other Loan Documents and shall continue to secure the Obligations without interruption or impairment of any kind and all such security interests are hereby ratified, confirmed and continued.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day andyear fist above written.

GRANTOR:	UNIPLAST INDUSTRIES CO.
	By:
		Name:
		Title:
COLLATERAL AGENT:	GENERAL ELECTRIC CAPITAL CORPORATION
	By:
		Name:
		Title:

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

Schedule I to the

Amended and Restated Canadian Pledge Agreement

PLEDGORS

Name	Address
Uniplast Industries Co.	1475 Woodfield Road, Suite 700 Schaumberg, Illinois 60173

Schedule II to the

Amended and Restated Canadian Pledge Agreement

CAPITAL STOCK

Issuer	Number of Certificate	Registered Owner	Number and Class of Shares	Percentage of Shares
Uniplast US Inc.	R-1	Uniplast Industries Co.	1000 preferred shares	100% (of  preferred shares)

DEBT SECURITIES

1.The following Intercompany Notes:

	Intercompany Note	Date
1.	Intercompany Note	2/17/04
2.	Intercompany Note issued by Uniplast Holdings, Inc. to Uniplast Industries Co.	5/27/03
3.	Intercompany Note issued by Pliant Corporation to Uniplast Industries Co.	5/27/03
4.	Intercompany Note issued by Pliant Packaging of Canada, LLC to Uniplast Industries Co.	5/27/03
5.	Intercompany Note issued by Pliant Solutions Corporation to Uniplast Industries Co.	5/27/03

Annex 1 to the

Amended and Restated Canadian Pledge Agreement

SUPPLEMENT NO.       dated as of                , 20    , to the AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, the “Canadian Pledge Agreement”) dated as of November 21, 2005, among each of the parties listed on the signature pages thereto and those additional entities that thereafter become parties thereto (each a “Pledgor” and collectively, the “Pledgors”) and GENERAL ELECTRIC CAPITAL CORPORATION, as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below)

A.            Reference is made to (a) the Amended and Restated Credit Agreement dated as of November 21, 2005 (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 Canadian Subsidiary Borrower, the lenders from time to time party thereto (the “Lenders”), Morgan Stanley Senior Funding, Inc., as Domestic B Agent, General Electric Capital Corporation, as Domestic A Agent and Administrative Agent, and the Collateral Agent and (b) the Amended and Restated Guarantee Agreement dated as of November 21, 2005 (as amended, supplemented or otherwise modified from time to time, the “Guarantee Agreement”), among certain of the Pledgors party thereto and the Administrative Agent.

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

C.            The Pledgors have entered into the Canadian Pledge 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 Loan Party organized under the laws of Canada or any province thereof (a “Canadian Subsidiary”) that was not in existence or not a Loan Party on the date of the Credit Agreement is required to enter into the Canadian Pledge Agreement as a Pledgor upon becoming a Loan Party. Section 24 of the Canadian Pledge Agreement provides that such Canadian Subsidiaries may become Pledgors under the Canadian Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Canadian Subsidiary (the “New Pledgor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Pledgor under the Canadian Pledge 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 Collateral Agent and the New Pledgor agree as follows:

SECTION 1.           In accordance with Section 24 of the Canadian Pledge Agreement, the New Pledgor by its signature below becomes a Pledgor under the Canadian Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the

New Pledgor hereby agrees (a) to all the terms and provisions of the Canadian Pledge Agreement applicable to it as a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Pledgor, as security for the payment and performance in full of the Obligations (as defined in the Canadian Pledge Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Pledgor’s right, title and interest in and to the Collateral (as defined in the Canadian Pledge Agreement) of the New Pledgor. Each reference to a “Pledgor” in the Canadian Pledge Agreement shall be deemed to include the New Pledgor. The Canadian Pledge Agreement is hereby incorporated herein by reference.

SECTION 2.           The New Pledgor represents and warrants to the Collateral 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, 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 Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission or other electronic method of transmission shall be effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4.           The New Pledgor hereby represents and warrants that set forth on Schedule I attached hereto is a true and correct schedule of all its Pledged Securities.

SECTION 5.           Except as expressly supplemented hereby, the Canadian Pledge Agreement shall remain in full force and effect.

SECTION 6.           THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

SECTION 7.           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 Canadian Pledge 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 8.           All communications and notices hereunder shall be in writing and given as provided in Section 15 of the Canadian Pledge Agreement. All communications and

2

notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature hereto.

SECTION 9.           The New Pledgor agrees to reimburse the Collateral 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 Collateral Agent.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly executed this Supplement to the Canadian Pledge Agreement as of the day and year first above written.

NEW PLEGDOR:
[NAME OF NEW PLEDGOR]
By:
	Name:
	Title:
COLLATERAL AGENT:
GENERAL ELECTRIC CAPITAL
CORPORATION, AS COLLATERAL AGENT
By:
	Name:	Brian E. Johnson
	Title:	Executive Vice-President

Schedule I to

Supplement No.    

to the Amended and Restated Canadian Pledge Agreement

Pledged Securities of the New Pledgor

CAPITAL STOCK

Issuer Number ofCertificate Registered Owner Number and Class of Shares Percentageof Shares

DEBT SECURITIES

Issuer Principal Amount Date ofNote MaturityDate

EX-21.1

EXHIBIT 21.1

PLIANT CORPORATION

LIST OF SUBSIDIARIES AND
STATES OF INCORPORATION OR ORGANIZATION

COMPANY NAME	JURISDICTION OF INCORPORATION/ORGANIZATION
Alliant Company LLC(1)	Delaware
Pliant Corporation International(2)	Utah
Pliant Film Products of Mexico, Inc.(2)	Utah
Pliant Corporation of Canada Ltd.(2)	Canada
Pliant Corporation Pty. Ltd.(2)	Australia
Pliant Film Products GmbH(2)	Germany
Pliant Packaging of Canada, LLC(2)	Utah limited liability company
Pliant Investment, Inc.(2)	Utah
ASPEN Industrial, S.A. de C.V.(3)	Mexico
Jacinto Mexico, S.A. de C.V.(4)	Mexico
Pliant de Mexico, S.A. de C.V.(5)	Mexico
Uniplast Holdings Inc.(2)	Delaware
Uniplast U.S., lnc.(6)	Delaware
Uniplast Industries Co.(6)	Nova Scotia, Canada
Pliant Solutions Corporation(2)	Utah

(1)  Owned by Pliant Investment, Inc.

(2)  Owned by Pliant Corporation

(3)  Owned by Pliant Corporation (greater than 99%) and Pliant Corporation International (less than 1%)

(4)  Owned by ASPEN Industrial, S.A. de C.V. (greater than 99%) and Pliant Corporation (less than 1%)

(5)  Owned by ASPEN Industrial, S.A. de C.V. (greater than 99%) and Pliant Corporation (less than 1%)

(6)  Owned by Uniplast Holdings Inc.

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Harold C. Bevis, certify that:

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

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

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

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

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

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

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

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

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

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

Date: March 30, 2006	/s/ HAROLD C. BEVIS
	Harold C. Bevis Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Joseph J. Kwederis, certify that:

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

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

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

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

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

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

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

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

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

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

Date: March 30, 2006	/s/ JOSEPH J. KWEDERIS
	Joseph J. Kwederis Chief Financial Officer

EX-32.1

EXHIBIT 32.1

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

In connection with the annual report of Pliant Corporation (the “Company”) on Form 10-K for the period ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Harold C. Bevis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

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

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

March 30, 2006	/s/ HAROLD C. BEVIS
	Harold C. Bevis Chief Executive Officer

EX-32.2

EXHIBIT 32.2

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

In connection with the annual report of Pliant Corporation (the “Company”) on Form 10-K for the period ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Joseph J. Kwederis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

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

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

March 30, 2006	/s/ JOSEPH J. KWEDERIS
	Joseph J. Kwederis Chief Financial Officer