As filed with the Securities and Exchange Commission on July 16, 2003

Registration No. 333-106432

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

PLIANT CORPORATION

(Exact name of registrant as specified in its charter)

Utah

2673

87-0496065

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

PLIANT CORPORATION INTERNATIONAL

(Exact name of registrant as specified in its charter)

Utah

2673

87-0473075

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

PLIANT FILM PRODUCTS OF MEXICO, INC.

(Exact name of registrant as specified in its charter)

Utah

2673

87-0500805

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

PLIANT SOLUTIONS CORPORATION

(Exact name of registrant as specified in its charter)

Utah

2673

87-0563872

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

PLIANT PACKAGING OF CANADA, LLC

(Exact name of registrant as specified in its charter)

Utah

2673

87-0580929

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

UNIPLAST HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware

2673

13-3999589

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

UNIPLAST U.S., INC.

(Exact name of registrant as specified in its charter)

Delaware

2673

04-3199066

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

TUREX, INC.

(Exact name of registrant as specified in its charter)

Rhode Island

2673

05-0354901

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

PIERSON INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Massachusetts

2673

04-2692382

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

UNIPLAST MIDWEST, INC.

(Exact name of registrant as specified in its charter)

Indiana

2673

98-0166923

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

1475 Woodfield Road, Suite 700

Schaumburg, Illinois 60173

(847) 969-3300

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

JACK E. KNOTT II

Chief Executive Officer

1475 Woodfield Road, Suite 700

Schaumburg, Illinois 60173

(847) 969-3300

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With a copy to:

Michael D. Annes, Esq.		Reed W. Topham, Esq.
Pliant Corporation		Paul M. Wilson, Esq.
1475 Woodfield Road, Suite 700		Stoel Rives LLP
Schaumburg, Illinois 60173		201 South Main Street, Suite 110
(847) 969-3300		Salt Lake City, Utah 84111
		(801) 328-3131

Approximate date of commencement of proposed sale to the public: As promptly as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act of 1933, please check the following box. ¨

The registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such a date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion, dated July 16, 2003

Prospectus

LOGO

Pliant Corporation

13% Senior Subordinated Notes due 2010

Which Are Guaranteed on a Senior Subordinated Basis by

Substantially All of Our Domestic Subsidiaries

We issued in our 2002 exchange offer $100,000,000 aggregate principal amount of 13% Senior Subordinated Notes due 2010, which have been registered under the Securities Act of 1933, in exchange for our 13% Senior Subordinated Notes due 2010.

We issued in our 2000 exchange offer $220,000,000 aggregate principal amount of 13% Senior Subordinated Notes due 2010, which have been registered under the Securities Act of 1933, in exchange for our 13% Senior Subordinated Notes due 2010.

Maturity

•	The Notes will mature on June 1, 2010.

Interest

•	Interest on the Notes is payable June 1 and December 1 of each year.

Redemption

•	We may redeem some or all of the Notes at any time on or after June 1, 2005.

•	We may also redeem up to $112,000,000 of the Notes using the proceeds of certain equity offerings completed before June 1, 2003.

•	The redemption prices are described on page 81.

Change of Control

•	If we experience a change of control, we must offer to purchase the Notes.

Security and Ranking

•	The Notes are unsecured. The Notes are subordinated to all of our existing and future senior debt, rank equally with all of our future senior subordinated debt and rank senior to all of our future subordinated debt.

Guarantees

•	If we fail to make payments on the Notes, our guarantor subsidiaries must make them instead. These guarantees are senior subordinated obligations of our guarantor subsidiaries. Not all of our subsidiaries guarantee the Notes.

We prepared this prospectus for use by J.P. Morgan Securities Inc. in connection with offers and sales related to market-making transactions of the Notes. J.P. Morgan Securities Inc. may act as principal or agent in these transactions. These sales will be made at prices related to prevailing market prices at the time of sale. We will not receive any of the proceeds of these sales.

You should carefully consider the risk factors beginning on page 12 of this prospectus before making an investment decision with respect to the Notes.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is , 2003

TABLE OF CONTENTS

	Page		Page
Market and industry data Important information	i i	Security ownership of certain beneficial owners and management and related stockholder matters	64
Summary	1	Certain relationships and related transactions	66
Risk factors	12	Description of credit facilities and other indebtedness	71
Disclosure regarding forward-looking statements	22	Description of the notes	79
Use of proceeds	23	Book-entry; delivery and form	122
Capitalization	24	Plan of distribution	125
Selected financial data	25	Legal matters	125
Management’s discussion and analysis of financial condition and results of operations		Experts	125
	27	Where you can find more information	126
Business	46	Index to consolidated financial statements	F-1
Management	55

Market and industry data

All industry data presented in this prospectus are for the year ended December 31, 2002. Unless otherwise indicated, the market share and industry data used throughout this prospectus 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 in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the captions “Risk factors” and “Disclosure regarding forward-looking statements” in this prospectus. Some of the industry data presented in this prospectus were obtained from the Flexible Packaging Association. Jack E. Knott II, our Chief Executive Officer, is chairman of the Flexible Packaging Association.

Important information

This prospectus refers to documents that are not delivered with this prospectus. These documents are available without charge to our security holders upon written or oral request. Security holders may request copies of documents referred to in this prospectus by writing or calling us at the following address or phone number:

Pliant Corporation

1475 Woodfield Road, Suite 700

Schaumburg, Illinois 60173

(847) 969-3300

Attention: Michael D. Annes, Secretary

SUMMARY

The following summary highlights certain material information contained elsewhere in this prospectus but does not contain all the information that may be important to you. You should read this entire prospectus and the documents to which we refer you before making an investment decision. You should carefully consider the information set forth under “Risk factors.” In addition, certain statements include forward-looking information that involves risks and uncertainties. See “Disclosure regarding forward-looking statements.”

The information presented in this prospectus with respect to the years ended December 31, 2002, 2001 and 2000 reflect four reporting segments: Pliant U.S., Pliant Flexible Packaging, Pliant International and Pliant Solutions. In April 2003, we combined our Pliant U.S. and Pliant Solutions segments into a single segment. Therefore, beginning with the second quarter of 2003 our operating segments for financial reporting purposes will be Pliant U.S. (including our Pliant Solutions segment), Pliant Flexible Packaging and Pliant International.

The company

We are 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 26 manufacturing and research and development facilities worldwide and we currently have approximately 1.0 billion pounds of annual production capacity. For the twelve months ended March 31, 2003, we generated net sales of $909.6 million and a net loss of $53.3 million.

The markets in which we operate are highly competitive, and our financial performance can be affected by economic downturns and other factors beyond our control, including fluctuations in interest rates, unscheduled plant shutdowns, increased operating costs, prices and supply of raw materials, product prices and regulatory developments. Further, as a result of our substantial indebtedness, a large portion of the cash provided by our operations must be used to pay interest expense. We have experienced losses in each of our last three fiscal years, including a net loss of $43.4 million in 2002, $2.1 million in 2001 and $50.8 million in 2000. In addition to the factors described above, our losses reflect significant restructuring charges, which we incurred in an effort to improve the efficiency of our operations.

Our products are sold into numerous markets for a wide variety of end uses. As of March 31, 2003, our operations consisted of four operating segments: Pliant U.S., Pliant Flexible Packaging, Pliant International and Pliant Solutions.

•

Our Pliant U.S. segment manufactures and sells films and other packaging products primarily in the United States. Our Pliant U.S. segment accounted for 61.0%, 63.2% and 63.1% of our net sales in 2002, 2001 and 2000, respectively. The principal products of our Pliant U.S. segment include personal care and medical films, converter films, agricultural films, stretch films and PVC films.

•

Our Pliant Flexible Packaging segment manufactures and sells printed film and packaging products primarily in the United States. Our Pliant Flexible Packaging segment accounted for 23.5%, 24.4% and 26.2% of our net sales in 2002, 2001 and 2000, respectively. The principal products of our Pliant Flexible Packaging segment include printed products and barrier films.

•

Our Pliant International segment manufactures and sells films and other flexible packaging products. The Pliant International segment has manufacturing operations located in Australia, Brazil, Canada, Germany and Mexico. These operations service Australia, Southeast Asia, Latin America, Canada, Europe and Mexico. In addition, our operation in Mexico provides the film for our Pliant Solutions segment. Our Pliant International segment accounted for 12.3%, 12.4% and

10.7% of our net sales in 2002, 2001 and 2000, respectively. The principal products of our Pliant International segment vary depending on the particular country or region and include personal care films, converter films, printed products, barrier films, stretch and shrink films and PVC films.

•

Our Pliant Solutions segment consists primarily of the consumer products business we acquired from Decora Industries, Inc. and its operating subsidiary, Decora Incorporated, in May 2002. Net sales of the Pliant Solutions segment since the acquisition date accounted for 3.2% of our net sales in 2002. Our Pliant Solutions segment markets and distributes decorative and surface coverings, including self-adhesive and non-adhesive coverings, primarily in the United States and Canada. We market these consumer products primarily under the Con-Tact^® brand name, which is considered to be the most recognized brand of consumer decorative and surface coverings.

Our principal executive offices are located at 1475 Woodfield Road, Suite 700, Schaumburg, Illinois 60173, and our telephone number is (847) 969-3300.

Industry overview

We manufacture and sell a variety of plastic films and flexible packaging products. Flexible packaging is the largest end market for plastic films. The plastic film industry serves a variety of flexible packaging markets, as well as secondary packaging and non-packaging end use markets, including pharmaceutical, medical, personal care, household, industrial and agricultural film markets. According to the Flexible Packaging Association, the North American market for flexible packaging was approximately $20.4 billion in 2002 and has grown at a compound annual growth rate, or CAGR, of approximately 3.9% from 1992 to 2002. 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.

Our competitive strengths

Strong market positions. We have leading market positions in many of our product lines. We are North America’s largest supplier of converter and frozen food films, its second largest supplier of films for the bread and bakery goods market and its third largest supplier of PVC films. We also maintain significant market shares in personal care and stretch films in North America. We attribute our market leadership primarily to our broad and innovative product lines, low-cost manufacturing capabilities, technological capabilities and well-established customer relationships.

Superior manufacturing capability. We have modern and efficient manufacturing facilities. During the past three fiscal years, excluding acquisitions, we have invested a total of $171.3 million to expand, upgrade and maintain our asset base and information systems. With 26 plants, we are often able to allocate lines to specific products, resulting in fewer change-overs and more efficient use of production capacity. Our combination of manufacturing flexibility and efficiency enhances our ability to bring new

technologies to the marketplace and meet the ever-increasing performance needs of our customers in a cost-effective manner.

Low-cost production. We believe that our manufacturing costs are among the lowest in the industry because of: (a) economies of scale provided by our high volume production; (b) high plant utilization; (c) highly competitive pricing for resin and other raw materials, based on our significant purchasing requirements; (d) modern manufacturing equipment that minimizes resin requirements and waste; and (e) capital investment that has improved our technical capabilities and operating efficiencies.

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

Well-established customer relationships. Our films are components of flexible packaging for some of the largest food companies in the world, including household names such as General Mills, Interstate Bakeries (Wonder Bread), Kraft/Nabisco, Kroger, and Safeway. Our customers also include many of North America’s largest flexible packaging converters, such as Lawson Mardon, Pechiney, Printpack and Sonoco, and the largest national distributors of industrial films, Bunzl, Unisource, and Xpedx. In addition, we manufacture and supply film to some of the largest non-food film consumers in North America, including 3M, Baxter, Becton-Dickinson, Goodyear, Johnson & Johnson, Kimberly-Clark and Tyco/Kendall Healthcare.

Proven and committed management team. We have assembled an outstanding management team at both our corporate and operating levels. At the corporate level, our senior management has extensive and varied experience in identifying, acquiring and integrating strategic businesses and in allocating capital, developing corporate strategy and bringing financial discipline to such businesses. At the operating level, our Executive and Senior Vice Presidents have an average of more than 20 years of industry experience.

Strategy

In order to continue to expand our business and increase our profitability, we continue to focus on developing new products and new markets and enhancing customer relationships. We have brought innovative technological advances to the marketplace through acquisitions, internal product development and purchasing or licensing technology from other film companies. We have long-standing relationships with customers who value product innovation and reliable supply and, consequently, exercise great care in establishing and maintaining their supplier relationships. We intend to continue to focus on meeting the increasingly complex packaging needs of our customers with our wide array of film and flexible packaging products and product development capabilities.

History

We were founded in 1992. We have combined strategic acquisitions, internal growth, product innovation and operational improvements to grow our business from net sales of $447.7 million in 1997 to $879.2 million in 2002. We have acquired and integrated numerous film and flexible packaging operations since 1992, including, most recently:

•

the August 2002 acquisition of the business of Roll-O-Sheets Canada Limited;

•

the May 2002 acquisition of the business of Decora Industries, Inc. and its operating subsidiary, Decora Incorporated; and

•

the July 2001 acquisition of Uniplast Holdings Inc. and its operating subsidiaries.

On May 31, 2000, we consummated a recapitalization pursuant to an agreement dated March 31, 2000 among us, our then existing stockholders and Southwest Industrial Films, LLC, an affiliate of J.P. Morgan Partners, LLC, whereby Southwest Industrial Films acquired majority control of our common stock. The total consideration paid in the recapitalization was approximately $1.1 billion, including transaction costs. In connection with the recapitalization, we restructured our indebtedness. We refinanced all amounts outstanding under our then existing credit facility and replaced it with amended and restated secured credit facilities.

As a result of the recapitalization and subsequent investments, J.P. Morgan Partners (BHCA), L.P. and its affiliates own approximately 55% of our outstanding common stock, 75% of our preferred stock warrants to purchase common stock and 59% of our outstanding preferred stock, subject to certain preemptive rights with respect to 10,000 shares of preferred stock issued on March 25, 2003. J.P. Morgan Partners (BHCA), L.P. and its affiliates have invested a total of approximately $238.0 million in our common and preferred stock (including warrants).

Recent developments

Issuance of 2003 Notes. On May 30, 2003, we completed the sale of $250 million aggregate principal amount of 11¹/8% Senior Secured Notes Due 2009 (the “2003 Notes”). The 2003 Notes are our senior secured obligations and are guaranteed on a senior secured basis by the same subsidiaries that guarantee the Notes. The net proceeds from the sale of the 2003 Notes were used to repay borrowings under our credit facilities, which were amended in connection with the sale of the 2003 Notes. See “Description of credit facilities and other indebtedness—2003 Notes” for additional information about the terms of the 2003 Notes.

Amendment to our credit facilities. In connection with the issuance of the 2003 Notes, we entered into an amendment to our credit facilities, which permitted the issuance of the 2003 Notes and the second-priority liens securing the 2003 Notes and, among other things:

•

required the prepayment of revolving loans with the net proceeds received from the issuance of the 2003 Notes until $75.0 million (or, if less, all) of the revolving loans were paid;

•

required the prepayment of the tranche A term loans in an amount equal to 50% of the portion of such net proceeds not applied to the revolving loans and the prepayment of the tranche B term loans in an amount equal to 50% of the portion of such net proceeds not applied to the revolving loans (subject to the right of the tranche B term lenders to reject such prepayment, to the extent tranche A term loans remained, in which case such rejected prepayments were instead applied to the tranche A term loans); (A) with respect to the tranche A term loans, first, in direct order of maturities to reduce scheduled repayments of such loans through 2004, second, to reduce scheduled repayments of such loans ratably for 2005, and third, with the balance of such portion, if any, to reduce the remaining scheduled repayments of such loans ratably; and (B) with respect to the tranche B term loans, to reduce the remaining scheduled repayments of such loans ratably;

•

added Uniplast Holdings Inc. and its United States subsidiaries as borrowers under our credit facilities for up to $9.4 million of loans;

•

adjusted the terms pursuant to which J.P. Morgan Partners is required to purchase up to $25 million of additional equity securities to the extent necessary to enable us to meet certain leverage ratios;

•

added a new financial covenant based on the ratio of indebtedness under our credit facilities and certain qualified receivables financings to consolidated EBITDA; and

•

adjusted certain financial and negative covenants, including the leverage and interest coverage ratios.

We prepaid a total of $75.0 million of our revolving loans and $165 million of our term loans with the proceeds from the issuance of the 2003 Notes. Proposed tranche B payments of $22.8 million were rejected by tranche B lenders and applied to tranche A term loans. Accordingly, a total of $105.3 million was applied to tranche A term loans and $59.7 million was applied to tranche B term loans.

See “Description of credit facilities and other indebtedness—The credit facilities” for additional information about our credit facilities, as amended.

Summary of the terms of the notes

Issuer		Pliant Corporation.

Notes		$320 million aggregate principal amount of 13% Senior Subordinated Notes due 2010.

Maturity		June 1, 2010.

Interest Payment Dates		June 1 and December 1 of each year.

Optional Redemption		On or after June 1, 2005, we may redeem some or all of the Notes at the redemption prices listed in the section entitled “Description of the notes – Optional redemption.” Prior to such date, we may not redeem the Notes, except as described in the following paragraph. At any time prior to June 1, 2003, we may redeem up to 35% of the original aggregate principal amount of the Notes issued under the applicable indenture with the net cash proceeds of certain equity offerings at a redemption price equal to 113% of the principal amount thereof, plus accrued interest, so long as (a) at least 65% of the original aggregate amount of the Notes remains outstanding after each such redemption and (b) any such redemption by us is made within 120 days of such equity offering.

Guarantees		Each of our existing domestic restricted subsidiaries has, and each of our future domestic restricted subsidiaries will, fully and unconditionally guarantee the Notes on an unsecured senior subordinated basis. Also, if any of our existing or future restricted foreign subsidiaries guarantees any senior debt (other than a foreign subsidiary that guarantees senior debt of another foreign subsidiary), such foreign subsidiary will be required to fully and unconditionally guarantee the Notes on an unsecured senior subordinated basis. If we fail to make payments on the Notes, our subsidiaries that are guarantors must make them instead. Guarantees of the Notes are subordinated to the guarantees of our senior debt under our credit facilities.

Ranking		The Notes will be unsecured and: • are subordinated to all of our existing and any future senior debt; • rank equally with all of our existing and any future senior subordinated debt;

• rank senior to any future subordinated debt;

• are effectively subordinated to our secured debt to the extent of the value of the assets securing such indebtedness; and

• are effectively subordinated to all liabilities of our subsidiaries that do not guarantee the Notes.

Similarly, the guarantees of the Notes by our subsidiaries that also guarantee our credit facilities are unsecured and;

• are subordinated to all of the applicable guarantors’ existing and any future senior debt;

• rank equally with all of the applicable guarantors’ existing and any future senior subordinated debt;

• rank senior to any of the applicable guarantors’ future subordinated debt; and

• are effectively subordinated to any secured debt of such guarantor to the extent of the value of the assets securing such debt.

As of March 31, 2003, after giving effect to the issuance of the 2003 Notes and the use of proceeds therefrom:

• we would have had $470.5 million of senior debt to which the Notes would have been subordinated (which amount does not include the remaining availability of $88.1 million under our revolving credit facility after giving effect to outstanding letters of credit and current borrowing limitations under our indentures);

• we would not have had any senior subordinated debt other than the Notes;

• we would not have had any subordinated debt; and

• our subsidiaries that are not guarantors of the Notes would have had $54.5 million of liabilities, including trade payables, excluding liabilities owed to us.

The indentures relating to the Notes permit us to incur a significant amount of additional senior debt. In addition to the $470.5 million of senior debt outstanding as of March 31, 2003, after giving effect to the issuance of the 2003 Notes and the use of proceeds therefrom, the indentures permit us to incur approximately $88.1 million of additional senior debt, plus any additional amount of senior debt incurred under overdraft facilities. We currently maintain a $5 million overdraft facility. In addition, if we satisfy certain fixed charge coverage ratios in future periods, the indentures will permit us to incur additional senior debt.

Payment Blockage Provisions

The indentures relating to the Notes prohibit us from making payments on or redeeming the Notes if:

• any principal, interest or certain other payments or fees with respect to our credit facilities, the 2003 Notes and other senior indebtedness

designated by us is not paid when due; or

• any other default on such designated senior indebtedness occurs and the maturity of such designated senior indebtedness is accelerated in accordance with its terms

unless:

• the default has been cured or waived and any acceleration has been rescinded;

• the amount of such designated senior indebtedness has been repaid in full; or

• the trustee under the indentures receives written notice from the representative of such designated senior indebtedness approving a payment with respect to the Notes.

During the continuance of any other default with respect to any designated senior indebtedness pursuant to which the maturity thereof may be accelerated immediately, we may not make payments on the Notes if the trustee under the indentures has received a notice of default from the representative of such designated senior indebtedness and such notice specifies an election to effect a payment blockage period. A payment blockage period continues for 179 days unless terminated earlier:

• by written notice from the representative of the designated senior indebtedness;

• by repayment in full of the designated senior indebtedness; or

• because the default giving rise to the payment blockage is no longer continuing.

See “Description of the notes—Ranking.”

Certain Covenants

The indentures relating to the Notes limit our ability and the ability of our subsidiaries to:

• borrow money;

• make distributions, redeem equity interests or redeem subordinated debt;

• make investments;

• use assets as security in other transactions;

• sell assets;

• guarantee other debt;

• enter into agreements that restrict dividends from subsidiaries;

• sell capital stock of subsidiaries;

• merge or consolidate; and

• enter into transactions with affiliates.

		These covenants are subject to a number of important exceptions. For more details, see “Description of the notes – Certain covenants.”

Change of Control		Upon the occurrence of a change of control, unless we have exercised our right to redeem all of the Notes as described above, you will have the right to require us to repurchase all or a portion of your Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued interest to the date of repurchase. However, we may not be able to repurchase the Notes if we do not have sufficient funds. Further, we may be contractually restricted under the terms of our senior indebtedness from repurchasing all of the Notes tendered by holders upon a change of control unless we repay such senior indebtedness or obtain the requisite consents of the lenders to permit the repurchase of the Notes. If we do not obtain such consents or repay such indebtedness, we will remain prohibited from repurchasing the Notes and we will be unable to make an offer to purchase your Notes. Our failure to make such an offer would constitute an event of default under the indentures relating to the Notes, which in turn would constitute a default under our credit facilities and the indenture relating to the 2003 Notes. See “Description of credit facilities and other indebtedness,” “Description of the notes – Change of control” and “Risk factors.”

Risk factors

Investing in the Notes involves substantial risk. You should carefully consider all the information contained in this prospectus and, in particular, should consider carefully the factors set forth under the caption “Risk factors” before making an investment in the Notes.

Summary financial data

The following table sets forth summary financial data for the fiscal years ended December 31, 2000, 2001 and 2002, for the three months ended March 31, 2002 and as of and for the three months ended March 31, 2003 and for the the twelve months ended March 31, 2003. The summary financial data for the years ended December 31, 2000, 2001 and 2002 have been summarized from our consolidated financial statements and are qualified in their entirety by reference to our consolidated financial statements. The summary financial data for the three months ended March 31, 2002 and as of and for the three months ended March 31, 2003 and for the twelve months ended March 31, 2003 have been derived from our unaudited consolidated financial statements. In the opinion of management, the unaudited information reflects all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the results for those periods. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year or any future period. You should read the following summary financial data together with “Capitalization,” “Selected financial data,” “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and the notes thereto included elsewhere in this prospectus.

	Years ended December 31,									Three months ended March 31,						Twelve months ended March 31,
	2000			2001			2002			2002			2003			2003
										(unaudited)						(unaudited)
	(Dollars in millions)
Statement of operations data:
Net sales	$	843.8		$	840.4		$	879.2		$	210.1		$	240.5		$	909.6
Cost of sales		696.7			665.1			714.5			164.4			197.7			747.7

Gross profit		147.1			175.3			164.7			45.7			42.8			161.9
Total operating expenses(1)		132.7			101.1			136.6			24.7			28.8			140.6

Operating income		14.4			74.2			28.1			21.0			14.0			21.3
Interest expense(2)		(68.5	)		(76.0	)		(75.3	)		(16.9	)		(19.9	)		(78.3	)
Loss on extinguishment of debt(3)		(18.7	)		—			—			—			—			—

Other income (expense), net		0.3			6.5			2.3			0.4			0.6			2.3

Income (loss) before income taxes		(72.5	)		4.7			(44.9	)		4.5			(5.3	)		(54.7	)
Income tax expense (benefit)		(21.7	)		6.8			(1.5	)		1.9			2.0			(1.4	)

Net income (loss)	$	(50.8	)	$	(2.1	)	$	(43.4	)	$	2.6		$	(7.3	)	$	(53.3	)

Other financial data:
EBITDA(4)	$	35.5		$	127.7		$	77.3		$	32.7		$	25.8		$	70.3
Net cash provided by (used in) operating activities		60.3			30.3			43.6			11.9			(1.5	)		30.2
Net cash provided by (used in) investing activities		(65.6	)		(87.3	)		(55.2	)		(10.5	)		(3.6	)		(48.4	)
Net cash provided by (used in) financing activities		0.3			55.0			12.4			(2.7	)		7.7			22.8
Depreciation and amortization		39.5			47.0			46.9			11.3			11.2			46.7
Restructuring and other costs(1)		19.4			(4.6	)		43.1			3.3			6.1			45.9
Non-cash stock-based compensation expense		2.6			7.0			—			—			—			—
Capital expenditures		65.6			56.4			49.2			10.5			3.6			42.3
Ratio of earnings to fixed charges(5)		—			1.1	x		—			1.3	x		—			—

	(Dollars in millions)
Balance sheet data at March 31, 2003 (unaudited):
Cash and cash equivalents	$	4.5
Working capital		56.7
Total assets		870.0
Total debt		736.3
Total liabilities		974.5
Redeemable preferred stock(6)		167.0
Redeemable common stock		13.0
Stockholders’ equity (deficit)		(284.6	)

(1)

Total operating expenses for the three months ended March 31, 2003 include $6.1 million for restructuring and other costs. These costs include $2.8 million for plant closing costs related to the closure of our facilities in Merced, California and Shelbyville, Indiana, production rationalization costs for our plant in Toronto, Canada and the relocation costs of certain lines from our Merced plant and Fort Edward plant to other facilities. These costs also include $3.3 million related to the present value of future lease payments on two buildings that we do not currently occupy. In connection with the 2001 restructuring plan, we vacated and subleased these facilities in 2001. During the first quarter of 2003, the sublessees defaulted on the subleases. Total operating expenses for the three months ended March 31, 2002 include $3.3 million for restructuring and other costs. These costs primarily include costs of relocating production lines from the plants acquired and closed as a result of the acquisition of Uniplast Holdings, Inc.

Total operating expenses for 2002 include $43.1 million of restructuring and other costs, including $19.2 million related to the closure of our plant in Merced, California, a portion of our plant in Shelbyville, Indiana, a part of our plant in Toronto, Canada, one of our plants in Mexico, and our Fort Edward, New York facility (acquired as part of the Decora acquisition). In addition, these costs reflect $7.9 million for the costs of relocating several of our production lines related to plant closures and costs associated with production rationalizations at several plants. Total operating expenses for 2002 also include $7.4 million related to severance costs, including benefits for several company-wide workforce reduction programs that were completed in 2002. An $8.6 million charge for the impairment of goodwill on our Pliant International segment is also reflected in total operating expenses for 2002.

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 the previously accrued charge for the closure of our Harrington plant. In 2001, we decided not to proceed with our previously announced closure of our Harrington plant. Total operating expenses for 2000 include $10.8 million of costs related to the recapitalization and related transactions, $10.8 million of fees and expenses relating to our supply chain cost initiative, $19.4 million of restructuring and other costs, $7.1 million of costs related to the relocation of our corporate headquarters and a reduction in force, and $2.6 million of non-cash stock-based compensation expense.

(2)

After giving effect to the issuance of the 2003 Notes and the use of proceeds therefrom, we would have had interest expense of $95.2 million for the twelve months ended March 31, 2003. The estimated issuance costs of $10.0 million relating to the issuance of the 2003 Notes will be amortized to interest expense as a non-cash charge on an effective interest method basis until the maturity of the notes.

(3)

In 2000, we refinanced most of our long-term debt and recorded a loss to write-off unamortized deferred debt issuance costs. In addition, during 2000, we recorded a loss related to our tender offer for our 9¹/8% senior subordinated notes due 2007. The amount presented has been reclassified from an extraordinary item due to the adoption of SFAS 145.

(4)

EBITDA reflects income 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. In addition, EBITDA is used internally by our management to measure operating performance. 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 cash provided by operating activities as set forth in our consolidated statements of cash flows is as follows:

	Years ended December 31,									Three months ended March 31,						Twelve months ended March 31,
	2000			2001			2002			2002			2003			2003(7)
													(unaudited)			(unaudited)
	(Dollars in millions)
EBITDA	$	35.5		$	127.7		$	77.3		$	32.7		$	25.8		$	70.3
Adjustments:
Interest expense		(68.5	)		(76.0	)		(75.3	)		(16.9	)		(19.9	)		(78.3	)
Income tax (expense) benefit		21.7			(6.8	)		1.5			(1.9	)		(2.0	)		1.4
Amortization of deferred financing costs		1.4			2.7			3.7			0.8			1.1			4.0
Deferred income taxes		(25.8	)		3.0			(5.4	)		0.1			(0.7	)		(6.2	)
Change in provision for accounts receivable		(0.2	)		0.3			2.6			—			—			2.6
Non-cash compensation expense related to stock options		2.6			7.0			—			—			—			—
Discount on stockholder note receivable		0.3			—			—			—			—			—
Non-cash plant closing costs		14.8			(7.6	)		14.2			—			3.3			17.5
Write-down of impaired goodwill		—			—			8.6			—			—			8.6
(Gain) loss on disposal of assets		0.5			(0.4	)		0.4			0.1			(0.1	)		0.2
Loss on extinguishment of debt		18.7			—			—			—			—			—
Minority interest		—			0.3			(0.1	)		—			—			(0.1	)
Change in operating assets and liabilities, net of effects of acquisitions		59.3			(19.9	)		16.1			(3.0	)		(9.0	)		10.2

Net cash provided by (used in) operating activities		60.3			30.3			43.6			11.9			(1.5	)		30.2

(5)

For purposes of this ratio, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of (i) interest, whether expensed or capitalized, (ii) amortization of debt issuance costs and (iii) an allocation of one-third of the rental expense from operating leases, which we consider to be a reasonable approximation of the interest factor of operating lease payments. For the three months ended March 31, 2003, earnings were insufficient to cover fixed charges by approximately $5.3 million. In 2000 and 2002, earnings were insufficient to cover fixed charges by approximately $72.5 million and $44.9 million, respectively. For the twelve months ended March 31, 2003, earnings were insufficient to cover fixed charges by approximately $54.7 million.

(6)

The amount presented includes proceeds of $141.0 million from the issuance of preferred stock in 2000, 2001 and 2003, plus the accrued and unpaid dividends of $55.9 million, less the unamortized discount due to detachable preferred stock warrants and unamortized issuance costs totaling $29.9 million.

(7)

The summary financial data for the twelve months ended March 31, 2003 was derived from our unaudited financial statements for the quarters ended June 30, 2002, September 30, 2002, December 31, 2002 and March 31, 2003.

Risk factors

The risks below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business operations. All of the following risks could affect our business, financial condition or results of operations. In such a case, you may lose all of or a part of your original investment. You should carefully consider the risks described below as well as other information and data included in this prospectus before making an investment decision with respect to the Notes.

Risks related to the notes

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 obligations under the Notes.

We are highly leveraged, which means that we have a large amount of indebtedness relative to our stockholders’ deficit. We are highly leveraged particularly in comparison to some of our competitors.

As of March 31, 2003, we would have had, on a pro forma basis after giving effect to the issuance of the 2003 Notes and the use of proceeds therefrom, the following credit statistics:

	Pro forma as of March 31, 2003
	(dollars in millions)
Total debt	$	782.4
Redeemable preferred stock		167.0
Redeemable common stock		13.0
Stockholders’ equity (deficit)		(290.8	)

Our ratio of earnings to fixed charges is a broad measure of how well our earnings from operations cover interest expense and other fixed charges. For purposes of this ratio, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of (i) interest, whether expensed or capitalized, (ii) amortization of debt issuance costs and (iii) an allocation of one-third of the rental expense from operating leases, which we consider to be a reasonable approximation of the interest factor of operating lease payments. For the three months ended March 31, 2003, earnings were insufficient to cover fixed charges by approximately $5.3 million. On a pro forma basis, after giving effect to the issuance of the 2003 Notes and the use of proceeds therefrom, our earnings for the three months ended March 31, 2003 were insufficient to cover fixed charges by approximately $9.4 million. In 2000 and 2002, our earnings were insufficient to cover fixed charges by approximately $72.5 million and $44.9 million, respectively. For the twelve months ended March 31, 2003, earnings were insufficient to cover fixed charges by approximately $54.7 million. These deficits indicate that it may be difficult for us to generate sufficient earnings to cover fixed charges in future years.

Our high degree of leverage could have important consequences for you, including the following:

•

it 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;

•

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 and future business opportunities;

•

the debt service requirements of our other indebtedness could make it more difficult for us to make payments on the Notes;

•

certain of our borrowings, including borrowings under our credit facilities, are at variable rates of interest, exposing us to the risk of increased interest rates;

•

it 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, including the Notes, and be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

After giving effect to payments made through June 1, 2003, our estimated debt service for the remainder of 2003 is approximately $59.6 million, consisting solely of interest payments.

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

•

fluctuations in interest rates;

•

unscheduled plant shutdowns;

•

increased operating costs;

•

prices and supply of raw materials; and

•

product prices and regulatory developments.

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

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness, including the Notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and 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 credit facilities and indentures restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. See “Description of credit facilities and other indebtedness” and “Description of the notes.”

Our variable rate indebtedness subjects us to interest rate risk, which could cause our annual debt service obligations to increase significantly.

Certain of our borrowings, including borrowings under our credit facilities, are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. After giving effect to the issuance of the 2003 Notes and the use of the proceeds therefrom and after accounting for the effect of our interest rate hedge agreements, an increase of 1.0% in the interest rates payable on our variable rate indebtedness would increase our 2003 estimated debt service requirements by approximately $1.0 million.

Accordingly, an increase in interest rates from current levels could cause our annual debt service obligations to increase significantly.

If we default on our obligations to pay our indebtedness we may not be able to make payments on the Notes.

Any default under the agreements governing our indebtedness, including a default under our credit facilities that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including covenants in our indentures and our credit facilities), we could be in default under the terms of the agreements governing such indebtedness, including our credit facilities and our indentures governing the Notes and the 2003 Notes. 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 our credit facilities could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. For the third quarter ended September 30, 2000, we entered into an amendment to our credit facilities to avoid being in default under our leverage ratio financial covenant. Effective April 2, 2002, we entered into an amendment to our credit facilities which, among other changes, further revised our leverage and interest coverage ratio financial covenants. Effective September 30, 2002, we entered into an amendment to our credit facilities which, among other changes, further revised our leverage and interest coverage ratio financial covenants. Effective March 24, 2003, we entered into an amendment to our credit facilities which, among other changes, further adjusted the leverage and interest coverage ratios, required us to issue $10 million of equity securities and use the proceeds to reduce our term debt and required us to obtain a commitment for the purchase of up to $25 million of additional equity securities to the extent necessary to enable us to comply with our leverage ratio or the target senior debt leverage ratio specified in the amendment at the end of any calendar quarter or fiscal year ending on or before December 31, 2004. Effective May 22, 2003, we entered into an amendment to our credit facilities which, among other things, further revised our leverage ratio and interest coverage ratio to ease our covenant obligations, added a first-lien leverage ratio covenant and adjusted the terms pursuant to which J.P. Morgan Partners is required to purchase the additional equity securities referenced above. If our operating performance declines we may in the future need to obtain waivers from the required lenders under our credit facilities to avoid being in default. If we breach our covenants under the credit facilities and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under the credit facilities and the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation. See “Description of credit facilities and other indebtedness” and “Description of the notes.”

We may not be able to repurchase the Notes upon a change of control.

Upon a change of control, we must offer to repurchase all of the outstanding Notes at 101% of the principal amount thereof, plus accrued interest to the date of repurchase. We may not be able to repurchase the Notes upon a change of control because we may not have sufficient funds. Further, we may be contractually restricted under the terms of our senior indebtedness from repurchasing all of the Notes tendered by holders upon a change of control unless we repay such senior indebtedness or obtain the requisite consents of the lenders to permit the repurchase of the Notes. If we do not obtain such consents or repay such indebtedness, we will remain prohibited from repurchasing the Notes and we will be unable to make an offer to repurchase the Notes. Our failure to make such an offer would constitute an event of default under the indentures relating to the Notes, which in turn would constitute a default under our credit facilities and the indenture relating to the 2003 Notes. As a result of the limitations on our

ability to repurchase the Notes upon a change of control, the change of control provision may not necessarily protect holders of the Notes if we engage in a highly leveraged transaction or certain other transactions involving us or our subsidiaries. See “Description of credit facilities and other indebtedness” and “Description of the notes—Change of control.”

We will rely significantly on the funds received from our subsidiaries to meet our debt service obligations on the Notes, 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, 2002, 21% of our net sales was generated by our subsidiaries. As a result, our ability to pay interest on the Notes and to satisfy our other 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 subject to various business considerations as well as certain contractual provisions which may restrict the payment of dividends and distributions and the transfer of assets to us. See “Description of credit facilities and other indebtedness” and “Description of the notes—Certain covenants—Limitation on Restrictions on Distributions from Restricted Subsidiaries.” In the event of bankruptcy, liquidation or reorganization of our subsidiaries, claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims as the holder of the equity of our subsidiaries.

Your right to receive payments on the Notes is subordinated in right of payment to the prior payment in full of our and our subsidiaries’ senior indebtedness, including our credit facilities and the 2003 Notes, which means that if we become insolvent, our remaining assets may not be sufficient to pay amounts due on the Notes.

The payment of principal, premium, if any, and interest on, and any other amounts owing in respect of, the Notes is subordinated in right of payment to the prior payment in full of all of our existing and future senior indebtedness, including all amounts owing under our credit facilities and the 2003 Notes. In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding, our assets will be available to pay obligations on the Notes only after all of our senior indebtedness has been paid in full, and there may not be sufficient assets remaining to pay amounts due on all or any of the Notes. As of March 31, 2003, after giving effect to the issuance of the 2003 Notes and the use of the proceeds therefrom, the aggregate principal amount of our senior indebtedness would have been $470.5 million (which amount does not include the remaining availability of $88.1 million under our revolving credit facility after giving effect to outstanding letters of credit and current borrowing limitations under our indentures). The guarantees by our subsidiaries are unsecured senior subordinated obligations of theirs and subordinated in right of payment to all of their existing and future senior indebtedness, including all amounts owing under our credit facilities and the 2003 Notes. As of March 31, 2003, after giving effect to the issuance of the 2003 Notes and the use of the proceeds therefrom, there would have been no senior indebtedness of our subsidiary guarantors other than the guarantees under our credit facilities and the 2003 Notes.

Because each guarantor’s liability under its guarantee may be reduced to zero, avoided or released under certain circumstances, you may not receive any payments from some or all of the guarantors.

The holders of the Notes have the benefit of the full and unconditional guarantees of the guarantors. However, the guarantees by our subsidiary guarantors are limited to the maximum amount which the guarantors are permitted to guarantee under applicable law. As a result, a guarantor’s liability under its guarantee could be reduced to zero, depending upon the amount of other obligations of the guarantors. Further, under the circumstances discussed more fully below, a court under federal and state fraudulent conveyance and transfer statutes could void the obligations under the guarantee or further subordinate it to all other obligations of the guarantor. In addition, you will lose the benefit of a particular subsidiary

guarantee if it is released under certain circumstances described under “Description of the notes—The Note guarantees.”

The Notes are structurally subordinated in right of payment to the indebtedness of those of our subsidiaries that are not guaranteeing the Notes and, if the guarantees are deemed unenforceable, to those of our guarantor subsidiaries, and the remaining assets of such subsidiaries may not be sufficient to make any payments on the Notes.

The Notes are effectively subordinated to all liabilities of our subsidiaries which are not guarantors. In addition, although the guarantees provide the holders of the Notes with a direct claim as a creditor against the assets of the subsidiary guarantors, the guarantees may not be enforceable as described in more detail below. If the guarantees by the subsidiary guarantors are not enforceable, the Notes would be effectively subordinated to all liabilities of the subsidiary guarantors, including trade payables. As a result of being effectively subordinated to the liabilities of a subsidiary, if there was a dissolution, bankruptcy, liquidation or reorganization of such subsidiary, the holders of the Notes would not receive any amounts with respect to the Notes until after the payment in full of the claims of creditors of such subsidiary.

Our subsidiaries that are not guarantors generated 15.4% of our net sales for the year ended December 31, 2002. As of December 31, 2002, our subsidiaries that are not guarantors accounted for 12.2% of our total assets and had total liabilities (excluding liabilities owed to us) of $57.1 million. As of March 31, 2003, after giving effect to the issuance of the 2003 Notes and the use of proceeds therefrom, our subsidiaries that are not guarantors would have had total liabilities (excluding liabilities owed to us) of $54.5 million and our subsidiaries that are guarantors would have had total liabilities (excluding liabilities owed to us and guarantees of our credit facilities, the Notes and the 2003 Notes) of $16.5 million.

Federal and state fraudulent transfer laws permit a court to void the Notes and the guarantees, and if that occurs, you may not receive any payments on the Notes.

Our issuance of the Notes and the issuance of the Guarantees by our subsidiary guarantors may be subject to review under federal and state fraudulent transfer and conveyance statutes. While the relevant laws may vary from state to state, under such laws the payment of consideration will be a fraudulent conveyance if (1) we paid the consideration with the intent of hindering, delaying or defrauding creditors or (2) we or any of our subsidiary guarantors, as applicable, received less than reasonably equivalent value or fair consideration in return for issuing either the Notes or a Guarantee, and, in the case of (2) only, one of the following is also true:

•

we or any of our subsidiary guarantors were or was insolvent, or rendered insolvent, by reason of such transactions;

•

paying the consideration left us or any of our subsidiary guarantors with an unreasonably small amount of capital to carry on the business; or

•

we or any of our subsidiary guarantors intended to, or believed that we or it would, be unable to pay debts as they matured.

If a court were to find that the issuance of the Notes or a Guarantee was a fraudulent conveyance, the court could avoid the payment obligations under the Notes or such guarantee or further subordinate the Notes or such guarantee to presently existing and future indebtedness of ours or of such guarantor, or require the holders of the Notes to repay any amounts received with respect to the Notes or such guarantee. In the event of a finding that a fraudulent conveyance occurred, you may not receive any repayment on the Notes. Further, the avoidance of the Notes could result in an event of default with respect to our other debt and that of our subsidiaries, which could result in acceleration of such debt.

Generally, an entity would be considered insolvent if, at the time it incurred indebtedness:

•

the sum of its debts was greater than the fair value of all its assets;

•

the present fair saleable value of its assets is less than the amount required to pay the probable liability on its existing debts and liabilities as they become due; or

•

it can not pay its debts as they become due.

If we default under our senior secured credit facilities or the 2003 Notes, the lenders or holders could foreclose on the assets we have pledged to them, to the exclusion of you as the holders of the Notes.

Our obligations under the Notes are unsecured, but our obligations under the credit facilities and the 2003 Notes and each guarantor’s obligations under their guarantees are secured by a security interest in substantially all of our assets. If we are declared bankrupt or insolvent, or if we default under the credit facilities or the 2003 Notes, the lenders or holders, as the case may be, could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, the lenders or holders, as the case may be, could foreclose on the pledged assets to the exclusion of holders of the Notes, even if an event of default exists under our indentures at such time. Furthermore, if the lenders or holders, as the case may be, foreclose and sell the equity interests in any subsidiary of ours that is a guarantor under the Notes, then that guarantor will be released from its guarantee of the Notes automatically and immediately upon such sale. See “Description of credit facilities and other indebtedness.”

An active trading market may not develop for the Notes, which may make the Notes illiquid and adversely affect the market price quoted for the Notes.

You cannot be sure that an active trading market will develop for the Notes. We do not intend to have the Notes listed on a national securities exchange. We have been advised by J.P. Morgan Securities Inc. that J.P. Morgan Securities Inc. currently intends to continue to make a market in the Notes. J.P. Morgan Securities Inc. is not obligated to do so, however, and any market-making activities with respect to the Notes may be discontinued at any time without notice. In addition, such market-making activity is subject to limits imposed by the Securities Act and the Securities Exchange Act of 1934. Because J.P. Morgan Securities Inc. is our affiliate, J.P. Morgan Securities Inc. is required to deliver a current “market-making” prospectus and otherwise comply with the registration requirements of the Securities Act in any secondary market sale of the Notes. Accordingly, the ability of J.P. Morgan Securities Inc. to make a market in the Notes may, in part, depend on our ability to maintain a current market-making prospectus. If we are unable to maintain a current market-making prospectus, J.P. Morgan Securities Inc. may be required to discontinue its market-making activities without notice.

Historically, the market for noninvestment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Notes. The market, if any, for the Notes may experience similar disruptions and any such disruptions may adversely affect the prices at which you may sell your Notes. If a trading market does not develop for the Notes or is not maintained, you may experience difficulty in reselling the Notes or you may be unable to sell them at all. If a market develops for the Notes, future trading prices of the Notes will depend on many factors, including, among other things, prevailing interest rates, our financial condition and results of operations, and the market for similar notes. Depending on these and other factors, the Notes may trade for less than what you paid for them.

Risks related to our business

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

We use large quantities of polyethylene, PVC, polypropylene and other resins in manufacturing our products. For the year ended December 31, 2002 and the three months ended March 31, 2003, resin costs comprised approximately 62% and 60%, respectively, of our total manufacturing costs. Significant increases in the price of resins would increase our costs, reduce our operating margins and impair our

ability to service our debt unless we were able to pass all of the increase on to our customers. The price of resins is a function of, among other things, manufacturing capacity, demand, and the price of crude oil and natural gas feedstocks. Since the resins used by us are derived from petroleum and natural gas, the instability in the world markets for petroleum and natural gas could adversely affect the prices of our raw materials and their general availability. We may not be able to pass such increased costs on to customers. In addition, we rely on certain key suppliers of resin for most of our resin supply. Some of this resin has characteristics proprietary to the supplier. The loss of a key source of supply, our inability to obtain resin with desired proprietary characteristics, or a delay in shipments could adversely affect our revenues and profitability and force us to purchase resin in the open market at higher prices. We may not be able to make such open market purchases at prices that would allow us to remain competitive. See “Management’s discussion and analysis of financial condition and results of operations” and “Business—Raw materials.”

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

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, 2002, 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 27.6% of our net sales in 2002. 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 the prospectus, many of which are beyond our control, such as a reduction in the demand for our products or increases in raw material costs.

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

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

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, which in turn could adversely affect our ability to service our indebtedness.

We expect to continue to make acquisitions as opportunities arise within the constraints of our credit facilities, as amended. However, without the consent of the lenders under our credit facilities, we cannot make an acquisition under the terms of our credit facilities unless our leverage ratio will be equal to or less than 4.0 to 1.0 after the acquisition is completed. Our efforts to integrate 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, which in turn could adversely affect our ability to service our indebtedness.

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, Australia and Brazil. 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 the Notes and certain borrowings under our credit facilities. 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 yours as a creditor.

Affiliates of J.P. Morgan Partners, LLC beneficially own approximately 55% of our outstanding common stock, 75% of our preferred stock warrants to purchase common stock and 59% of our outstanding preferred stock, subject to certain preemptive rights with respect to 10,000 shares of preferred stock issued on March 25, 2003. Subject to certain limitations contained in the stockholders’ agreement among us, our stockholders, and holders of our preferred stock warrants, 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 as a holder of the Notes.

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

Although we consider our current relations with our employees to be good, if major work disruptions were to occur, our business could be adversely affected by, for instance, a loss of revenues, increased costs or reduced profitability. As of March 31, 2003, we had approximately 3,250 employees, of which approximately 1,000 employees were subject to a total of 12 collective bargaining agreements that expire on various dates between February 19, 2004 and March 7, 2007. We have had one labor strike in the United States in our history, which occurred at our Chippewa Falls, Wisconsin plant in March 2000 and lasted approximately two weeks. In October 2001, we entered into a five year agreement with the union representing the approximately 150 employees at our Chippewa Falls, Wisconsin manufacturing plant. We also had a temporary work stoppage at our Australia facility in 2001 that lasted approximately 30 days.

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

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

Risks related to our prior auditors

Arthur Andersen LLP, our former auditors, audited certain financial information included in this prospectus. In the event such financial information is later determined to contain false statements, you may be unable to recover damages from Arthur Andersen LLP.

Arthur Andersen LLP completed its audit of our financial statements as of December 31, 2001 and for the two years then ended and issued its report with respect to such financial statements on January 28, 2002. Subsequently, Arthur Andersen was convicted of obstruction of justice for activities relating to its previous work for Enron Corp.

In May 2002 both our audit committee and our board of directors approved the appointment of Ernst & Young LLP as our independent public accountants to audit our financial statements for fiscal year 2002. Ernst & Young replaced Arthur Andersen, which had served as our independent auditors since 1997. We

had no disagreements required to be disclosed pursuant to Item 304 of Regulation S-K with Arthur Andersen on any matter of accounting principle or practice, financial statement disclosure or auditing scope or procedure. Arthur Andersen audited the financial statements that we include in this prospectus as of December 31, 2001 and 2000, and for each of the years in the two-year period ended December 31, 2001, as set forth in its report herein. We include these financial statements in reliance on the authority of Arthur Andersen as experts in giving said reports.

We have not been able to obtain, after reasonable efforts, the written consent of Arthur Andersen to the inclusion in this prospectus of its report with respect to the consolidated financial statements and financial statement schedule of Pliant Corporation included in this prospectus as of December 31, 2001 and for the two years then ended, as required by Section 7 of the Securities Act of 1933. Accordingly, we have dispensed with the requirement to file such consent in reliance upon Rule 437a of the Securities Act. Because Arthur Andersen has not consented to the inclusion of its report in this prospectus, you may have no effective remedy against Arthur Andersen under Section 11 of the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen, or any omissions to state a material fact required to be stated therein.

Arthur Andersen has stopped conducting business before the SEC and has limited assets available to satisfy the claims of creditors. As a result, you may be limited in your ability to recover damages from Arthur Andersen under federal or state law if it is later determined that there are false statements contained in this prospectus relating to or contained in financial data audited by Arthur Andersen.

Disclosure regarding forward-looking statements

This prospectus includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information and, in particular, appear under the headings “Summary,” “Management’s discussion and analysis of financial condition and results of operations” and “Business.” When used in this prospectus, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” and variations of such words or similar expressions are intended to identify forward-looking 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, management’s expectations, beliefs and projections may not result or be achieved.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this prospectus. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this prospectus are set forth in this prospectus, including under the heading “Risk factors.” As stated elsewhere in this prospectus, such risks, uncertainties and other important factors include, among others:

•

general economic and business conditions, particularly an economic downturn;

•

industry trends;

•

increases in our leverage;

•

interest rate increases;

•

changes in our ownership structure;

•

raw material costs and availability, particularly resin;

•

competition;

•

the loss of any of our major customers;

•

changes in demand for our products;

•

new technologies;

•

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

•

costs of integrating any future acquisitions;

•

loss of our intellectual property rights;

•

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

•

changes in our business strategy or development plans;

•

availability, terms and deployment of capital;

•

availability of qualified personnel; and

•

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

There may be other factors that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this prospectus and are expressly qualified in their entirety by the cautionary statements included in this prospectus. 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.

Use of proceeds

This prospectus is delivered in connection with the sale of the Notes by J.P. Morgan Securities Inc. in market-making transactions. We will not receive any of the proceeds from these transactions.

The net proceeds of approximately $204.7 million from the Notes and related warrants originally issued in 2000 were used to fund a portion of the recapitalization and related transactions. As part of the recapitalization, we repurchased $125.0 million principal amount of our outstanding senior subordinated notes, which bore interest at the rate of 9¹/8% per annum and were scheduled to mature on October 1, 2007. We used all of the net proceeds of approximately $98.8 million from the Notes originally issued in 2002 to repay indebtedness under our credit facilities, including a repayment of approximately $68.8 million on our revolving credit facility and a $30 million repayment on our term loans. At the time of these repayments, our credit facility was scheduled to mature on May 31, 2006, the interest rate on borrowings under the revolving credit facility was 8.83% per annum and the interest rate on the borrowings under our term loans was 8.34% per annum.

Capitalization

The following table sets forth our capitalization as of March 31, 2003 on an actual basis and on an as adjusted basis to reflect the issuance of the 2003 Notes.

	March 31, 2003
	Actual			As adjusted
				(unaudited)
	(Dollars in millions)
Cash and cash equivalents(1)	$	4.5		$	40.6

Total debt:
Credit facilities
Revolving credit facility(2)	$	38.9		$	—
Tranche A facility and Mexico facility(3)		139.1			33.8
Tranche B facility(3)		245.5			185.8
13% Senior subordinated notes due 2010		311.9			311.9
11¹/8% Senior secured notes due 2009		—			250.0
Obligations under capital leases and other		.9			.9

Total debt		736.3			782.4
Redeemable preferred stock		167.0			167.0
Redeemable common stock		13.0			13.0
Stockholders’ deficit(4)		(284.6	)		(290.8	)

Total capitalization	$	631.7		$	671.6

(1)

The as adjusted cash balance reflects the increase in cash from the issuance of the 2003 Notes after the repayment of the $38.9 million outstanding balance on our revolving credit facility at March 31, 2003 and the repayment of $165 million on our tranche A and tranche B facilities.

(2)

The amount shown does not include $6.6 million of outstanding letters of credit that reduce available borrowings under our revolving credit facility. As of May 31, 2003, the outstanding borrowings under the revolving credit facility were $1.0 million. Amounts outstanding under the revolving credit facility vary on a daily basis.

(3)

The as adjusted amounts outstanding under the tranche A facility and the tranche B facility reflect prepayments of term loans with a portion of the proceeds from the issuance of the 2003 Notes. Proposed tranche B payments of $22.8 million were rejected by tranche B lenders and applied to tranche A term loans. Accordingly, a total of $105.3 million was applied to tranche A term loans and $59.7 million was applied to tranche B term loans.

(4)

The as adjusted stockholders’ deficit gives effect to the after tax write off of $6.2 million of debt issuance costs.

Selected financial data

The following table sets forth selected financial data as of and for the fiscal years ended December 31, 1998, 1999, 2000, 2001 and 2002 and as of and for the three months ended March 31, 2002 and 2003. The 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, “Capitalization” and “Management’s discussion and analysis of financial condition and results of operations.” The selected financial data as of and for the three months ended March 31, 2002 and 2003 have been derived from our unaudited consolidated financial statements. In the opinion of management, the unaudited information reflects all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the results for those periods. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year or any future period.

	Years ended December 31,															Three months ended March 31,
	1998			1999			2000			2001			2002			2002			2003
																			(unaudited)
	(Dollars in millions)
Statement of operations data:
Net sales	$	681.1		$	813.7		$	843.8		$	840.4		$	879.2		$	210.1		$	240.5
Cost of sales		561.6			655.7			696.7			665.1			714.5			164.4			197.7

Gross profit		119.5			158.0			147.1			175.3			164.7			45.7			42.8
Total operating expenses(1)		70.1			82.0			132.7			101.1			136.6			24.7			28.8

Operating income		49.4			76.0			14.4			74.2			28.1			21.0			14.0
Interest expense(2)		(37.5	)		(44.0	)		(68.5	)		(76.0	)		(75.3	)		(16.9	)		(19.9	)
Loss on extinguishment of debt(3)		—			—			(18.7	)		—			—			—			—

Other income (expense), net		(0.8	)		0.4			0.3			6.5			2.3			0.4			0.6

Income (loss) before income taxes and discontinued operations		11.1			32.4			(72.5	)		4.7			(44.9	)		4.5			(5.3	)
Income tax expense (benefit)		8.6			14.1			(21.7	)		6.8			(1.5	)		1.9			2.0

Income (loss) before discontinued operations		2.5			18.3			(39.5	)		(2.1	)		(43.4	)		2.6			(7.3	)
Income from discontinued operations(4)		0.6			—			—			—			—			—			—
Gain on sale of discontinued operations(4)		5.2			—			—			—			—			—			—
Net income (loss)	$	8.3		$	18.3		$	(50.8	)	$	(2.1	)	$	(43.4	)	$	2.6		$	(7.3	)
Other financial data:
EBITDA(5)	$	81.5		$	111.4		$	35.5		$	127.7		$	77.3		$	32.7		$	25.8
Net cash provided by operating activities		45.5			51.4			60.3			30.3			43.6			11.9			(1.5	)
Net cash used in investing activities		(314.8	)		(46.0	)		(65.6	)		(87.3	)		(55.2	)		(10.5	)		(3.6	)
Net cash provided by financing activities		275.9			(16.7	)		0.3			55.0			12.4			(2.7	)		7.7
Depreciation and amortization		27.1			35.0			39.5			47.0			46.9			11.3			11.2
Restructuring and other costs(1)		4.9			2.5			19.4			(4.6	)		43.1			3.3			6.1
Non-cash stock-based compensation expense		—			0.8			2.6			7.0			—			—			—
Capital expenditures		52.1			35.7			65.6			56.4			49.2			10.5			3.6
Ratio of earnings to fixed charges(6)		1.3	x		1.7	x		—			1.1	x		—			1.3	x		—

	December 31,													March 31,
	1998		1999		2000			2001			2002			2002			2003
														(unaudited)			(unaudited)
	(Dollars in millions)
Balance sheet data (at period end):
Cash and cash equivalents	$	19.2	$	9.1	$	3.1		$	4.8		$	1.6		$	4.2		$	4.5
Working capital		93.4		103.8		57.6			58.4			45.8			81.2			56.7
Total assets		734.3		769.0		785.0			851.7			853.2			861.1			870.0
Total debt		524.9		510.4		687.4			713.3			736.4			710.4			736.3
Total liabilities		662.5		675.4		885.9			903.0			960.1			907.2			974.5
Redeemable preferred stock(7)		—		—		88.7			126.1			150.8			132.1			167.0
Redeemable common stock		1.2		2.9		16.5			16.8			13.0			16.8			13.0
Stockholders’ equity (deficit)		70.6		90.7		(206.0	)		(194.5	)		(270.9	)		(195.1	)		(284.6	)

(1)

also include $3.3 million related to the present value of future lease payments on two buildings that we do not currently occupy. In connection with the 2001 restructuring plan, we vacated and subleased these facilities in 2001. During the first quarter of 2003, the sublessees defaulted on the subleases. Total operating expenses for the three months ended March 31, 2002 include $3.3 million for restructuring and other costs. These costs primarily include costs of relocating production lines from the plants acquired and closed as a result of the acquisition of Uniplast Holdings, Inc.

Total operating expenses for 2002 include $43.1 million of restructuring and other costs, including $19.2 million related to the closure of our plant in Merced, California, a portion of our plant in Shelbyville, Indiana, a part of our plant in Toronto, Canada, one of our plants in Mexico, and our Fort Edward, New York facility (acquired as part of the Decora acquisition). In addition, these costs reflect $7.9 million for the costs of relocating several of our production lines related to plant closures and costs associated with production rationalizations at several plants. Total operating expenses for 2002 also include $7.4 million related to severance costs, including benefits for several company-wide workforce reduction programs that were completed in 2002. A $8.6 million charge for the impairment of goodwill on our Pliant International segment is also reflected in total operating expenses for 2002.

(2)

(3)

(4)

In 1998, we sold our entire interest in our foam products operations, which were operated exclusively in Europe. The financial position and results of operations of this separate business segment are reflected as discontinued operations for the applicable years presented.

(5)

EBITDA reflects income 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. In addition, EBITDA is used internally by our management to measure operating performance. 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 operating activities as set forth in our consolidated statements of cash flows is as follows:

	Years ended December 31,															Three months ended March 31,
	1998			1999			2000			2001			2002			2002			2003
																(unaudited)			(unaudited)
	(Dollars in millions)
EBITDA	$	81.5		$	111.4		$	35.5		$	127.7		$	77.3		$	32.7		$	25.8
Adjustments:
Interest expense		(37.5	)		(44.0	)		(68.5	)		(76.0	)		(75.3	)		(16.9	)		(19.9	)
Income tax (expense) benefit		(8.6	)		(14.1	)		21.7			(6.8	)		1.5			(1.9	)		(2.0	)
Amortization of deferred financing costs		—			—			1.4			2.7			3.7			0.8			1.1
Deferred income taxes		7.0			7.1			(25.8	)		3.0			(5.4	)		0.1			(0.7	)
Change in provision for accounts receivable		(1.7	)		(0.5	)		(0.2	)		0.3			2.6			—			—
Non-cash compensation expense related to stock options		—			0.8			2.6			7.0			—			—			—
Discount on stockholder note receivable		—			—			0.3			—			—			—			—
Non-cash plant closing costs		—			—			14.8			(7.6	)		14.2			—			3.3
Write-down of impaired goodwill and property, plant and equipment		1.3			1.4			—			—			8.6			—			—
(Gain) loss on disposal of assets and discontinued operations		(4.9	)		—			0.5			(0.4	)		0.4			0.1			(0.1	)
Loss on extinguishment of debt		—			—			18.7			—			—			—			—
Minority interest		—			—			—			0.3			(0.1	)		—			—
Change in operating assets and liabilities, net of effects of acquisitions		8.4			(10.7	)		59.3			(19.9	)		16.1			(3.0	)		(9.0	)

Net cash provided by (used in) operating activities		45.5			51.4			60.3			30.3			43.6			11.9			(1.5	)

(6)

(7)

The amount presented for March 31, 2003 includes proceeds of $141.0 million from the issuance of preferred stock in 2000, 2001 and 2003, plus the accrued and unpaid dividends of $55.9 million, less the unamortized discount due to detachable preferred stock warrants and unamortized issuance costs totaling $29.9 million.

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 prospectus. 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 prospectus.

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

General

We generate our revenues, earnings and cash flows from the sale of film and flexible packaging products throughout the world. We manufacture these products at 26 facilities located in the United States, Australia, Brazil, 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. In addition, as discussed below under “Acquisitions in 2002 and 2001,” we recently acquired a consumer products business that manufactures and sells products under the Con-Tact^® brand name.

Acquisitions in 2002 and 2001

In August 2002, we purchased substantially all of the assets and assumed certain liabilities of the business of Roll-O-Sheets Canada Limited (“Roll-O-Sheets”). The Roll-O-Sheets business consists of one plant in Barrie, Canada engaged in the conversion and sale of PVC and polyethylene film for the food industry. In addition, the business includes the distribution of purchased polyester film, polypropylene food trays and other food service products.

In May 2002, we acquired substantially all of the assets and assumed certain liabilities of Decora Industries, Inc. and its operating subsidiary, Decora Incorporated (collectively, “Decora”), a New York based manufacturer and reseller of printed, plastic films, including plastic films and other consumer products sold under the Con-Tact^® brand name. Our purchase of Decora’s assets was approved by the United States Bankruptcy Court. The initial purchase price was approximately $18 million. The purchase price was negotiated with the creditors committee and was paid in cash using borrowings from our existing revolving credit facility. The assets purchased consisted of one plant in Fort Edward, New York, and related equipment used by Decora primarily to print, laminate and convert films into adhesive shelf liner. We have substantially completed the process of closing the Decora plant in Fort Edward, New York and have moved the production to our facilities in Mexico and Danville, Kentucky. The final purchase price after adjustments totaled $23.2 million.

In July 2001, we acquired 100% of the outstanding stock of Uniplast Holdings, Inc. (“Uniplast”), a manufacturer of multi-layer packaging films, industrial films and cast-embossed films, with operations in the United States and Canada, for an initial purchase price of approximately $56.0 million in cash and equity. In connection with the acquisition of Uniplast, we announced a plan to close three of Uniplast’s six plants, move certain purchased assets to other locations and terminate certain of the sales, administration and technical employees of Uniplast. All three of these plants were closed in 2001 and sold in the first six months of 2002. The final purchase price after adjustments totaled $59.3 million.

Critical accounting policies

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

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

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

Accounts receivable. We evaluate accounts receivable on a quarterly basis and review any significant customers with delinquent balances to determine future collectibility. We base our determinations on legal issues (such as bankruptcy status), past history, current financial and credit agency reports, and the experience of the credit representatives. We reserve accounts that we deem to be uncollectible in the quarter in which we make the determination. We maintain additional reserves based on our historical bad debt experience. Although there is a greater risk of uncollectibility in an economic downturn, we believe, based on past history and proven credit policies, that the net accounts receivable as of March 31, 2003 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. We have determined that certain of our trademarks have indefinite lives, and thus they are not amortized. This is in accordance with Statements 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 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 worker’s 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 worker’s compensation claims to be reported within 24 hours. As a result, we accrue our worker’s 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.

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 carryforwards. Valuation allowances are recorded for amounts that management believes are not recoverable in future periods.

Recent accounting pronouncements

In April 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” Under Statement 4, all gains and losses from extinguishment of debt were required to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. Upon adoption of Statement No. 145, gains and losses on the extinguishment of debt will no longer be classified as an extraordinary item and any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Accounting Principles Board Opinion 30 for classification as an extraordinary item shall be reclassified. The provisions of this Statement related to the rescission of Statement 4 shall be applied in fiscal years beginning after May 15, 2002. We adopted this Statement on January 1, 2003 and reclassified amounts related to the extinguishment of debt in 2000 that were previously reported as an extraordinary item in the consolidated financial statements.

In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The primary difference between this Statement and Issue No. 94-3 relates to its requirements for recognition of a liability for a cost associated with an exit or disposal activity. This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. We adopted this Statement on January 1, 2003. This Statement did not have any impact on our consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin (ARB) No. 51” (the “Interpretation”). The Interpretation introduces a new consolidation model which determines control and consolidation based on potential variability in gains and losses of the entity being evaluated for consolidation. The Interpretation applies to variable interest entities created after January 31, 2003, and to variable interest entities in which a company obtains an interest after that date. The Interpretation applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which a company holds a variable interest that it acquired before February 1, 2003. We are currently evaluating the impact of the Interpretation on our consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This standard is effective for financial instruments entered into or modified after May 31, 2003. We are currently evaluating the impact of this Statement on our 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.

	Three months ended March 31,								Year ended December 31,
	2003				2002				2002				2001					2000
	(Dollars in millions)
Net sales	$	240.5	100.0	%	$	210.1	100.0	%	$	879.2	100.0	%	$	840.4		100.0	%	$	843.8	100.0	%
Cost of sales		197.7	82.2			164.4	78.3			714.5	81.3			665.1		79.2			696.7	82.6

Gross profit		42.8	17.8			45.7	21.7			164.7	18.7			175.3		20.8			147.1	17.4
Operating expenses before restructuring and other costs		22.7	9.5			21.4	10.2			93.5	10.6			105.7		12.6			113.3	13.4
Restructuring and other costs		6.1	2.5			3.3	1.6			43.1	4.9			(4.6	)	(0.6	)		19.4	2.3

Total operating expenses		28.8	12.0			24.7	11.8			136.6	15.5			101.1		12.0			132.7	15.7

Operating income	$	14.0	5.8	%	$	21.0	9.9	%	$	28.1	3.2	%	$	74.2		8.8	%	$	14.4	1.7	%

Three months ended March 31, 2003 compared with the three months ended March 31, 2002

Net sales. Net sales increased by $30.4 million, or 14.5%, to $240.5 million for the first quarter of 2003 from $210.1 million for the three months ended March 31, 2002. The increase was primarily due to a 4.7% increase in sales volume and a 9.5% increase in our average selling price resulting primarily from increases in our raw material costs. See “—Operating segment review” below for a detailed discussion of sales volumes and selling prices by segment and division.

Gross profit. Gross profit decreased by $2.9 million, or 6.3%, to $42.8 million for the first quarter of 2003, from $45.7 million for the three months ended March 31, 2002. This decrease was primarily due to lower margins, partially offset by the effect of higher sales volumes. See “—Operating segment review” below for a detailed discussion of the margin variances by segment.

Total operating expenses before restructuring and other costs. Total operating expenses before restructuring and other costs increased $1.3 million, or 6.1%, to $22.7 million for the first quarter of 2003 from $21.4 million for the first quarter of 2002. This increase was principally due to the selling, general and administrative expenses of the Pliant Solutions segment, which was created from the acquisition of the assets of Decora Industries, Inc. and its operating subsidiary in May 2002.

Restructuring and other costs. Restructuring and other costs increased by $2.8 million to $6.1 million for the first quarter of 2003 from $3.3 million for the three months ended March 31, 2002. The costs for the first quarter of 2003 included an accrual for the present value of future lease payments on two buildings that we do not currently occupy, the exit costs related to the closure of our Merced facility and costs of moving production lines to our Toronto plant, costs related to the transition of production from the Fort Edward plant to our plant in Mexico and exit costs related to the closure of our Shelbyville plant.

The costs for the first quarter of 2002 included costs of relocating production lines from the plants acquired and closed as a result of the acquisition of Uniplast Holdings, Inc.

Operating income. Operating income decreased by $7.0 million, or 33.3%, to $14.0 million for the three months ended March 31, 2003 from $21.0 million for the three months ended March 31, 2002, due to the factors discussed above.

Interest expense. Interest expense increased by $3.0 million, or 17.8%, to $19.9 million for the three months ended March 31, 2003 from $16.9 million for the three months ended March 31, 2002. This increase was principally due to the higher interest costs resulting from the issuance of an additional $100 million of senior subordinated notes in April 2002.

Other income. Other income was $0.4 million for the three months ended March 31, 2003, which was comparable to the amount of other income for the three months ended March 31, 2002 of $0.6 million. Other income for the three months ended March 31, 2003 included $0.1 million related to the elimination of our share of the pre-tax losses of the Alliant joint venture, $0.1 million of proceeds received from the rental of machinery, $0.1 million related to transaction gains recorded at our Mexican subsidiary and $0.1 million related to less significant items. Other income for the three months ended March 31, 2002 included $0.3 million of proceeds from a settlement with a customer, $0.1 million received pursuant to a state grant and $0.1 million related to less significant items.

Income tax expense (benefit). Income tax expense for the three months ended March 31, 2003 was $2.0 million on pretax losses of $5.3 million as compared to $1.9 million on pretax income of $4.5 million for the same period in 2002. See Note 5 to the unaudited condensed consolidated financial statements included elsewhere in this prospectus for a discussion of the change in the effective income tax rate.

Year ended December 31, 2002 compared with the year ended December 31, 2001

Net sales. Net sales increased by $38.8 million, or 4.6%, to $879.2 million for 2002 from $840.4 million for 2001. An increase in sales volume of 7.2% was partially offset by a decrease in selling prices of 2.4 cents per pound, or 2.4%. 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 $10.6 million, or 6.0%, to $164.7 million for 2002 from $175.3 million for 2001. This decrease was primarily due to lower margins, partially offset by the effect of higher sales volumes. See “—Operating segment review” below for a detailed discussion of the margin variances by segment.

Operating expenses before restructuring and other costs. Operating expenses before restructuring and other costs decreased $12.2 million, or 11.5%, to $93.5 million for 2002 from $105.7 million for 2001. This decrease was due primarily to stock based compensation expenses of $7.0 million in 2001, and reductions in operating expenses due to cost reduction programs implemented in 2002. In addition, expenses for 2001 included $6.0 million related to fees and expenses incurred in connection with a company-wide supply chain cost initiative. These decreases were partially offset by additional selling and general expenses of $5.9 million related to the Decora acquisition (the Pliant Solutions segment) and a $2.6 million charge for bad debts in 2002.

Restructuring and other costs. Restructuring and other costs increased to $43.1 million for 2002 from a credit of $4.6 million in 2001. Restructuring and other costs for 2002 reflect approximately $13.2 million related to the partial closure of our Shelbyville, Indiana facility (including non-cash charges of $12.2 million related to impaired assets), $3.7 million related to the closure of our Merced, California facility (including non-cash charges of $0.7 million related to impaired assets), $3.9 million related to costs associated with moving production lines purchased in the Uniplast acquisition, approximately $7.4 million related to severance costs related to several company-wide workforce reduction programs implemented in 2002, approximately $2.3 million related to costs associated with moving production equipment from our Fort Edward, New York facility to our Mexico facility (including the costs associated with the closure of the Fort Edward plant acquired in the Decora acquisition), a non-cash charge of $1.0 million related to the impairment of certain manufacturing assets in our U.S. plants, a non-cash charge of $8.6 million related to the impairment of goodwill in our International segment and approximately $3.0 million related to other costs associated with re-alignment of production resources at several other plants. See Note 4 to the consolidated financial statements included elsewhere in this prospectus.

Due to our decision not to proceed with the previously announced closure of our Harrington plant, approximately $7.6 million of the costs accrued for plant closures in 2000 was credited to plant closing costs in 2001. This credit was partially offset by $3.0 million of plant closing costs incurred during the fourth quarter of 2001, related primarily to the relocation of production lines as a result of the Uniplast acquisition.

Operating income. Operating income decreased $46.1 million, or 62.1%, to $28.1 million for 2002 from $74.2 million for 2001 for the reasons discussed above.

Interest expense. Interest expense decreased $0.7 million, or 1%, to $75.3 million for 2002 from $76.0 million for 2001. The decrease in interest expense, which resulted from lower outstanding term loans, due to repayments, and lower interest rates applicable to our term debt and revolving credit facilities, due to a decrease in LIBOR, was partially offset by higher interest costs from the issuance of an additional $100 million of subordinated debt in April 2002.

Other income (expense). Other income decreased $4.2 million to $2.3 million in 2002 from $6.5 million for 2001. The decrease reflects an amount of other income for the 2001 period that was primarily due to the proceeds and assets received from a settlement with a potential customer in the second quarter of 2001.

Income tax expense (benefit). In 2002 our income tax benefit was $1.5 million, compared to an income tax expense of $6.8 million in 2001. These amounts represent effective tax rates of (3.3)% and 143.8% for the years ended December 31, 2002 and 2001, respectively. The fluctuation in income tax expense (benefit) relates primarily to the fluctuation in our income (loss) before income taxes for the years presented. The fluctuation in the effective tax rate is principally the result of foreign tax rate differences, the provision for valuation allowances and the amortization of goodwill in 2001. These differences increase the effective tax rate in years in which we have pretax profit and decrease our effective tax rate in years in which we have pretax loss. Pretax loss in 2002 was $44.9 million as compared to pretax income of $4.7 million in 2001. As of December 31, 2002, our deferred tax assets totaled approximately $79.1 million, of which $46.2 million related to net operating loss carryforwards. Our deferred tax liabilities totaled approximately $84.0 million. Due to uncertainty regarding the timing of the future reversals of existing deferred tax liabilities we have recorded a valuation allowance of approximately $3.8 million to offset the deferred tax asset relating to the net operating loss carryforwards. Due to uncertainty regarding the realization of our foreign tax credit carryforwards, we have recorded a valuation allowance of approximately $7.0 million to offset all of our foreign tax credit carryforwards.

Year ended December 31, 2001 compared with the year ended December 31, 2000

Net sales. Net sales decreased by $3.4 million, or 0.4%, to $840.4 million for 2001 from $843.8 million for 2000. A decrease in selling prices of 6.0 cents per pound, or 5.9%, was partially offset by an increase in sales volume of 5.8%. 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 $28.2 million, or 19.2%, to $175.3 million for 2001 from $147.1 million for 2000. This increase was primarily due to the effect of higher sales volumes and improved margins. See “—Operating segment review” below for a detailed discussion of the margin variances by segment.

Operating expenses before restructuring and other costs. Operating expenses before restructuring and other costs decreased $7.6 million, or 6.7%, to $105.7 million for 2001 from $113.3 million for 2000. As a percentage of sales, our operating expenses were relatively high in both periods due to several unusual items in 2001 and 2000.

The unusual items in 2001 included:

•

$7.0 million of non-cash stock compensation costs;

•

$4.0 million related to the relocation of our corporate offices from Salt Lake City, Utah to Schaumburg, Illinois;

•

$6.0 million related to fees and expenses incurred in connection with a company-wide supply chain cost initiative; and

•

$3.0 million increase in depreciation expenses due primarily to new computer systems.

The unusual items in 2000 included:

•

$10.8 million of costs related to the recapitalization;

•

$10.8 million related to fees and expenses incurred in connection with a company-wide supply chain cost initiative;

•

$7.1 million related to a company-wide work force reduction program; and

•

$2.6 million of non-cash stock compensation costs.

Restructuring and other costs. Restructuring and other costs for 2001 consisted of a credit of $4.6 million as compared to restructuring and other expenses of $19.4 million in 2000. Due to our decision not to

proceed with the previously announced closure of our Harrington plant, approximately $7.6 million of the costs accrued for plant closures in 2000 were credited to plant closing costs in 2001. This credit was partially offset by $3.0 million of plant closing costs incurred during the fourth quarter of 2001, related primarily to the relocation of production lines as a result of the Uniplast acquisition. The restructuring and other costs for 2000 included costs related to the closure of our facilities in Birmingham, Alabama and Dallas, Texas. In addition, the restructuring and other costs for 2000 included costs for the expected closure of our Harrington facility.

Operating income. Operating income increased $59.8 million to $74.2 million for 2001 from $14.4 million for 2000 for the reasons discussed above.

Interest expense. Interest expense increased by $7.5 million, or 11%, to $76.0 million for 2001 from $68.5 million for 2000. This increase was principally a result of the recapitalization in May 2000. The increased interest expense attributable to increased borrowings was partially offset by a reduction in LIBOR, which decreased the variable interest rate on our term debt.

Income tax expense (benefit). In 2001, our income tax expense was $6.8 million, compared to an income tax benefit of $21.7 million in 2000. These amounts represent effective tax rates of 143.8% and (30.0%) for the years ended December 31, 2001 and 2000, respectively. The fluctuation in income tax expense (benefit) relates primarily to the fluctuation in our income (loss) before income taxes for the years presented. The fluctuation in the effective tax rate is principally the result of foreign tax rate differences and amortization of goodwill, which are relatively fixed and therefore have a greater impact on the effective rate in years in which our pre-tax income or loss is relatively low. Pretax income in 2001 was $4.7 million as compared to a pre-tax loss of $72.5 million in 2000. As of December 31, 2001, our deferred tax assets totaled approximately $47.9 million of which $30.6 million related to net operating loss carryforwards. Our deferred tax liabilities totaled $69.6 million. Due to uncertainty regarding the realization of our foreign tax credit carryforwards, we have recorded a valuation allowance of approximately $1.9 million to offset all of our foreign tax credit carryforwards.

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 discontinued operations, 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 and Note 8 to the unaudited condensed consolidated financial statements included elsewhere in this prospectus.

During the first quarter of 2003, we reorganized our operations under four operating segments. On May 7, 2003 we filed our quarterly report on Form 10-Q for the period ended March 31, 2003 reflecting four operating segments: Pliant U.S., Pliant Flexible Packaging, Pliant International and Pliant Solutions. Segment information with respect to 2002, 2001 and 2000 has been restated to reflect the operating segments as of March 31, 2003 for comparative purposes.

In April 2003, we combined our Pliant U.S. and Pliant Solutions segments into a single segment. Therefore, beginning with the second quarter of 2003 our operating segments for financial reporting purposes will be Pliant U.S. (including our current Pliant Solutions segment), Pliant Flexible Packaging and Pliant International.

Three months ended March 31, 2003 compared with the three months ended March 31, 2002

Summary of segment information (in millions of dollars):

	Pliant U.S.		Pliant Flexible Packaging		Pliant International		Pliant Solutions			Unallocated Corporate Expenses			Total
Quarter ended March 31, 2003
Net sales	$	151.9	$	51.8	$	28.0	$	8.8		$	—		$	240.5

Segment profit	$	26.8	$	7.7	$	2.9	$	(0.9	)	$	(4.4	)	$	32.1

Quarter ended March 31, 2002
Net sales	$	132.9	$	48.7	$	28.5		—		$	—		$	210.1

Segment profit(1)	$	26.7	$	8.2	$	5.5		—		$	(4.4	)	$	36.0

(1)

See Note 8 to the unaudited condensed consolidated financial statements included elsewhere in this prospectus for a reconciliation of segment profit to income before taxes.

Pliant U.S

Net sales. The net sales of our Pliant U.S. segment increased $19.0 million, or 14.3%, to $151.9 million for the first quarter of 2003 from $132.9 million for the first quarter of 2002. This increase was primarily due to a 5.1% increase in our sales volumes, and an increase in our average selling prices of 7.6 cents per pound, or 8.7%. The increase in sales volumes is discussed for each Pliant U.S. division below, and the increase in our average selling prices is discussed under “Segment profit,” below. Net sales in our Industrial Films division increased $11.1 million, or 30.6%, to $47.4 million for the first quarter of 2003 from $36.3 million for the first quarter of 2002. This increase was principally due to an increase in sales volumes of 7.0 million pounds, or 13%, and an increase in our average selling prices of 10.5 cents per pound, or 15.6%. The increase in sales volume was primarily the result of incremental sales from new stretch film production lines at our Lewisburg plant and an increase in demand in this market during the first quarter of 2003. Net sales in our Specialty Films division increased $6.8 million, or 16.5%, to $48.1 million for the first quarter of 2003 from $41.3 million for the first quarter of 2002. This increase was principally due to an increase in our sales volume of 4.7 million pounds, or 12.1%, and an increase in our average selling prices of 4.1 cents per pound, or 3.9%. The increase in sales volume was primarily the result of incremental sales from a new film line at our Washington, Georgia plant. Net sales in our Converter Films division increased $1.1 million, or 1.9%, to $56.4 million for the first quarter of 2003 from $55.3 million for the first quarter of 2002. This increase was principally due to an increase in our average selling prices of 8.4 cents per pound, or 9.1%, partially offset by the effect of lower sales volumes, which decreased 6.6%. The sales volumes decreased primarily as a result of the slowdown in the economy.

Segment profit. The Pliant U.S. segment profit was $26.8 million for the first quarter of 2003 as compared to $26.7 million for the first quarter of 2002. The increases in sales volumes discussed above were offset by lower gross margins. The decrease in gross margins was principally due to the fact that the higher selling prices discussed above were not sufficient to offset the increase in raw material prices. Our raw material costs for this segment increased 10.5 cents per pound, or 27.5%, for the first quarter of 2003 as compared to the first quarter of 2002.

Pliant Flexible Packaging

Net sales. The net sales of our Pliant Flexible Packaging segment increased $3.1 million, or 6.4%, to $51.8 million for the first quarter of 2003 from $48.7 million for the first quarter of 2002. This increase was principally due to an increase in our sales volumes of 3.3%, primarily due to incremental sales from a

new printing press and a new extrusion line, and an increase in our average selling prices of 4.4 cents per pound, or 3.0%.

Segment profit. The Pliant Flexible Packaging segment profit decreased $0.5 million, or 6.1%, to $7.7 million for the first quarter of 2003 from $8.2 million for the first quarter of 2002. This decrease in segment profit was primarily due to a decrease in gross margins, which was partially offset by the effect of higher sales volumes discussed above. The decrease in gross margins was principally due to the fact that the higher selling prices discussed above were not sufficient to offset the increase in raw material prices. Our raw material costs for this segment increased 10.9 cents per pound, or 20.2%, for the first quarter of 2003 as compared to the first quarter of 2002.

Pliant International

Net sales. The net sales of our Pliant International segment decreased $0.5 million, or 1.8%, to $28.0 million for the first quarter of 2003 from $28.5 million for the first quarter of 2002. This decrease was principally due to a 7.1% decrease in our sales volume, partially offset by an increase in our average selling prices of 5.4 cents per pound, or 6.0%. Among other factors, our sales volumes were adversely affected by a reduction in sales of personal care films sold in Latin America.

Segment profit. The Pliant International segment profit decreased $2.6 million, to $2.9 million for the first quarter of 2003 from $5.5 million for the first quarter of 2002. The decrease was due principally to the decrease in sales volume and lower gross margins. The decrease in gross margins was principally due to the fact that the higher selling prices discussed above were not sufficient to offset the increase in raw material prices. Our raw material costs for this segment increased 9.9 cents per pound, for the first quarter of 2003 as compared to the first quarter of 2002.

Pliant Solutions

Our Pliant Solutions segment was created following the Decora acquisition in May 2002. Therefore, a discussion of results of operations for this segment as compared to the first quarter of 2002 is not presented.

Pliant Solutions had net sales of $8.8 million and a segment loss of $0.9 million for the first quarter of 2003.

Unallocated Corporate Expenses

Unallocated corporate expenses remained unchanged at $4.4 million for the three months ended March 31, 2003 and 2002.

Summary for years ended December 31, 2002, 2001 and 2000

Summary of segment information (in millions of dollars):

	Pliant U.S.		Pliant Flexible Packaging		Pliant International		Pliant Solutions		Unallocated Corporate Expenses			Total
Year ended December 31, 2002
Net sales	$	535.6	$	207.0	$	108.3	$	28.3	$	—		$	879.2

Segment profit		85.5		32.5		15.6		2.7		(14.7	)		121.6

Year ended December 31, 2001
Net sales	$	530.8	$	205.3	$	104.3		—	$	—		$	840.4

Segment profit		97.9		38.6		19.4		—		(14.1	)		141.8

Year ended December 31, 2000
Net sales	$	532.4	$	220.8	$	90.6		—	$	—		$	843.8

Segment profit(1)		82.8		27.6		17.1		—		(19.9	)		107.6

(1)

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

Year ended December 31, 2002 compared with the year ended December 31, 2001

Pliant U.S.

Net sales. The net sales of our Pliant U.S. segment increased $4.8 million, or 0.9%, to $535.6 million for 2002 from $530.8 million for 2001. This increase was primarily due to a 4.3% increase in our sales volumes, partially offset by a decrease in our average selling prices of 3.0 cents per pound, or 3.3%. The increase in sales volumes is discussed for each Pliant U.S. division, below, and the decrease in our average selling prices is discussed under “—Segment profit,” below.

Net sales in our Industrial Films division decreased $2.8 million, or 1.7%, to $158.7 million for 2002 from $161.5 million for 2001. This decrease was principally due to a decrease in our average selling prices of 5.2 cents per pound, or 6.8%, partially offset by a 5.4% increase in sales volumes. The increase in sales volume was primarily the result of incremental sales from new stretch film production lines at our Lewisburg plant. Net sales in our Specialty Films division decreased $2.8 million, or 1.8%, to $155.9 million for 2002 from $158.7 million for 2001. This decrease was principally due to a decrease in our average selling prices of 4.3 cents per pound, or 4.0%, partially offset by a 0.3% increase in sales volumes. Net sales in our Converter Films division increased $10.4 million, or 4.9%, to $221.0 million for 2002 from $210.6 million for 2001. This increase was principally due to an increase in our sales volumes of 6.0%, primarily as a result of the Uniplast acquisition in July 2001, partially offset by a decrease in our average selling prices of 1.0 cent per pound, or 1.0%.

Segment profit. The Pliant U.S. segment profit decreased $12.4 million, or 12.7%, to $85.5 million for 2002 from $97.9 million for 2001, primarily due to a decrease in gross margins. The decrease in gross margins was principally a result of lower selling prices, partially offset by the effect of the increase in sales volumes discussed above.

Our average raw material costs for 2002 as a whole were comparable to average raw material costs in 2001. However, there was a significant fluctuation in raw material costs during the two year period. Raw material costs were relatively high at the beginning of 2001 and declined throughout 2001 and the first quarter of 2002. Raw material costs sharply increased throughout the second and third quarters of 2002. As raw material costs declined in 2001, our average selling prices also declined to reflect lower raw material costs partially offset by a lag of contractual selling prices. As raw material costs began to sharply increase, lagging contractual prices and a competitive pricing environment resulted in a compression between our average selling prices and average raw material costs. The lagging contractual prices were the result of specific agreements with certain customers that in some cases delayed the implementation of price increases and decreases as raw material costs changed. As a result of these factors, our average selling prices continued to remain low during the second half of 2002 while our average raw material costs increased. A change in our sales mix toward lower margin products, in part resulting from the slowdown in the economy, also contributed to a decrease in our average selling prices. Segment profit was also adversely affected by a $2.6 million charge related to bad debts.

Pliant Flexible Packaging

Net sales. Net sales of our Flexible Packaging segment increased $1.7 million, or 0.8%, to $207.0 million for 2002 from $205.3 million for 2001. This increase was principally due to an increase in our sales volumes of 7.1%, primarily due to incremental sales from a new printing press, partially offset by a decrease in our average selling prices of 8.9 cents per pound, or 5.9%.

Segment Profit. The Pliant Flexible Packaging segment profit decreased $6.1 million, or 15.8%, to $32.5 million for 2002 from $38.6 million for 2001, primarily due to a decrease in gross margins. The decrease in gross margins was principally a result of lower selling prices, partially offset by the effect of the

increase in sales volumes discussed above. See Pliant U.S. “—Segment profit” above for a discussion on the effect of raw material prices on segment profits.

Pliant International

Net sales. The net sales of our Pliant International segment increased $4.0 million, or 3.8%, to $108.3 million for 2002 from $104.3 million for 2001. This increase was principally due to a 13.9% increase in our sales volume, primarily due to the Uniplast acquisition in July 2001, partially offset by a decrease in our average selling prices of 9 cents per pound, or 8.9%. Among other factors, our average selling prices were adversely affected by a reduction in sales of our higher value personal care film sold in Mexico and Argentina, each of which has experienced economic turmoil.

Segment profit. The Pliant International segment profit decreased $3.8 million, or 19.6%, to $15.6 million for 2002 from $19.4 million for 2001. The decrease was due principally to lower gross margins as a result of lower selling prices as discussed above.

Pliant Solutions

Our Pliant Solutions segment was created in 2002 following the Decora acquisition. Therefore, a discussion of results of operations for this segment as compared to 2001 is not presented. Pliant Solutions had net sales of $28.3 million and segment profit of $2.7 million from the date of acquisition in May 2002 to December 31, 2002.

Unallocated Corporate Expenses

Unallocated corporate expenses increased $0.6 million, or 4.3%, to $14.7 million for 2002 from $14.1 million for 2001.

Year ended December 31, 2001 compared with the year ended December 31, 2000

Pliant U.S.

Net sales. The net sales of our Pliant U.S. segment decreased $1.6 million, or 0.3%, to $530.8 million for 2001 from $532.4 million for 2000. This decrease was primarily due to a decrease in our average selling prices of 5.0 cents per pound, or 5.2%, partially offset by an increase in our sales volumes of 5.2%. The increase in sales volumes is discussed for each Pliant U.S. division, below, and the decrease in our average selling prices is discussed under “—Segment profit,” below.

Net sales in our Industrial Films division increased $15.6 million, or 10.7%, to $161.5 million for 2001 from $145.9 million for 2000. This increase was principally due to a 16.9% increase in sales volumes partially offset by a decrease in our average selling prices of 4.2 cents per pound, or 5.3%. The increase in sales volume was primarily the result of increased sales of stretch film. Net sales in our Specialty Films division decreased $30.0 million, or 15.9%, to $158.7 million for 2001 from $188.7 million for 2000. This decrease was principally due to a decrease in sales volumes of 14.7% and a decrease in our average selling prices of 2.5 cents per pound, or 2.3%. The sales volumes decreased due to a significant reduction in sales at our Harrington plant, which was downsized in 2001, and a reduction in sales volume at our Washington plant due to a decrease in sales of our personal care films. Net sales in our Converter Films division increased $12.8 million, or 6.5%, to $210.6 million for 2001 from $197.8 million for 2000. This increase was principally due to an increase in our sales volumes of 10.6%, primarily as a result of the Uniplast acquisition in July 2001, partially offset by a decrease in our average selling prices of 3.7 cents per pound, or 3.7%.

Segment profit. The Pliant U.S. segment profit increased $15.1 million, or 18.2%, to $97.9 million for 2001 from $82.8 million for 2000. The increase was primarily due to the increase in sales volumes, discussed above, and an increase in gross margins. The increase in gross margins was principally a result of lower raw material prices that were only partially offset by lower selling prices during 2001.

Pliant Flexible Packaging

Net sales. Net sales of our Flexible Packaging segment decreased $15.5 million, or 7.0%, to $205.3 million for 2001 from $220.8 million for 2000. This decrease was principally due to a decrease in sales volumes of 5.7% due to the closure of our Birmingham, Alabama plant, substantial downsizing of our Shelbyville, Indiana plant and a decrease in our average selling prices of 2.4 cents per pound, or 1.6%.

Segment profit. The Pliant Flexible Packaging segment profit increased $11.0 million, or 39.9%, to $38.6 million for 2001 from $27.6 million for 2000. The increase was primarily due to an increase in gross margins partially offset by the effect of lower sales volumes discussed above. The increase in gross margins was principally a result of lower raw material prices that were only partially offset by lower selling prices during 2001.

Pliant International

Net sales. The net sales of our Pliant International segment increased $13.7 million, or 15.1%, to $104.3 million for 2001 from $90.6 million for 2000. This increase was principally due to a 31.2% increase in our sales volume, primarily due to the Uniplast acquisition in July 2001, partially offset by a decrease in our average selling prices of 14.2 cents per pound, or 12.2%. Our average selling prices decreased due to a change in sales mix.

Segment profit The Pliant International segment profit increased $2.3 million, or 13.5%, to $19.4 million for 2001 from $17.1 million for 2000. The increase was due principally to the effect of higher sales volume discussed above, partially offset by lower gross margins as a result of lower selling prices discussed above.

Pliant Solutions

Our Pliant Solutions segment was created in 2002 following the Decora acquisition. Therefore, a discussion of results of operations for this segment is not presented.

Unallocated Corporate Expenses

Unallocated corporate expenses decreased $5.8 million, or 29.1%, to $14.1 million for 2001 from $19.9 million for 2000. Unallocated corporate expenses were relatively high in both periods due to several unusual items in 2001 and 2000. For a discussion of these items see “Year ended December 31, 2001 compared with the year ended December 31, 2000 – Operating expenses before restructuring and other costs.”

Liquidity and capital resources

Our principal sources of funds are cash generated by our operations and borrowings under our credit facilities. In addition, we have raised funds through the issuance of our senior subordinated notes and the sale of shares of our preferred stock.

Credit facilities

As amended, our credit facilities consist of:

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tranche A term loans in an aggregate principal amount of $9.6 million outstanding as of June 30, 2003;

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Mexico term loans in an aggregate principal amount of $24.2 million outstanding as of June 30, 2003;

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tranche B term loans in an aggregate principal amount of $185.8 million outstanding as of June 30, 2003; and

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revolving credit facility in an aggregate principal amount of up to $100 million.

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Up to $30.0 million (plus an additional amount up to $40.0 million to support certain borrowings by our principal Mexican subsidiary) of the revolving credit facility is available in the form of letters of credit.

The interest rates under the revolving credit facility, the tranche A facility and the Mexico facility are, at our option, Adjusted LIBOR or ABR, plus a spread determined by reference to our leverage ratio. In accordance with the March 24, 2003 amendment to our credit facilities described below, the spread will not exceed 4.0% for Adjusted LIBOR or 3.0% for ABR. Adjusted LIBOR is the London inter-bank offered rate adjusted for statutory reserves. ABR is the alternate base rate, which is the higher of the lender’s prime rate or the federal funds effective rate plus 1/2 of 1%. The interest rates under the tranche B facility are, at our option, Adjusted LIBOR or ABR, plus a spread determined by reference to our leverage ratio. As amended, our credit facilities provide that the spread will not exceed 4.75% for Adjusted LIBOR or 3.75% for ABR. We may elect interest periods of one, two, three or six months for Adjusted LIBOR borrowings. The calculation of interest is on the basis of actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR loans based on the Prime Rate) and interest is payable at the end of each interest period and, in any event, at least every three months.

Compliance with financial covenants

Our credit facilities currently require us to maintain certain key financial ratios on a quarterly basis. These key ratios include a leverage ratio and an interest coverage ratio. Effective March 24, 2003, we entered into an amendment (the “Amendment”) of our credit facilities to, among other things, permit us to issue up to $50 million of our common stock, qualified preferred stock, warrants to acquire our common stock or qualified preferred stock, or any combination of our common stock, qualified preferred stock or warrants, or other capital contributions with respect to our common stock or qualified preferred stock. The Amendment also adjusted certain financial covenants, including the leverage and interest coverage ratios. As a condition to the effectiveness of the Amendment, we agreed to issue 10,000 shares of our Series A preferred stock and warrants to purchase 43,962 shares of our common stock to J.P. Morgan Partners (BHCA), L.P. (“J.P. Morgan Partners”), and J.P. Morgan Partners agreed to purchase such shares and warrants for $10 million. We completed this sale on March 25, 2003. All of the proceeds of this sale were used to reduce our term debt. In addition, the Amendment allows us to issue an additional $40 million of equity securities between March 25, 2003 and March 31, 2005 in order to obtain cash to reduce the revolving borrowings and/or term borrowings under our credit facilities. J.P. Morgan Partners is required to purchase up to $25 million of such additional equity securities to the extent necessary to enable us to meet our leverage ratio or the target senior debt leverage ratio specified in the Amendment at the end of any calendar quarter or fiscal year ending on or before December 31, 2004. Any such additional issuance of Series A preferred stock to J.P. Morgan Partners will also include warrants to purchase 4.3962 shares of our common stock for every $1,000 face amount of preferred stock issued. Our obligations to issue, and J.P. Morgan Partners’ obligation to purchase such equity securities are set forth in a Securities Purchase Agreement dated as of March 25, 2003. Generally, if we are required to issue any portion of such $25 million of equity securities under the Amendment with respect to any fiscal quarter in 2003, we must use 50% of the net proceeds from the issuance of any such equity securities to reduce our revolving borrowings, and 50% to reduce our term borrowings. If we are required to issue any such equity securities under the Amendment with respect to any fiscal quarter in 2004, we must use 100% of the net proceeds to reduce our term borrowings. The issuance of the remaining $15 million of equity securities is voluntary on our part, and neither J.P. Morgan Partners nor any other person is required to purchase such equity securities. We incurred an amendment fee of $2.2 million in connection with the Amendment. We also incurred approximately $0.5 million of legal and administrative expenses in connection with negotiating the Amendment and the issuance of 10,000 shares of Series A preferred stock and related warrants.

On May 22, 2003, we entered into an additional amendment to our credit facilities, which permitted us to issue $250 million of senior secured notes, as described below, and, among other things:

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required the prepayment of revolving loans with the net proceeds received from the issuance of the senior secured notes until $75.0 million (or, if less, all) of the revolving loans were paid;

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added Uniplast Holdings Inc. and its United States subsidiaries as borrowers under our credit facilities for up to $9.4 million of loans;

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added a new financial covenant based on the ratio of indebtedness under the credit facilities and certain qualified receivables financings to consolidated EBITDA; and

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adjusted certain financial and negative covenants, including the leverage and interest coverage ratios.

Based on our current earnings forecast, our cash flow forecast and the proceeds received from the sale of $10 million of Series A preferred stock, as described above, we believe that we will comply with the covenants contained in our credit facilities, as amended, during 2003. Further, J.P. Morgan Partners’ commitment to purchase additional equity securities will allow us to raise up to $25 million of additional funds, as described above, to the extent necessary to enable us to comply with the financial covenants if we do not meet our earnings and cash flow forecast. However, if our actual earnings and cash flow are significantly below expectations and we are unable to raise enough funds to maintain compliance with the financial covenants through the sale of equity securities to J.P. Morgan Partners, we may not be able to comply with our financial covenants. Absent a waiver or further amendment of our credit facilities, the failure to comply with our financial covenants would cause us to be in default under our credit facilities. Any such default would have a material adverse effect on our liquidity and financial condition.

We are required to make annual mandatory prepayments of the term loans under our credit facilities within 90 days following the end of each year in an amount equal to the amount by which 100% of excess cash flow for such year (or 50% of excess cash flow if our leverage ratio at the end of such year is less than or equal to 4.0 to 1.0) exceeds the aggregate amount of voluntary prepayments made since the last excess cash flow payment, subject to certain adjustments. In addition, the term loan facilities are subject to mandatory prepayments in an amount equal to (a) 100% of the net cash proceeds of equity and debt issuances by us or any of our restricted subsidiaries, and (b) 100% of the net cash proceeds of asset sales or other dispositions of property by us or any of our restricted subsidiaries, in each case subject to certain exceptions. See “Description of credit facilities and other indebtedness.”

Senior secured notes

On May 30, 2003, we completed the sale of $250 million aggregate principal amount of 11¹/8% Senior Secured Notes Due 2009 (the “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 credit facilities in accordance with the amendment to our credit facilities, described above. The 2003 Notes rank equally with our existing and future senior debt and rank senior to our existing and future subordinated indebtedness, including the Notes. The 2003 Notes are secured, on a second-priority lien basis, by a substantial portion of our assets. Due to this second-priority status, the 2003 Notes effectively rank junior to (1) our obligations under our credit facilities and any other existing and future obligations secured by a first-priority lien on the collateral securing the 2003 Notes to the extent of the value of such collateral, and (2) our obligations under our credit facilities and any other existing and future 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 Notes prior to June 1, 2007. On or after that date, 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.

Senior subordinated 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 Notes mature on June 1, 2010, and interest on the Notes is payable on June 1 and December 1 of each year. The 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 Notes are guaranteed by some of our subsidiaries. The Notes are unsecured. Prior to June 1, 2003, we may, on one or more occasions, redeem up to a maximum of 35% of the original aggregate principal amount of the Notes with the net cash proceeds of one or more equity offerings by us at a redemption price equal to 113% of the principal amount thereof, plus accrued and unpaid interest. Otherwise, we may not redeem the Notes prior to June 1, 2005. On or after that date, we may redeem the 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. See “Description of the notes.”

Preferred stock

We have approximately $141 million of Series A Cumulative Exchangeable Redeemable Preferred Stock outstanding. The Series A preferred stock accrues dividends at the rate of 14% per annum; however, our board of directors has never declared or paid any dividends on the Series A preferred stock. Unpaid dividends accumulate and are added to the liquidation amount of the Series A preferred stock. After May 31, 2005 the annual dividend rate increases to 16% unless we pay dividends in cash. The dividend rate also increases to 16% if we fail to comply with certain of our obligations or upon certain events of bankruptcy. The Series A Preferred Stock is mandatorily redeemable on May 31, 2011. See Note 10 to the consolidated financial statements included elsewhere in this prospectus.

Net cash provided by operating activities

Net cash used in operating activities was $1.5 million for the three months ended March 31, 2003, a decrease of $13.4 million, as compared to net cash provided by operations of $11.9 million for the same

period in 2002. This decrease was largely due to changes in working capital items, including increases in accounts receivable and inventory. Accounts receivable increased due to significantly higher sales volume in March 2003 and increases in selling prices for our products. Inventory increased principally due to the price increase for raw materials.

Net cash provided by operating activities was $43.6 million for the year ended December 31, 2002, an increase of $13.3 million, or 43.9%, from $30.3 million in 2001. The increase was primarily due to changes in working capital items, changes in restructuring and other costs and changes in operating earnings. Working capital improved principally due to lower accounts receivable at December 31, 2002, as compared to December 31, 2001, as a result of improved collections and lower sales volumes in 2002. In addition, other liabilities increased primarily due to the increase in accrued long-term pension liabilities.

Net cash used in investing activities

Net cash used in investing activities was $3.6 million for the three months ended March 31, 2003, as compared to $10.5 million for the same period in 2002, in each case for capital expenditures. Capital expenditures for the first quarter of 2003 were principally for ongoing maintenance. Capital expenditures in the first quarter of 2002 were primarily for expansion projects as well as ongoing maintenance costs.

Net cash used in investing activities was $55.2 million for the year ended December 31, 2002, compared to $87.3 million for the same period in 2001. Capital expenditures were $49.2 million and $56.4 million for the years ended December 31, 2002 and 2001, respectively. Capital expenditures in both periods were primarily for major expansion projects in all of our product lines, costs for upgrading our information systems, and for company-wide maintenance projects. We received $17.1 million and $7.9 million as part of sale-leaseback transactions of newly-acquired machinery and equipment in 2002 and 2001, respectively. In addition, we invested $23.2 million consisting of investments in the Decora and Roll-O-Sheets acquisitions and additional adjustments to the Uniplast acquisition in 2002 and invested $38.8 million in cash in the Uniplast acquisition in 2001.

Net cash provided by financing activities

Net cash provided by financing activities was $7.7 million for the three months ended March 31, 2003, as compared to net cash used in financing activities of $2.7 million for the three months ended March 31, 2002. The activity for the first quarter of 2003 includes the net proceeds (after financing fees and expenses) from the issuance of $10 million of Series A preferred stock and warrants and the use of these proceeds to repay term debt. We paid $2.2 million in financing fees for a related amendment to our credit facilities and the issuance of the Series A preferred stock and warrants. The activity for both periods also includes scheduled principal payments on our term loans and borrowings and repayments under our revolving credit facility.

Net cash provided by financing activities was $12.4 million in 2002, as compared with $55.0 million in 2001. The 2002 activity represents principally the net proceeds from the issuance of $100 million of 13% Senior Subordinated Notes due 2010, partially offset by repayments of term debt and revolving debt under our credit facilities. The activity in 2001 represents the proceeds of $31.0 million from the issuance of shares of preferred stock and preferred stock warrants used to fund the Uniplast acquisition and scheduled repayments of term debt, net of borrowings and repayments under our revolving credit facility.

Liquidity

As of March 31, 2003, we had approximately $56.7 million of working capital. As of March 31, 2003, we had approximately $54.5 million available for borrowings under our $100.0 million revolving credit facility, with outstanding borrowings of approximately $38.9 million and approximately $6.6 million of letters of credit issued under our revolving credit facility. Our outstanding borrowings under our revolving credit facility fluctuate significantly during each quarter as a result of the timing of payments

for raw materials, capital and interest, as well as the timing of customer collections. The outstanding balance of our revolving credit facility had a peak balance of $81.2 million during the quarter ended March 31, 2003. We may borrow amounts under the revolving credit facility upon satisfaction of certain customary conditions including compliance with our indentures. As of June 30, 2003, we had approximately $88.3 million available for borrowings under our revolving credit facility and $0 million of borrowings outstanding thereunder. As of December 31, 2002, the debt under our credit facilities and our senior subordinated notes bore interest at a weighted average rate of 9.5%, including the effect of interest rate derivative agreements.

As of March 31, 2003, we had approximately $4.5 million in cash and cash equivalents. A portion of this amount was held by our foreign subsidiaries. Repatriation tax rates may limit our ability to access cash and cash equivalents generated by our foreign operations for use in our U.S. operations, including to pay principal, premium and interest on the outstanding borrowings.

We expect that our total capital expenditures will be approximately $20 to $30 million in each of 2003 and 2004. These expenditures will consist primarily of ongoing maintenance capital expenditures.

The following table sets forth our total contractual cash obligations as of March 31, 2003 and after giving effect to the issuance of the 2003 Notes and the use of proceeds therefrom:

	Payments Due by Period
Contractual Cash Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-term debt (including capital lease obligations)	$	782,399	$	304	$	25,596	$	128,424	$	628,075
Operating leases		65,902		13,215		22,686		16,198		13,803
Redeemable preferred stock		167,046		—		—		—		167,046

Total contractual cash obligations	$	1,015,347	$	13,519	$	48,282	$	144,622	$	808,924

After giving effect to payments made through June 1, 2003, our estimated debt service for the remainder of 2003 is approximately $59.6 million, consisting solely of interest payments. Although our outstanding preferred stock accrues dividends, these dividends are only paid if declared. We do not expect to declare any dividends on our preferred stock for the foreseeable future.

The credit facilities and the indentures relating to the Notes and the 2003 Notes 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. In addition, the credit facilities require us to maintain certain financial ratios.

The interest expense and scheduled principal payments on our borrowings affect our future liquidity requirements. We expect that cash flows from operating activities and available borrowings under our revolving credit facility of $100 million will provide sufficient cash flow to operate our business, to make expected capital expenditures and to meet foreseeable liquidity requirements. As discussed above, we have a commitment from J.P. Morgan Partners to purchase up to an additional $25 million of equity securities if necessary to maintain our financial covenants under our credit facilities. However, any proceeds from the issuance of any such equity securities must be used to repay amounts outstanding under our credit facilities as described above.

Changes in raw material costs can significantly affect the amount of cash provided by our operating activities, which can affect our liquidity requirements. Over the past several months, we have experienced a period of extreme uncertainty with respect to resin supplies and prices. High crude oil and natural gas pricing, resulting in part from harsh winter weather conditions in the eastern United States and uncertainties regarding the situation with Iraq have had a significant impact on the price and supply of resins. During the same period, many major suppliers of resin have announced price increases to cover their increases in feedstock costs. While the prices of our products generally fluctuate with the prices of

resins, certain of our customers have contracts that limit our ability to pass the full cost of higher resin pricing through to our customers immediately. Further, competitive conditions in our industry may make it difficult for us to sufficiently increase our selling prices for all customers to reflect the full impact of increases in raw material costs. If this period of high resin pricing continues, we may be unable to pass on the entire effect of the price increases to our customers, which would adversely affect our profitability and working capital. In addition, further increases in crude oil and natural gas prices could make it difficult for us to obtain an adequate supply of resin from manufacturers affected by these factors.

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

Other Developments

On June 10, 2002, we entered into a separation agreement with Richard P. Durham, our former Chairman and Chief Executive Officer. 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 an outstanding promissory note issued as payment for a portion of his shares into two promissory notes. The first note (the “Vested Secured Note”), in the principal amount of $2,430,798, 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 an outstanding balance of $1,637,974 at the date of his resignation, relating to a portion of the shares of common stock held by Mr. Durham. In accordance with the separation agreement, we repurchased and cancelled Mr. Durham’s 9,667 unvested shares in exchange for cancellation of the Non-Vested Secured Note on October 3, 2002.

The separation agreement preserved a put option established by Mr. Durham’s employment agreement with respect to his shares. For purposes of this put option, the separation agreement provides that the price per share to be paid by us is $483.13 with respect to common stock, $483.13 less any exercise price with respect to warrants, and the liquidation preference with respect to preferred stock. On July 9, 2002, Mr. Durham exercised his put option with respect to 28,289 shares of common stock, 1,232 shares of preferred stock and warrants to purchase 1,250.48 shares of common stock. Mr. Durham’s put option is subject to any financing or other restrictive covenants to which we are subject at the time of the proposed repurchase. Restrictive covenants under our credit facilities limit the number of shares we can currently repurchase from Mr. Durham. On October 3, 2002, as permitted by the covenants contained in our credit facilities, we purchased 8,204 shares from Mr. Durham for a purchase price of $3,963,599 less the outstanding amount of the Additional Note, which was cancelled. In December 2002 we purchased an additional 1,885 shares of common stock from Mr. Durham for an aggregate purchase price of approximately $910,700. As of December 31, 2002, our total remaining purchase obligation to Mr. Durham was approximately $10,623,097, excluding accrued preferred dividends. We are limited by our credit facilities to a maximum purchase from Mr. Durham of $5,000,000 of shares in 2003, which purchase may only be made if we meet certain leverage ratios. In connection with Mr. Durham’s resignation as Chairman and Chief Executive Officer, Jack E. Knott II was appointed our Chief Executive Officer. Mr. Timothy J. Walsh, a director since May 31, 2000, and a Partner of J.P. Morgan Partners, LLC, was appointed as the non-executive Chairman of the Board of Directors. Mr. Durham continues to

serve as a member of our Board of Directors as a designee of The Christena Karen H. Durham Trust, which holds 158,917 shares, or approximately 27.5%, of our outstanding common stock.

During 2001, we completed the transition of our corporate headquarters from Salt Lake City, Utah to Schaumburg, Illinois, and we made certain changes in our management. During the first quarter of 2001, we incurred non-cash stock-based compensation expense of approximately $7.0 million as a result of certain modifications to our senior management employment arrangements with two executive officers.

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 enter into interest rate collar and swap agreements to manage interest rate market risks and commodity collar 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.

We finance our operations with borrowings comprised primarily of variable rate indebtedness. Market risk arises from changes in interest rates. Based on amounts outstanding as of March 31, 2003, an increase of 1% in interest rates payable on our variable rate indebtedness would increase our annual interest expense by approximately $2.2 million, after accounting for the effect of our interest rate hedge agreements. We have six interest rate derivative agreements with financial institutions that would reduce the impact of changes in interest rates on our floating-rate, long-term debt. These agreements include interest rate cap agreements, interest rate swap agreements and an interest rate collar agreement. These agreements have a notional amount of $358.0 million and expire from December 31, 2003 through January 18, 2005. See Note 6 to the consolidated financial statements included elsewhere in this prospectus.

Our raw material costs are comprised primarily of resins. Our resin costs comprised approximately 62% of our total manufacturing costs in 2002 and approximately 60% of our total manufacturing costs for the three months ended March 31, 2003. Market risk arises from changes in resin costs. Based upon our results of operations for the year ended December 31, 2002, an increase in our cost of raw materials of $0.01 per pound would have increased our costs of sales and our net loss by approximately $8.8 million, assuming we were unable to pass any of this cost increase through to our customers. 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 March 31, 2003, we did not have any commodity collar agreements outstanding.

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

We enter into certain transactions denominated in foreign currencies but, because of the relatively small size of each individual currency exposure, we do not employ hedging techniques designed to mitigate foreign currency exposures. Gains and losses from these transactions as of March 31, 2003 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.

Business

General

Pliant Corporation, with 2002 revenues of approximately $879 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 26 manufacturing and research and development facilities worldwide and we currently have approximately 1.0 billion pounds of annual production capacity.

We were founded in 1992. We have combined strategic acquisitions, internal growth, product innovation and operational improvements to grow our business from net sales of $447.7 million in 1997 to $879.2 million in 2002. We have acquired and integrated numerous strategic film and flexible packaging operations since 1992.

Recapitalization

•

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

•

Southwest Industrial Films 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;

•

Southwest Industrial Films 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 Southwest Industrial Films and to certain other institutional investors a new series of senior cumulative exchangeable redeemable preferred stock and detachable warrants for our common stock.

In connection with the recapitalization, we restructured our indebtedness. We refinanced all amounts outstanding under our then existing credit facility and replaced it with amended and restated secured credit facilities.

Controlling shareholder

J.P. Morgan Partners (BHCA), L.P. and its affiliates own approximately 55% of our outstanding common stock, 75% of our preferred stock warrants to purchase common stock and 59% of our outstanding preferred stock, subject to certain preemptive rights with respect to 10,000 shares of preferred stock issued on March 25, 2003. J.P. Morgan Partners (BHCA), L.P. and its affiliates have invested a total of approximately $238.0 million in our common and preferred stock (including warrants). J.P. Morgan Partners, LLC serves as investment advisor to J.P. Morgan Partners (BHCA), L.P. J.P. Morgan Partners, LLC is the private equity group of J.P. Morgan Chase & Co., which is one of the largest financial holding companies in the United States. J.P. Morgan Partners, LLC is a global private equity organization, with over $25 billion under management. J.P. Morgan Partners, LLC has closed over 1,000 individual

transactions since its inception in 1984 and has more than 150 investment professionals in eight offices throughout the world.

Recent acquisitions

In August 2002, we purchased substantially all of the assets and assumed certain liabilities of the business of Roll-O-Sheets Canada Limited. The Roll-O-Sheets business consists of one plant in Barrie, Canada engaged in the conversion and sale of PVC and polyethylene film for the food industry. In addition, the business includes the distribution of purchased polyester film and polypropylene food trays and other food service products.

In May 2002, we acquired substantially all of the assets and assumed certain liabilities of Decora Industries, Inc. and its operating subsidiary, Decora Incorporated (collectively, “Decora”), a New York based manufacturer and marketer of adhesive and non-adhesive decorative and surface coverings, including plastic films and other consumer products sold under the Con-Tact^® brand name. The initial purchase price was approximately $18 million. The assets purchased consisted of one plant in Fort Edward, New York, and related equipment used by Decora primarily to print, laminate and convert films into adhesive shelf liner. In addition, we accrued certain liabilities related to acquisition costs and expenses related to the relocation of the production facility, including severance payments to terminated employees. The final purchase price after adjustments totaled $23.2 million.

In July 2001, we acquired 100% of the outstanding stock of Uniplast Holdings, Inc., a manufacturer of multi-layer packaging films, industrial films and cast-embossed films, with operations in the United States and Canada, for an initial purchase price of approximately $56.0 million in cash and equity. In addition, we accrued certain liabilities related to acquisition costs and expenses related to the relocation of the production facility including severance payments to terminated employees. The final purchase price after adjustments totaled $59.3 million.

Products, markets and customers

Our products are sold into numerous markets for a variety of end uses. 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. During the first quarter of 2003, we reorganized our operations under four operating segments: Pliant U.S., Pliant Flexible Packaging, Pliant International and Pliant Solutions and our financial information contained in this prospectus is presented on that basis. In April 2003, we combined our Pliant U.S. and Pliant Solutions segments into a single segment. Therefore, beginning with the second quarter of 2003 our operating segments for financial reporting purposes will be Pliant U.S. (including our current Pliant Solutions segment), Pliant Flexible Packaging and Pliant International. For more information on our operating segments and geographic information, see Note 14 to the consolidated financial statements included elsewhere in this prospectus.

Pliant U.S.

Our Pliant U.S. segment manufactures and sells films and other flexible packaging products primarily in the United States. Our Pliant U.S. segment accounted for 61.0%, 63.2% and 63.1% of our net sales in 2002, 2001 and 2000, respectively. The principal products of our Pliant U.S. segment include personal care and medical films, converter films, agricultural films, stretch films and PVC films.

Personal Care and Medical Films. 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. We are also a specialized 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.

Converter Films. We are North America’s largest producer of converter films. Converter films are sold to converters of flexible packaging who laminate them to foil, paper or other films, and/or print them, and ultimately fabricate them into the final flexible packaging product. Our converter films are a key component in a wide variety of flexible packaging products. Generally, our converter films add value by providing the final packaging product with specific performance characteristics.

Agricultural Films. 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. We are one of North America’s two largest producers of mulch films.

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

PVC Films. Our PVC films are used by supermarkets, delicatessens and restaurants to wrap meat, cheese and produce. PVC films are preferred in these applications because of their clarity, elasticity and cling. We also produce PVC films for laundry and dry cleaning bags. Finally, we produce PVC films that are repackaged by us and other companies in smaller cutterbox rolls for sale in retail markets in North America, Latin America and Asia. We are the third largest producer of PVC films in North America.

The following table presents the net sales, excluding intercompany sales, contributed by the primary divisions in our Pliant U.S. segment. The Industrial Films division includes our stretch films and PVC films product categories. The Specialty Films division includes the majority of the sales from our personal care and medical films categories, as well as the sales from our agricultural films category and sales from our facility in Newport News, Virginia, which conducts a majority of our research and development. The Converter Films division consists of our converter films product category and some sales from our personal care and medical films product categories.

Net sales, excluding intercompany sales (dollars in millions):

	2002		2001		2000
Industrial Films	$	158.7	$	161.5	$	145.9
Specialty Films		155.9		158.7		188.7
Converter Films		221.0		210.6		197.8

Total Pliant U.S.	$	535.6	$	530.8	$	532.4

Pliant Flexible Packaging

Our Pliant Flexible Packaging segment manufactures and sells printed film and packaging products primarily in the Unites States. Our Pliant Flexible Packaging segment accounted for 23.5%, 24.4% and 26.2% of our net sales in 2002, 2001 and 2000, respectively. The principal products of our Pliant Flexible Packaging segment include printed products and barrier films.

Printed Products. Our printed products include printed rollstock, bags and sheets used to package food, consumer goods and personal care products. 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. We are the leading manufacturer of films used for frozen foods packaging in North America. In addition, we are the second largest manufacturer of films for the bread and bakery goods market in North America.

Barrier Films. We manufacture a variety of barrier films, primarily for food packaging. We are North America’s second largest producer of films for cookie, cracker and cereal box liners. We are also a leading manufacturer of barrier films for liners in multi-wall pet food bags, frozen baked goods and dry mix packaging.

Pliant International

Our Pliant International segment manufactures and sells films and other flexible packaging products. We have manufacturing operations located in Australia, Brazil, Canada, Germany and Mexico. These operations service Australia, Southeast Asia, Latin America, Canada, Europe and Mexico. In addition, our operation in Mexico provides the film for our Pliant Solutions segment. Our Pliant International segment accounted for 12.3%, 12.4% and 10.7% of our net sales in 2002, 2001 and 2000, respectively. The principal products of our Pliant International segment vary depending on the particular country or region.

Mexico

Our facility in Mexico produces a variety of films and flexible packaging products. These products are sold primarily in Mexico, although we have a few customers in other Latin American countries. Our facility in Mexico manufactures personal care films, printed products and barrier films. We also sell stretch films and PVC films manufactured by our U.S. plants in Mexico and the Latin America region.

Personal Care Films. We believe we are a leading supplier of personal care films in Mexico. We produce both printed and unprinted films for use in disposable diapers, feminine care products and adult incontinence products.

Printed Products. Our facility in Mexico produces printed rollstock, bags and sheets used to package food and consumer products.

Barrier Films. We manufacture co-extruded barrier films in our Mexico facility. These films are used for cookie, cracker and cereal box liners.

Stretch and Shrink Films. We believe we are a leading supplier of stretch and shrink films in Mexico. Stretch films are used to bundle, unitize and protect palletized loads during shipment and storage. These stretch films are manufactured by our U.S. plants. Shrink film is produced in our Mexican operations as well as our U.S. plants for sale into this region.

PVC Films. We also sell PVC films in Mexico. Like our stretch films, our PVC films are manufactured by our U.S. plants and shipped to customers in Mexico.

Germany

Our facility in Germany produces PVC films primarily for sale throughout Europe. We are a leading producer of PVC films in Europe, where our films are sold primarily to supermarkets and processors of red meat and poultry. In Southern Europe, we also sell our PVC films to produce suppliers.

Australia

Our facility in Australia produces PVC films primarily for sale in Australia, New Zealand and Southeast Asia. In this region, we sell our PVC films primarily to supermarkets, delicatessens and restaurants to wrap meat, cheese and produce. We also sell PVC films to converters that rewind and slit the PVC films for use in retail cutter boxes.

Canada

We are a leading supplier of converter films in Canada. We manufacture converter films at both our Canadian facilities and our U.S. facilities for sale in Canada. In Canada, we sell our converter films primarily to converters of flexible packaging, distributors and end users.

Pliant Solutions

Our Pliant Solutions segment consists primarily of the consumer products business we acquired from Decora in May 2002. Net sales of the Pliant Solutions segment since the acquisition date accounted for 3.2% of our net sales in 2002. Our Pliant Solutions segment markets and distributes decorative and surface coverings, including self-adhesive and non-adhesive coverings, primarily in the United States and Canada. We market these consumer products primarily under the Con-Tact^® brand name, which is considered to be the most recognized brand of consumer decorative and surface coverings.

Decorative and surface coverings are manufactured through the conversion of various films into consumer packaged goods. These products are sold by retailers to consumers for a wide range of applications, including shelf-lining, decorative accenting, glass covering, surface repair, resurfacing and arts and crafts projects. Product lines currently marketed by our Pliant Solutions segment under the Con-Tact^® brand name include multipurpose decorative coverings, Shelf Liner^™, Grip Liner^™ and glass coverings. Consumers purchase these products based upon their ease of application, design, durability and price.

We believe we are the largest provider of decorative and surface coverings in the United States, which we attribute to the strength of our Con-Tact^® brand name. In North America, we sell our Con-Tact^® brand products primarily to retailers, including mass merchants, home centers, specialty stores, grocery stores, and drug stores.

Sales and marketing

Because of our broad range of product offerings and customers, our sales and marketing efforts are generally specific to a particular product, customer or geographic region. 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 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. In addition, certain of our personal care and barrier films, and all of our agricultural films are sold through brokers in the United States. Most of our printed products are sold domestically through brokers. National grocery chains and some smaller customer accounts are serviced by our own direct sales force.

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

No single customer accounted for more than 10% of our net sales for the year ended December 31, 2002.

Manufacturing

During the past three fiscal years, excluding acquisitions, we have invested a total of $171.3 million to expand, upgrade and maintain our asset base and information systems. With 26 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 support provide critical support to our business and customers. Our research and development group provides the latest resin and extrusion technology to our manufacturing facilities and allows us to test new resins and process technologies. Our technical center in Newport News, Virginia has a pilot plant that allows the technical center to run commercial “scale-ups” for new products. We are able to use our broad product offerings and technology to transfer technological innovations from one market to another.

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

We spent $8.1 million, $9.8 million and $8.6 million on research and development in 2002, 2001 and 2000, respectively, before giving effect to revenues from pilot plant sales.

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, 2002, resin costs comprised approximately 62% of our total manufacturing costs. The price of resins is a function of, among other things, manufacturing capacity, demand, and the price of crude oil and natural gas feedstocks. Resin shortages or significant increases in the price of resin could have a significant adverse effect on our business.

Over the past several months, we have experienced a period of extreme uncertainty with respect to resin supplies and prices. High crude oil and natural gas pricing, resulting in part from harsh winter weather conditions in the eastern United States and uncertainties regarding the situation with Iraq, have had a significant impact on the price and supply of resins. During the same period, many major suppliers of resin have announced price increases to cover their increases in feedstock costs. While the prices of our products generally fluctuate with the price of resins, certain of our customers have contracts that limit our ability to pass the full cost of higher resin pricing through to our customers immediately. Further, competitive conditions in our industry may make it difficult for us to sufficiently increase our selling prices for all customers to reflect the full impact of increases in raw material costs. If this period of high resin pricing continues, we may be unable to pass on the entire effect of the price increases to our customers, which would adversely affect our profitability and working capital. In addition, further

increases in crude oil and natural gas prices could make it difficult for us to obtain an adequate supply of resin from manufacturers affected by these factors.

Employees

As of March 31, 2003, we had approximately 3,250 employees, of which approximately 1,000 employees were subject to a total of 12 collective bargaining agreements that expire on various dates between February 19, 2004 and March 7, 2007. We consider our current relations with our employees to be good. However, if major work disruptions were to occur, our business could be adversely affected.

Properties

Our principal executive offices are located at 1475 Woodfield Road, Suite 700, Schaumburg, Illinois 60173. We own most of the improved real property and other assets used in our operations. We lease all or part of seven 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.

In an effort to maximize the efficiency of our facilities, we closed and disposed of a number of facilities in 2000, 2001 and 2002, including certain facilities acquired in connection with recent acquisitions. Production from these facilities was moved in large part to plants that were not operating at capacity. During 2000, we closed a facility in Dallas, Texas. In 2001, we closed a facility in Birmingham, Alabama, two facilities in Palmer, Massachusetts, a facility in Columbus, Indiana and a part of our facility in Toronto, Canada. During 2003, we are continuing a process to consolidate our two plants in Mexico. In addition, during the fourth quarter of 2002 we substantially completed the closure of our facility in Merced, California and a portion of our plant in Shelbyville, Indiana. The remaining portion of the Shelbyville, Indiana plant continues to operate as part of the Alliant joint venture. Alliant is a joint venture between us and Supreme Plastics Ltd., a company based in the United Kingdom. Alliant manufactures and sells recloseable zipper products. We have also substantially completed the process of closing a facility in Fort Edward, New York, which was acquired as part of the Decora acquisition, and have moved the production to our facilities in Mexico and Danville, Kentucky.

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

Location		Products
Pliant U.S.

Barrie, Canada*		PVC and polyethylene films
Burrillville, Rhode Island		Converter films
Calhoun, Georgia		PVC films
Chippewa Falls, Wisconsin		Converter and personal care films
Dalton, Georgia		Converter, barrier and custom films
Danville, Kentucky		Stretch and converter films
Deerfield, Massachusetts		Converter films
Harrington, Delaware		Personal care, medical and converter films
Lewisburg, Tennessee		Stretch films
McAlester, Oklahoma		Personal care, medical and converter films
Newport News, Virginia		Research facility and pilot plant
Shelbyville, Indiana		Reclosable zipper products
Toronto, Canada		PVC films
Washington, Georgia		Personal care, medical and agricultural films

Pliant Flexible Packaging

Bloomington, Indiana*		Barrier and custom films
Kent, Washington		Printed bags and rollstock
Langley, British Columbia*		Printed bags and rollstock
Macedon, New York+		Personal care films, printed bags and rollstock
Odon, Indiana*		Barrier and custom films

Pliant International

Mexico City, Mexico*		Barrier and personal care films, printed bags and rollstock
Orillia, Canada (two plants)		Converter films
Phillipsburg, Germany		PVC films
Porte Allegra, Brazil		Personal care bags
Preston, Australia*		PVC films

Pliant Solutions

Danville, Kentucky*		Packaging and distribution

Indicates a leased building.

Indicates a building that is approximately 95% owned and 5% leased.

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.

Competition

Legal proceedings

On November 19, 2001, S.C. Johnson & Son, Inc. and S.C. Johnson Home Storage, Inc. (collectively, “S.C. Johnson”) filed a complaint against us in the U.S. District Court for the District of Michigan, Northern Division (Case No. 01-CV-10343-BC). The complaint alleges misappropriation of proprietary trade secret information relating to certain componentry used in the manufacture of reclosable “slider” bags. We counterclaimed alleging that S.C. Johnson misappropriated certain of our trade secrets relating to the extrusion of flange zipper and unitizing robotics. Both the S.C. Johnson complaint and our counterclaim seek damages and injunctive and declaratory relief. We intend to resist S.C. Johnson’s claims and to pursue our counterclaim vigorously. We do not believe this proceeding will have a material adverse affect on our financial condition or results of operations.

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

We are involved in other 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.

Management

Certain information about our executive officers and directors is presented in the table 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, four of whom are designated by our institutional common stockholders and warrantholders, two of whom are designated by the The Christena Karen H. Durham Trust, or the Trust, and one of whom is appointed by our board of directors and must be a member of our senior management.

Name	Age	Position

Jack E. Knott II	49	Chief Executive Officer and Director

Brian E. Johnson	48	Executive Vice President and Chief Financial Officer

Stanley B. Bikulege	39	Executive Vice President and President, Pliant U.S.

Elise H. Scroggs	41	Executive Vice President and President, Pliant International

Len Azzaro	53	Executive Vice President and President, Flexible Packaging

Douglas W. Bengtson	55	Executive Vice President, Procurement and Strategic Sourcing

Timothy J. Walsh	40	Chairman of the Board and Director

Richard P. Durham	39	Director

Donald J. Hofmann, Jr.	45	Director

John M. B. O’Connor	49	Director

Edward A. Lapekas.	60	Director

Albert (Pat) MacMillan.	59	Director

Jack E. Knott II became our Chief Executive Officer in June 2002 and was our President from March 2001 through June 2002. Mr. Knott also served as our Chief Operating Officer from September 1, 1997 through June 2002. From September 1997 through March 2001, Mr. Knott also served as an Executive Vice President. Prior to joining us, Mr. Knott was a member of the board of directors of Rexene Corporation and held the positions of Executive Vice President of Rexene Corporation and President of Rexene Products. Mr. Knott served in various capacities at Rexene from 1985 to 1997, including Executive Vice President and President, Rexene Products, and Executive Vice President and President of CT Film, a division of Rexene Corporation. Prior to joining Rexene Corporation, Mr. Knott worked for American National Can. Mr. Knott received a B.S. degree in Chemical Engineering and an M.B.A. degree from the University of Wisconsin. Mr. Knott is currently chairman of the Flexible Packaging Association. Pursuant to the stockholders’ agreement, Mr. Knott is the board of directors’ appointee to the board from our senior management.

Brian E. Johnson became our Executive Vice President and Chief Financial Officer on July 17, 2001. Mr. Johnson joined Pliant in April 2001 as Senior Vice President and Chief Financial Officer. Prior to joining us, Mr. Johnson was Vice President and Chief Financial Officer of Geneer Corporation. His former positions include Executive Vice President at Lawson Mardon Packaging and Vice President and General Manager of Sengewald USA Inc. Mr. Johnson received a B.S. degree in Finance from the University of Illinois and an M.B.A. degree from the Kellogg School of Management at Northwestern University.

Stanley B. Bikulege became Executive Vice President and President, Pliant U.S. in June 2002. Mr. Bikulege served as Executive Vice President Operations from July 2001 through June 2002. Mr.

Bikulege’s prior positions with Pliant include Senior Vice President and General Manager, Industrial Films Division; Vice President, Stretch Films; General Manager-Castflex; Managing Director-Europe; Managing Director PVC Films-Europe; Director of Manufacturing; and Plant Manager. Prior to joining us in 1992, Mr. Bikulege held numerous positions in Goodyear Tire and Rubber Company’s Films Division. Mr. Bikulege received a B.S. degree in Chemical Engineering from Youngstown State University and an M.B.A. degree from Georgia State University.

Elise H. Scroggs became Executive Vice President and President, Pliant International in June 2002. Ms. Scroggs served as Senior Vice President of International Operations from December 2001 through June 2002. Ms. Scroggs’ prior positions with Pliant include numerous management positions overseeing transportation, customer service, purchasing, operations and administration. Prior to joining us in 1997, Ms. Scroggs held sales management positions with Rexene Corporation. Ms. Scroggs received a B.S. degree in Textile Chemistry from Auburn University.

Len Azzaro became Executive Vice President and President, Flexible Packaging on February 3, 2003. Prior to joining Pliant, Mr. Azzaro spent 30 years in global sales, marketing and general management at Dow Chemical. Most recently he served as leader of Dow’s global polyethylene business. Mr. Azzaro holds a B.S. degree from Youngstown State University and an M.B.A. degree from the Kellogg School of Management at Northwestern University.

Douglas W. Bengtson became our Executive Vice President, Procurement and Strategic Sourcing in June 2002. Mr. Bengtson served as Executive Vice President of Sales from July 2001 through June 2002. Mr. Bengtson joined Pliant in September 1997 as Senior Vice President and General Manager, Performance Films Division. Prior to joining us, Mr. Bengtson was Vice President of Sales and Marketing for Food Packaging at American National Can. His former positions include Vice President, Sales and Marketing at CT Film, a division of Rexene Corporation, and Vice President, Sales and Marketing, of the Polymer division of Rexene Corporation. Mr. Bengtson received a B.S. degree in Business/Marketing from Colorado State University.

Timothy J. Walsh became one of our directors on May 31, 2000 and the chairman of the board of directors, a non-executive position, in June 2002. 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., which is our principal stockholder. Since 1999, Mr. Walsh has been a Partner of J.P. Morgan Partners, LLC (formerly, Chase Capital Partners), a global private equity organization with over $25 billion of direct private equity under management. J.P. Morgan Partners, LLC has closed over 1,000 individual transactions since its inception in 1984 and has more than 150 investment professionals in eight offices throughout the world. From 1993 to 1999, Mr. Walsh held various positions with J.P. Morgan Partners, LLC in Europe and North America. Prior to 1993, he was a Vice President of J.P. Morgan Chase & Co. (formerly, The Chase Manhattan Corporation). Mr. Walsh is also a director of Better Minerals & Aggregates Company, Klockner Pentaplast S.A. and Metokote Corporation. Mr. Walsh received a B.S. degree from Trinity College and an M.B.A. degree from the University of Chicago. Pursuant to the stockholders’ agreement, Mr. Walsh is one of the designees to the board by our institutional common stockholders and warrantholders.

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

Donald J. Hofmann, Jr. became one of our directors on May 31, 2000. Since January 2003, Mr. Hofmann has been a Senior Advisor of J.P. Morgan Partners, LLC (formerly, Chase Capital Partners), a global private equity organization with over $25 billion of direct private equity under management. J.P. Morgan Partners, LLC has closed over 1,000 individual transactions since its inception in 1984 and has more than 150 investment professionals in eight offices throughout the world. From 1992 until January 2003, Mr. Hofmann was a partner of J.P. Morgan Partners, LLC. Mr. Hofmann received a B.A. degree from Hofstra University and an M.B.A. degree from the Harvard Business School. Pursuant to the stockholders’ agreement, Mr. Hofmann is one of the designees to the board by our institutional common stockholders and warrantholders.

John M. B. O’Connor became one of our directors on May 31, 2000. Mr. O’Connor 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., which is our principal stockholder. Mr. O’Connor joined J.P. Morgan Partners, LLC (formerly, Chase Capital Partners) in 1995 and is an Executive Partner. J.P. Morgan Partners, LLC is a global private equity organization with over $25 billion of direct private equity under management. J.P. Morgan Partners, LLC has closed over 1,000 individual transactions since its inception in 1984 and has more than 150 investment professionals in eight offices throughout the world. From 1993 to 1999, Mr. O’Connor held various positions with J.P. Morgan Partners, LLC in Europe and North America. Mr. O’Connor is also on the boards of directors of TK Aluminum Ltd., AdvisorTech Corporation and FHC Value Options. Mr. O’Connor is an appointee of New York City’s Mayor Bloomberg to the Board of the Center for Animal Care and Control, a Director of The Fund for the City of New York and a Director of the American Society for the Prevention of Cruelty to Animals. Mr. O’Connor received his B.A. degree from Tulane University and an M.B.A. degree from the Columbia University Graduate School of Business. Pursuant to the stockholders’ agreement, Mr. O’Connor is one of the designees to the board by our institutional common stockholders and warrantholders.

Edward A. Lapekas became one of our directors on December 19, 2001. 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. Pursuant to the stockholders’ agreement, Mr. Lapekas is one of the Trust’s designees to the board.

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 warrantholders.

Executive compensation

The following summary compensation table sets forth information about compensation earned in the fiscal years ended December 31, 2002, 2001 and 2000 by each person serving as chief executive officer

during 2002 and the five other most highly compensated executive officers of Pliant (as of the end of the last fiscal year) (collectively, the “Named Executive Officers”).

Summary compensation table

Name And Principal Position	Year	Annual Compensation(1)		Long Term Compensation(2)		All Other Compen- sation ($)
Name And Principal Position	Year	Salary ($)	Bonus ($)	Securities Underlying Options/ SARs (#)	LTIP Payouts ($)	All Other Compen- sation ($)

Jack E. Knott II Chief Executive Officer	2002 2001 2000	375,000 337,500 316,667	163,659 163,428 104,274	— — —	— — —	5,700 5,100 1,037,271	(3) (4) (5)

Richard P. Durham Chairman and Chief Executive Officer Until June 10, 2002(12)	2002 2001 2000	250,000 500,000 500,000	185,800 381,024 245,568	— — —	— — —	273,208 5,100 136,350	(6) (4) (7)

Brian E. Johnson Executive Vice President And Chief Financial Officer(13)	2002 2001 2000	265,200 179,333 —	41,928 44,370 —	— 5,000 —	— — —	5,700 5,100 —	(3) (4)

Stanley B. Bikulege Executive Vice President, President, Pliant USA	2002 2001 2000	247,083 203,125 182,250	47,093 66,245 60,304	2,720 250 1,030	— — 298,521	5,700 56,931 52,600	(3) (8) (9)

Elise H. Scroggs Executive Vice President, President, Pliant International	2002 2001 2000	205,417 151,917 115,916	32,972 46,207 15,984	2,200 425 375	— — 62,394	5,700 3,184 35,100	(3) (10) (11)

Douglas W. Bengtson Executive Vice President, Procurement and Strategic Sourcing	2002 2001 2000	222,500 204,583 190,000	35,147 66,245 121,293	720 250 1,030	— — 517,122	5,700 5,100 52,600	(3) (4) (9)

Ronald A. Artzer Senior Vice President, President, Pliant Solutions Corporation(14)	2002 2001 2000	223,846 — —	39,216 — —	1,500 — —	— — —	5,700 — —	(3)

(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)

At December 31, 2002, the number of shares of restricted stock held by Messrs. Durham and Knott were 4,833 and 7,750, respectively. The value of such shares of restricted stock at December 31, 2002 has not been reported as compensation because it did not exceed the consideration paid by the applicable Named Executive Officer.

(3)

Consists of $5,700 for employer’s 401(k) contributions.

(4)

Consists of $5,100 for employer’s 401(k) contributions.

(5)

Consists of (a) $836,785 gross-up payment of taxes payable for the exercise of options in connection with the recapitalization, (b) relocation expense reimbursement of $114,136, (c) a $81,250 retention bonus and (d) employer’s 401(k) contributions of $5,100.

(6)

Consists of (a) a $250,008 severance payment, (b) a $15,000 director’s fee for the period subsequent to Mr. Durham’s resignation as Chief Executive Officer, (c) a $2,500 committee meeting fee for the period subsequent to Mr. Durham’s resignation as Chief Executive Officer and (d) $5,700 for employer’s 401(k) contributions.

(7)

Consists of (a) a $125,000 retention bonus, (b) employer’s 401(k) contributions of $5,100 and (c) a $6,250 director’s fee.

(8)

Consists of employer’s 401(k) contributions of $5,100 and relocation expense reimbursement of $51,831.

(9)

Consists of a $47,500 retention bonus and employer’s 401(k) contributions of $5,100.

(10)

Consists of $3,184 for employer’s 401(k) contributions.

(11)

Consists of (a) a $30,000 retention bonus and (b) employer’s 401(k) contributions of $5,100.

(12)

Mr. Durham resigned as Chairman and Chief Executive Officer on June 10, 2002 and Jack E. Knott II was appointed Chief Executive Officer.

(13)

Mr. Johnson joined Pliant in April 2001.

(14)

Mr. Artzer joined Pliant in May 2002 and left his position as Senior Vice President and President, Pliant Solutions Corporation on April 21, 2003.

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, 2002, we had outstanding grants of restricted stock covering 13,208 shares of common stock and options to acquire 42,440 shares of common stock under the 2000 plan. Shares of restricted stock that are forfeited, and unissued shares reserved for issuance pursuant to options that terminate, expire or are cancelled without having been fully exercised, become available to be issued pursuant to new grants under the 2000 Plan.

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

The following table provides information related to options to purchase shares of our common stock granted to the Named Executive Officers during the last fiscal year pursuant to the 2000 Plan. We have never granted any freestanding stock appreciation rights.

Option/SAR grants in last fiscal year

Individual Grants							Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Terms(1)(3)(4)
Name	Number of Securities Underlying Options/SARs Granted (#)	% of Total Options/SARs Granted to Employees in Fiscal Year		Exercise or Base Price(1) ($/Sh)		Expiration Date(2)	5%($)	10%($)

Stanley B. Bikulege	1,720 1,000	8 5	% %	$ $	483.13 483.13	5/31/12 11/25/12	522,601 303,838	1,324,374 769,985

Elise H. Scroggs	1,200 1,000	6 5	% %	$ $	483.13 483.13	5/31/12 11/25/12	364,605 303,838	923,982 769,985

Ronald A. Artzer	500 1,000	2 5	% %	$ $	483.13 483.13	5/31/12 11/1/12	151,919 303,838	384,992 769,985

Douglas W. Bengtson	720	4	%	$	483.13	5/31/12	218,763	554,389

(1)

The exercise price was greater than or equal to fair market value on date of grant. There is no established trading market for our common stock and, therefore, the aggregate market value of our shares cannot be determined by reference to recent sales or bid and asked prices. The fair market value was assumed to be equal to the price per share paid in the recapitalization.

(2)

Subject to earlier termination under certain circumstances.

(3)

Potential realizable value is calculated based on an assumption that the price of our common stock appreciates at the annual rates shown (5% and 10%), compounded annually, from the date of grant of the option until the end of the option term. The value is net of the exercise price but is not adjusted for the taxes that would be due upon exercise. The 5% and 10% assumed rates of appreciation are mandated by the rules of the Securities and Exchange Commission and do not represent our estimate or projection of future stock values. Actual gains, if any, upon future exercise of any of these options will depend upon the actual value of our common stock.

(4)

All of the options granted to the Named Executive Officers during 2002 are subject to vesting requirements. All of the options granted to each Named Executive Officer vest in increments upon the achievement of a specified market value of equity applicable to such increment. Such market value of equity is determined pursuant to a formula based upon our adjusted earnings.

The following table provides information as to the options held by each of the Named Executive Officers at the end of 2002. There is no established trading market for our common stock and, therefore, the aggregate market value of our shares cannot be determined by reference to recent sales or bid and asked prices. The value of unexercised in-the-money options was assumed to be equal to the price per share paid in the recapitalization ($483.13 per share). None of the Named Executive Officers exercised any options during the last fiscal year.

Aggregated option/SAR exercises in last fiscal year

and FY-end option/SAR values

Name	Shares Acquired On Exercised	Value Realized	Number Of Securities Underlying Unexercised Options/SARs At FY-End (#) Exercisable/Unexercisable	Value Of Unexercised In- The-Money Options/SARs At FY-End ($) Exercisable/Unexercisable

Jack E. Knott II	—	—	8,902/0	$ 3,410,623/0

Brian E. Johnson	—	—	1,000/4,000	0/0

Stanley B. Bikulege	—	—	393/3,607	0/0

Elise H. Scroggs	—	—	210/2,790	0/0

Ronald A. Artzer	—	—	0/1,500	0/0

Douglas W. Bengtson	—	—	393/1,607	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-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.

Pension plans

The following table shows the estimated annual benefits payable under our tax-qualified defined benefit pension plan in specified final average earnings and years of service classifications.

Pliant Corporation pension plan table

	Years of Benefit Service at Retirement
Final Average Compensation	10		15		20		25		30		35		40
$100,000	$	16,000	$	24,000	$	32,000	$	40,000	$	48,000	$	56,000	$	64,000
125,000		20,000		30,000		40,000		50,000		60,000		70,000		80,000
150,000		24,000		36,000		48,000		60,000		72,000		84,000		96,000
175,000		28,000		42,000		56,000		70,000		84,000		98,000		112,000
200,000		32,000		48,000		64,000		80,000		96,000		112,000		128,000

Our current pension plan benefit is based on the following formula: 1.6% of final average compensation multiplied by years of credited service, minus 1.5% of estimated Social Security benefits multiplied by years of credited service (with a maximum of 50% of Social Security benefits). Final average compensation is based on the highest average of three consecutive years of compensation. In certain circumstances, covered compensation for purposes of the pension plan includes compensation earned with our former affiliates. The Named Executive Officers (excluding Ronald A. Artzer) were participants in the pension plan in 2002. The final average compensation for purposes of the pension plan in 2002 for each of the Named Executive Officers is $200,000, which is the maximum that can be considered for the 2002 plan year under federal regulations. Federal regulations also provide that the maximum annual benefit paid from a qualified defined benefit plan cannot exceed $160,000 as of January 1, 2002. Benefits are calculated on a straight life annuity basis. The benefit amounts under the pension plan are offset for Social Security as described above.

The number of completed years of credited service as of December 31, 2002 under our pension plan for the Named Executive Officers participating in the plan were as follows:

Name		Years of Credited Service
Richard P. Durham⁽¹⁾		17
Jack E. Knott II⁽¹⁾		17
Brian E. Johnson		1
Stanley B. Bikulege		10
Douglas W. Bengtson⁽²⁾		5
Elise H. Scroggs		9

(1)

The years of credited service under the pension plan include 12 years of service credited with the predecessor to Pliant for Mr. Durham and 12 years of service credited with affiliates of Pliant for Mr. Knott. The benefit calculation upon retirement under our pension plan is calculated by multiplying years of credited service by a fraction representing that part of total credited service for which services were provided to us.

(2)

In addition to the 5 years of credited service with Pliant, Mr. Bengtson has a frozen benefit as a result of his service with Rexene Corporation, which was purchased by the predecessor to Huntsman Packaging and Pliant. By agreement, Mr. Bengtson will be provided a pay update on the calculation of the Rexene formula. This payment is a non-qualified payment which will be paid out of our general assets as a lump sum.

Employment agreements

On May 31, 2000, we entered into a five-year employment agreement with Jack E. Knott II, our Chief Executive Officer. The employment agreement provides for the payment of a base salary, plus a bonus, at least four weeks paid vacation per year, participation in our leased car program and participation in our other employee benefit programs, including our management incentive program, and includes non-disclosure of confidential information provisions and a non-compete provision for one year following termination of employment with us (unless termination is due to the term expiring). Mr. Knott 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. In addition, if Mr. Knott’s employment with us terminates for any reason, we will have the right under the employment agreement to repurchase the shares of our common stock owned by him at a purchase price equal to their fair market value. Similarly, we will also be required to repurchase all of the shares of common stock owned by Mr. Knott at his option if his employment is terminated because of death, disability, retirement or resignation for good reason, so long as we are permitted to do so at the time under the covenants contained in our financing agreements.

We also entered into a five-year employment agreement with Richard P. Durham, our former Chief Executive Officer, on May 31, 2000. The terms of Mr. Durham’s employment agreement were substantially similar to Mr. Knott’s employment agreement. On February 1, 2001, however, we amended the employment agreement with Mr. Durham to, among other things, specify the duties he would perform as our Chairman and Chief Executive Officer and eliminate our right to repurchase his shares upon termination of employment. We also agreed to repurchase all of the shares of common stock owned by Mr. Durham at his option if Mr. Durham’s employment with us was terminated without cause. In addition, pursuant to the employment agreement amendment, we agreed to modify the terms of Mr. Durham’s secured and unsecured notes with us.

On June 10, 2002, we entered into a separation agreement with Richard P. 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 an outstanding promissory note issued as payment for a portion of his shares into two promissory notes. The first note (the “Vested Secured Note”), in the principal amount of $2,430,798, 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 an outstanding balance of $1,637,974 at the date of his resignation, 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.

facilities, we purchased 8,204 shares from Mr. Durham for a purchase price of $3,963,599 less the outstanding amount of the Additional Note, which was cancelled. In December 2002 we purchased an additional 1,885 shares of common stock from Mr. Durham for an aggregate purchase price of approximately $910,700. As of December 31, 2002, our total remaining purchase obligation to Mr. Durham was approximately $10,623,097, excluding accrued preferred dividends. We are limited by our credit facilities to a maximum purchase from Mr. Durham of $5,000,000 of shares in 2003, which purchase may only be made if we meet certain leverage ratios. In connection with Mr. Durham’s resignation as Chairman and Chief Executive Officer, Jack E. Knott II was appointed our Chief Executive Officer. Mr. Timothy J. Walsh, a director since May 31, 2000, and a Partner of J.P. Morgan Partners, LLC, was appointed as the non-executive Chairman of the Board of Directors. Mr. Durham continues to serve as a member of our Board of Directors as a designee of The Christena Karen H. Durham Trust, which holds 158,917 shares, or approximately 27.5%, of our outstanding common stock.

On March 30, 2001, we entered into a five year employment agreement with Brian E. Johnson, our Executive Vice President and Chief Financial Officer. The employment agreement provides for the payment of a base salary, a grant of a stock option to purchase 5,000 shares of our common stock, at least three weeks paid vacation per year, participation in our leased car program, payment of Mr. Johnson’s present country club membership dues and participation in our other employee benefit programs, including our management incentive program, and includes non-disclosure of confidential information provisions and a non-compete provision for one year following termination of employment with us (unless termination is due to the term expiring). Mr. Johnson 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. Johnson’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 one year. In addition, if Mr. Johnson’s employment with us terminates for any reason, we will have the right under the employment agreement to repurchase the shares of our common stock owned by him at a purchase price equal to their fair market value. Similarly, we will also be required to repurchase all of the shares of common stock owned by Mr. Johnson at his option if his employment is terminated because of death, disability, retirement or resignation for good reason, so long as we are permitted to do so at the time under the covenants contained in our financing agreements.

Committees of the board of directors

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 John M. B. O’Connor and Edward A. Lapekas. Our board of directors previously had an executive committee, a compensation committee and an environmental health and safety committee. However, our board of directors decided to dissolve these committees as they felt the activities of those committees could be sufficiently handled by the entire board of directors.

Compensation of directors

Each director who is not an employee of ours or a partner or senior advisor of J.P. Morgan Partners, LLC is entitled to receive an annual fee of $30,000, plus $10,000 per year per committee. Currently there are three directors of ours who receive director fees.

Security ownership of certain beneficial

owners and management

The following table sets forth information with respect to the ownership of our common stock as of March 31, 2003 by:

•

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

•

each of our directors,

•

each of our Named Executive Officers, and

•

all of our executive officers and directors as a group.

The amounts set forth in the table and footnotes below do not include shares of restricted common stock issued under the 2000 plan that remain subject to performance vesting requirements that have not been met as of March 31, 2003.

Notwithstanding the beneficial ownership of common stock presented below, the stockholders’ agreement governs the stockholders’ exercise of their voting rights with respect to election of directors and certain other material events. The parties to the stockholders’ agreement have agreed to vote their shares to elect the board of directors as set forth therein. See “Certain relationships and related transactions.”

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

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

Name of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned	Percent of Class
JPMP Capital Corp.(1)	406,191	61.0	%
The Christena Karen H. Durham Trust(2)	158,917	27.6	%
Perry Acquisition Partners-2, L.P.(3).	34,527	5.9	%
Richard P. Durham (4)	24,283	4.2	%
Jack E. Knott II(5)	11,717	2.0	%
Donald J. Hofmann, Jr.	—	*
Timothy J. Walsh(6)	—	*
John M. B. O’Connor(6)	—	*
Edward A. Lapekas	207	*
Albert (Pat) MacMillan	—	*
Brian E. Johnson	1,018	*
Stanley B. Bikulege	609	*
Elise H. Scroggs	318	*
Ronald A. Artzer	—	*
Douglas W. Bengtson	646	*
All directors and executive officers as a group (13 persons)	38,798	6.6	%

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) 43,962 shares of common stock which are issuable upon exercise of preferred stock warrants held by Southwest Industrial Films II, LLC, which is controlled by J.P. Morgan (BHCA), L.P., as managing member, (iii) 44,816 shares of common stock which are issuable upon exercise of preferred stock warrants held by Southwest Industrial Films, LLC, which is controlled by J.P. Morgan Partners (BHCA) L.P., as managing member, and (iv) 107 shares of common stock which are issuable upon exercise of the 1,264 note warrants held by Southwest Industrial Films, LLC, which is controlled by J.P. Morgan Partners (BHCA), L.P., as managing member. JPMP Capital Corp. is the indirect general partner of J.P. Morgan Partners (BHCA), L.P., and a wholly-owned subsidiary of J.P. Morgan Chase & Co., a publicly traded company. JPMP Capital Corp. and each of the foregoing entities is an affiliate of J.P. Morgan Partners, LLC and has an address c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas, 39^th Floor, New York, New York 10020.

(2)

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

(3)

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

(4)

Includes 1,250 shares of common stock issuable upon exercise of preferred stock warrants. As trustee of The Christena Karen H. Durham Trust and the spouse of Christena H. Durham, who is a beneficiary of the Trust, Richard P. Durham may be deemed the beneficial owner of the shares of common stock owned by the Trust. Richard P. Durham disclaims beneficial ownership of the shares of common stock owned by the Trust.

(5)

Includes 8,902 shares of common stock issuable upon exercise of 1998 options that are immediately exercisable. Does not include 5,167 shares of restricted common stock issued under the 2000 plan that do not vest until the performance conditions discussed in “Management—Stock options and restricted stock” are met.

(6)

Each of Messrs. Walsh and O’Connor 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 their positions with JPMP Capital Corp. and J.P. Morgan Partners, LLC, which are affiliates of J.P. Morgan Partners (BHCA), L.P., which in turn controls each of Southwest Industrial Films, LLC and Southwest Industrial Films II, LLC, as managing member.

Certain relationships and related transactions

Transactions with Huntsman Corporation

Prior to the recapitalization and related transactions, we were party to a services agreement with Huntsman Corporation, our former affiliate, pursuant to which Huntsman Corporation provided us with most of our insurance coverage, administered our employee benefit plans, rented to us corporate headquarters space and provided other services to us. Under that services agreement, we paid Huntsman Corporation $1.2 million in 2000. In addition to the amount paid for services provided under the services agreement, we also reimbursed Huntsman Corporation for insurance premiums and certain other expenses incurred on our behalf. Following the recapitalization and related transactions, all of the services provided under the services agreement were discontinued.

Transactions with management

Prior to the recapitalization, we sold shares of Class C common stock to certain members of management for cash. We also issued shares of Class C common stock to certain members of our senior management in exchange for promissory notes. Approximately one-half of these shares were purchased and approximately one-half were “rolled over” as common stock in the recapitalization. In connection with the recapitalization, we issued additional shares of restricted stock to each of our executive officers serving at that time in exchange for promissory notes. The original promissory notes of our executive officers were amended during 2000 and 2001 in connection with the recapitalization, certain severance arrangements and other events relating to the transition to a new management team. The terms of these promissory notes and the related transactions are described below for each person who served as an executive officer during 2000, 2001 or 2002.

Jack E. Knott II

In connection with our May 31, 2000 recapitalization, we issued 1,292 time-vested shares and 6,458 performance-vested shares to Mr. Knott in exchange for a promissory note of $3,744,260. Interest on Mr. Knott’s promissory note accrued at the rate of 7% per annum through December 31, 2000. On April 21, 2001, we amended the terms of Mr. Knott’s promissory note so that no interest would accrue after December 31, 2000 and our sole recourse against Mr. Knott with respect to his obligations under the promissory note would be the 7,750 shares of restricted stock pledged as collateral. Unless satisfied by returning the restricted stock to us, the interest accrued on Mr. Knott’s promissory note through December 31, 2000, in the amount of $153,672, is payable in three annual installments of $51,224, beginning May 31, 2006, and the principal balance of $3,744,260 is payable on May 31, 2008.

Richard P. Durham

Mr. Durham served as our Chairman and Chief Executive Officer until June 2002. Prior to his resignation, we issued common stock to Mr. Durham in exchange for promissory notes on three separate occasions. In connection with our split-off from Huntsman Corporation in 1997, we issued 5,000 shares of our Class A common stock and 2,000 shares of our Class B common stock to Mr. Durham in exchange for a $700,000 promissory note which bore interest at the rate of 7% per annum. This note was repaid in full by Mr. Durham during 2001. On February 22, 1999, we sold 15,734 shares of Class C common stock to Mr. Durham in exchange for a $1,573,400 promissory note. On May 31, 2000, we issued 2,417 time-vested shares and 12,083 performance-vested shares in exchange for a $7,005,389 promissory note. In connection with an amendment to Mr. Durham’s employment agreement in February 2001, we amended the $1,573,400 promissory note and the $7,005,389 promissory note, which originally bore interest at the rate of 7% per annum, to provide that no interest would accrue on these notes after December 31, 2000. We also amended the $7,005,389 promissory note to provide that our sole recourse against Mr. Durham with respect to the obligation under this promissory note would be the 14,500 shares of restricted stock

pledged as collateral. At the time of Mr. Durham’s resignation, the balances of his two outstanding promissory notes, including accrued interest, were $7,292,897 and $1,637,974.

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 the outstanding promissory note issued as payment for his time-vested and performance-vested shares into two promissory notes. The first note (the “Vested Secured Note”), in the principal amount of $2,430,798, related to Mr. Durham’s time-vested shares and the vested portion of his performance-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. Mr. Durham’s other note (the “Additional Note”) with an outstanding balance of $1,637,974 at the date of his resignation was not amended by the separation agreement. In accordance with the separation agreement, we repurchased and cancelled Mr. Durham’s 9,667 unvested shares in exchange for cancellation of the Non-Vested Secured Note on October 3, 2002.

The separation agreement preserved a put option established by Mr. Durham’s employment agreement with respect to his shares. For purposes of this put option, the separation agreement provides that the price per share to be paid by Pliant is $483.13 with respect to common stock, $483.13 less any exercise price with respect to warrants, and the liquidation preference with respect to preferred stock. On July 9, 2002, Mr. Durham exercised his put option with respect to 28,289 shares of common stock, 1,232 shares of preferred stock and warrants to purchase 1,250.48 shares of common stock. Mr. Durham’s put option is subject to any financing or other restrictive covenants to which we are subject at the time of the proposed repurchase. Restrictive covenants under our credit facilities limit the number of shares we can currently repurchase from Mr. Durham. On October 3, 2002, as permitted by the covenants contained in our credit facilities, we purchased 8,204 shares from Mr. Durham for a purchase price of $3,963,599 less the outstanding amount of the Additional Note, which was cancelled. In December 2002, we purchased an additional 1,885 shares of common stock from Mr. Durham for an aggregate purchase price of approximately $910,700. As of December 31, 2002, our total remaining purchase obligation to Mr. Durham was approximately $10,623,097, excluding accrued preferred dividends. We are limited by our credit facilities to a maximum purchase from Mr. Durham of $5,000,000 of shares in 2003, which purchase may only be made if we meet certain leverage ratios. The principal balance of Mr. Durham’s Vested Secured Note, which is still outstanding, is payable on May 31, 2008.

Scott K. Sorensen

Mr. Sorensen served as our Executive Vice President and Chief Financial Officer until February 2001. Prior to his resignation, we issued common stock to Mr. Sorensen in exchange for promissory notes on two separate occasions. On February 22, 1999, we sold 7,867 shares of Class C common stock to Mr. Sorensen in exchange for a $786,700 promissory note. On May 31, 2000, we issued 1,125 time-vested shares and 5,625 performance-vested shares in exchange for a $3,261,129 promissory note. Each of Mr. Sorensen’s promissory notes originally bore interest at the rate of 7% per annum. As part of our severance arrangements with Mr. Sorensen in February 2001, we cancelled all interest, in the amount of approximately $132,000, accrued under Mr. Sorensen’s $3,261,129 promissory note. We also redeemed all 6,750 of Mr. Sorensen’s time-vested and performance-vested shares in exchange for cancellation of this promissory note. In addition, we amended Mr. Sorensen’s $786,700 promissory note to provide that no interest would accrue after February 28, 2001. As of December 31, 2002, the amount outstanding under Mr. Sorensen’s remaining promissory note, including accrued interest, was $896,838. This amount is payable in three annual installments beginning on May 31, 2006.

Ronald G. Moffitt

Mr. Moffitt served as our Senior Vice President and General Counsel until February 2001. Prior to his resignation, we issued common stock to Mr. Moffitt in exchange for promissory notes on two separate occasions. On February 22, 1999, we sold 2,622 shares of Class C common stock to Mr. Moffitt in exchange for a $262,200 promissory note. On May 31, 2000, we issued 625 time-vested shares and 3,125 performance-vested shares in exchange for a $1,811,739 promissory note. Each of Mr. Moffitt’s promissory notes originally bore interest at the rate of 7% per annum. As part of our severance arrangements with Mr. Moffitt in February 2001, we cancelled all interest, in the amount of approximately $85,500, accrued under Mr. Moffitt’s $1,811,739 promissory note. We also redeemed all 3,125 of Mr. Moffitt’s performance-vested shares for an aggregate purchase price of $1,509,781, which was set-off against this promissory note. In addition, we amended Mr. Moffitt’s $262,200 promissory note to provide that no interest would accrue after February 28, 2001. As of December 31, 2002, the amounts outstanding under Mr. Moffitt’s two promissory notes, including accrued interest, were $301,956 and $275,877. Pursuant to the terms of the notes, each of these amounts is payable in three annual installments beginning on May 31, 2006. Mr. Moffitt’s severance agreement preserved a put option established by his employment agreement with respect to his shares. On March 28, 2003, Mr. Moffitt exercised his put option with respect to all 3,457 shares of common stock beneficially owned by him. We are currently evaluating our obligation with respect to the exercise of this put option.

Transactions between us and new 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 warrantholders 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 will be 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 our initial public offering, holders holding in excess of 60% of the shares of common stock underlying the preferred stock warrants 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 preferred stock warrants 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 preferred stock warrants and holders of the note warrants party to the registration rights agreement.

The stockholders’ agreement

The stockholders’ agreement entered into on May 31, 2000, as amended, governs the exercise of voting rights by our stockholders, including holders of our preferred stock warrants 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:

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restrictions on the transfer of shares of common stock and the preferred stock warrants;

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

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

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agreement by stockholders and holders of the preferred stock 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 preferred stock warrants if so required;

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

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

Credit facilities and note offerings

JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) is the syndication agent and is a lender under our credit facilities. JPMorgan Chase Bank receives customary fees under our credit facilities for acting in such capacities. J.P. Morgan Securities Inc. served as the arranger for the May 2003 amendment to our credit facilities and received a customary fee in such capacity.

J.P. Morgan Securities Inc. was one of the initial purchasers in our May 2000 offering 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. 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 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 credit facilities. Further, J.P. Morgan Securities Inc. was an initial purchaser in our May 2003 offering of the 2003 Notes and received fees of approximately $4.4 million for acting in such capacity. We used approximately $240 million of the net proceeds from the May 2003 offering to repay indebtedness under our credit facilities. In addition, when we amended our credit facilities, 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 and approximately $0.3 million in May 2003, to JPMorgan Chase Bank.

Each of JPMorgan Chase Bank, J.P. Morgan Chase & Co. and J.P. Morgan Securities Inc. is an affiliate of Southwest Industrial Films, LLC, which owns approximately 55% of our outstanding common stock and currently has the right under the stockholders’ agreement to appoint four of our directors, and of Flexible Films, LLC, which, together with affiliates, owns approximately 59% of our outstanding preferred stock, subject to certain preemptive rights with respect to 10,000 shares of preferred stock issued on March 25, 2003. Southwest Industrial Films, LLC and Flexible Films, LLC are subsidiaries of J.P. Morgan Partners (BHCA), L.P. During 2002, Donald J. Hofmann, Jr., Timothy J. Walsh and John

M.B. O’Connor, who serve as our directors, were partners of J.P. Morgan Partners, LLC, which serves as investment advisor to J.P. Morgan Partners (BHCA), L.P. and JPMP Capital Corp. JPMP Capital Corp. is a subsidiary of J.P. Morgan Chase & Co. and is the general partner JPMP Master Fund Manager, L.P., which is the general partner of J.P. Morgan Partners (BHCA), L.P. Messrs. Walsh and O’Connor are executive officers of JPMP Capital Corp. and limited partners of JPMP Master Fund Manager, L.P.

Description of credit facilities and other indebtedness

The following is a summary of the material terms of our credit facilities, as amended, with J.P. Morgan Securities Inc., as sole and exclusive advisor, lead arranger and lead book manager, JPMorgan Chase Bank, as sole and exclusive syndication agent, Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, The Bank of Nova Scotia, as documentation agent, and a syndicate of banking and financial institutions who became parties thereto and our 11¹/8% Senior Secured Notes due 2009 (the “2003 Notes”). The following summary of all of the material provisions is less complete than the actual documentation for our credit facilities and the 2003 Notes and is qualified in its entirety by reference to all of the provisions of the definitive documentation for our credit facilities and the 2003 Notes, copies of which have been filed or incorporated by reference as exhibits to the registration statement of which this prospectus forms a part.

The credit facilities

Structure

The credit facilities consist of:

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tranche A term loans in an aggregate principal amount of $9.6 million outstanding as of June 30, 2003;

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Mexico term loans in an aggregate principal amount of $24.2 million outstanding as of June 30, 2003;

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tranche B term loans in an aggregate principal amount of $185.8 million outstanding as of June 30, 2003; and

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revolving credit facility in an aggregate principal amount of up to $100.0 million.

•

Availability

Amounts borrowed under the term loan facilities that are repaid or prepaid may not be reborrowed. Loans and letters of credit under the revolving credit facility are available on and after May 31, 2000 and at any time prior to the final maturity of the revolving credit facility in specified minimum principal amounts. Amounts repaid under the revolving credit facility may be reborrowed.

Interest

The interest rates under the revolving credit facility, the tranche A facility and the Mexico facility are, at our option, Adjusted LIBOR or ABR, plus a spread determined by reference to our leverage ratio. The spread will not exceed 4.00% for Adjusted LIBOR or 3.00% for ABR. Adjusted LIBOR is the London inter-bank offered rate adjusted for statutory reserves. ABR is the alternate base rate, which is the higher of the lender’s prime rate or the federal funds effective rate plus 1/2 of 1%. The interest rates under the tranche B facility are, at our option, Adjusted LIBOR or ABR, plus a spread determined by reference to our leverage ratio. The spread will not exceed 4.75% for Adjusted LIBOR or 3.75% for ABR. We may elect interest periods of one, two, three or six months for Adjusted LIBOR borrowings. The calculation of interest is on the basis of actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR loans based on the Prime Rate) and interest is payable at the end of each interest period and, in any event, at least every three months.

Fees

We pay certain fees with respect to our credit facilities, including (a) 0.750% per annum on the undrawn portion of the revolving credit facility commitments in respect of our credit facilities, which began to accrue on May 31, 2000 and is payable quarterly in arrears after May 31, 2000, subject to certain adjustments, and (b) a fee at a per annum rate equal to the spread over Adjusted LIBOR under the revolving credit facility accruing on the aggregate face amount of outstanding letters of credit under the revolving credit facility, which is payable in arrears at the end of each quarter and upon the termination of the revolving credit facility, in each case for the actual number of days elapsed over a 360-day year. The fees referred to in (b) are distributed to the lenders participating in the revolving credit facility pro rata in accordance with the amount of each such lender’s revolving credit facility commitment. In addition, we pay to the issuing bank, for its own account, (i) a per annum fronting fee on the aggregate face amount of outstanding letters of credit, payable in arrears at the end of each quarter and upon the termination of the revolving credit facility, in each case for the actual number of days elapsed over a 360-day year, and (ii) customary issuance and administration fees. We also pay the administrative agent a customary annual administration fee.

Guarantees; security

Our obligations under our credit facilities, under the related security documentation and under any interest protection or other hedging arrangements entered into by us with a lender (or any affiliate thereof) and up to $10 million of our obligations under our domestic overdraft facilities are unconditionally guaranteed by each of our existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences would result therefrom, foreign) restricted subsidiaries.

These obligations are secured by substantially all of our assets (subject to customary exceptions) and by the assets of each of our existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences would result therefrom, foreign) restricted subsidiaries, including but not limited to:

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a first-priority pledge of all capital stock and other equity interests held by us or any other of our domestic (and, subject to the foregoing limitation, foreign) restricted subsidiaries and held by subsequently acquired or organized domestic (and, subject to the foregoing limitation, foreign) restricted subsidiaries of ours (which pledge, in the case of any foreign subsidiaries, is limited to 65% of the capital stock and other equity interests of such foreign subsidiary to the extent the pledge of any greater percentage would result in adverse tax consequences to us); and

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a perfected first-priority security interest in and, in some cases, mortgage on, substantially all of our tangible and intangible assets and on those of each of our existing or subsequently acquired or organized domestic (and, subject to the foregoing limitation, foreign) restricted subsidiaries (subject to certain exceptions, including for accounts receivable sold in certain qualified receivables financings), including but not limited to accounts receivable, inventory, real property, equipment, trademarks, other intellectual property, licensing agreements, cash and proceeds of the foregoing.

Commitment reductions and repayments

The tranche A facility and the Mexico facility mature on May 31, 2006, and amortize on a quarterly basis beginning June 30, 2004. The tranche B facility matures on May 31, 2008 and amortizes on a quarterly basis for the period beginning June 30, 2007 and ending on the final maturity date. The revolving credit facility matures on May 31, 2006.

In addition, we are required to make the following mandatory prepayments of the loans under our credit facilities:

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Within ninety days following the end of each year, we are required to prepay the term loan facilities in an amount equal to the amount by which 100% of excess cash flow for such year (or

50% of excess cash flow if our leverage ratio at the end of such year is less than or equal to 4.0:1.0) exceeds the aggregate amount of voluntary prepayments made since the last excess cash flow payment, subject to certain other adjustments.

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We are required to prepay the term loan facilities in an amount equal to 100% of the net cash proceeds of equity (other than as described below) and debt issuances (other than debt permitted under our credit facilities, except as described below) by us or any of our restricted subsidiaries, subject to certain other exceptions.

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We are required to prepay the term loan facilities in an amount equal to 100% of the net cash proceeds of asset sales or other dispositions of property by us or any of our restricted subsidiaries, subject to certain other exceptions.

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We were required to apply the net proceeds of the issuance of the 2003 Notes, first, to prepay the revolving credit facility (without reducing the commitments under the revolving credit facility) until $75.0 million (or, if less, all) of the revolving credit facility was repaid, and second, to prepay the tranche A term loan facility in an amount equal to 50% of the portion of such net proceeds not applied to the revolving credit facility and to prepay the tranche B term loan facility in an amount equal to 50% of the portion of such net proceeds not applied to the revolving credit facility (subject to the right of the tranche B term lenders to reject such prepayment, to the extent tranche A term loans remain, in which case such rejected prepayments were instead applied to the tranche A term loans).

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We are required to issue, and J.P. Morgan Partners (BHCA), L.P. is required to purchase (the “Equity Commitment”), up to $25.0 million (subject to adjustment for purchases by third parties) of our equity securities to the extent necessary to enable us to meet our (a) leverage ratio and the target senior debt leverage ratio specified in our credit facilities for the fiscal quarter ending on March 31, 2003; (b) first lien leverage ratio specified in our credit facilities for any fiscal quarter ending on or after June 30, 2003, and on or prior to December 31, 2003, and (c) first lien leverage ratio and leverage ratio specified in our credit facilities for any fiscal quarter ending after December 31, 2003 and on or prior to December 31, 2004. Generally, if we are required to issue any portion of such $25 million of equity securities with respect to any fiscal quarter in 2003, we must use 50% of the net proceeds to prepay the term loan facilities and 50% to prepay the revolving credit facility. If we are required to issue any such equity securities with respect to any fiscal quarter in 2004, we must use 100% of the net proceeds to prepay the term loan facilities.

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We are required to prepay amounts outstanding under our revolving credit facility, if any (without reducing the commitments under the revolving credit facility), to the extent our estimate of our available cash and cash equivalents and marketable securities on any day not held by our foreign subsidiaries (reduced by amounts required by us to make payments on that day) exceeds $5 million.

Affirmative covenants

The credit facilities contain a number of affirmative covenants including, among others, covenants relating to:

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delivery of financial statements and other information;

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notices of material events;

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information regarding collateral;

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existence;

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conduct of business;

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payment of obligations;

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maintenance of properties;

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insurance;

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casualty and condemnation;

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maintenance of books and records;

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inspection and audit rights;

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compliance with laws;

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use of proceeds and letters of credit;

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additional subsidiaries;

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further assurances;

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interest rate hedging, and

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raising proceeds through the issuance of equity securities to meet certain leverage ratios.

Negative covenants

The credit facilities contain a number of negative covenants including, among others, prohibitions or limitations on:

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indebtedness;

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liens;

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fundamental changes;

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investments, loans, advances, guarantees and acquisitions, subject to exceptions for certain permitted acquisitions;

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certain equity securities;

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asset sales;

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sale and lease-back transactions;

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hedging agreements;

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restricted payments;

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certain payments of indebtedness;

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transactions with affiliates;

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agreements that restrict the ability of our subsidiaries to pay dividends or make loans to us or to guarantee our debt;

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capital expenditures;

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amendment of material documents;

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designated senior debt; and

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cash held by foreign subsidiaries.

Financial covenants

Our credit facilities, as amended, contain the following financial covenants:

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We must maintain a ratio of period-end consolidated debt to Consolidated EBITDA of no more than 6.60 to 1.00 for the twelve month period ending on March 31, 2003, 6.60:1.00 for the twelve month period ending on March 31, 2004, 6.40:1.00 for the twelve month period ending on June 30, 2004, 6.30:1.00 for the twelve month period ending on September 30, 2004, 6.00:1.00 for the twelve month period ending on December 31, 2004, 5.50:1.00 for the twelve month periods ending on March 31, June 30, September 30 and December 31, 2005, 5.00:1.00 for the twelve month periods ending on March 31, June 30, September 30 and December 31, 2006, 4.50:1.00 for the twelve month periods ending on March 31, June 30, September 30 and December 31, 2007, and 4.00:1.00 for the twelve month periods ending on March 31, June 30, September 30 and December 31, 2008.

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We must maintain a ratio of Consolidated EBITDA to consolidated cash interest expense of at least 1.40:1.00 for the three month period ending on March 31, 2003, 1.25:1.00 for the twelve month period ending on June 30, 2003, 1.25:1.00 for the twelve month period ending on September 30, 2003, 1.30:1.00 for the twelve month period ending on December 31, 2003, 1.35:1.00 for the twelve month period ending on March 31, 2004, 1.35:1.00 for the twelve month period ending on June 30, 2004, 1.40:1.00 for the twelve month period ending on September 30, 2004, 1:45:1.00 for the twelve month period ending on December 31, 2004, 1.60:1.00 for the twelve month periods ending on March 31, June 30, September 30 and December 31, 2005, 1.75:1.00 for the twelve month periods ending, on March 31, June 30, September 30 and December 31, 2006, 1.85:1.00 for the twelve month periods ending on March 31, June 30, September 30 and December 31, 2007, and 2.00:1.00 for the twelve month periods ending on March 31, June 30, September 30 and December 31, 2008.

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We must maintain a ratio of period-end consolidated debt accounted for by indebtedness under our credit facilities and securitization obligations to Consolidated EBITDA of no more than 2.25:1.00 for the twelve month period ending on June 30, 2003, 2.25:1.00 for the twelve month period ending on September 30, 2003, and 2.25:1.00 for the twelve month period ending on December 31, 2003.

Under our credit facilities, as amended, our Consolidated EBITDA is calculated as follows, after giving pro forma effect to any permitted acquisitions or asset sales outside of the ordinary course of business:

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our consolidated net income, plus

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the amount of consolidated interest expense, plus

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the amount of income tax expense, plus

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the amount of letter of credit fees paid, plus

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the amount of all amortization and depreciation and other non-cash charges and losses, plus

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the amount of all extraordinary charges and losses, plus

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the amount of all nonrecurring charges incurred relating to restructurings, plant closings or similar actions in connection with our facilities in Birmingham, AL; Dalton, GA; Harrington, DE; Shelbyville, IN; and Toronto, Canada; other similar charges, the cash portion of which may not exceed $8 million in connection with similar actions occurring prior to November 30, 2001; for purposes of calculating the financial covenants for any of our four fiscal quarters ending on or after June 30, 2001, and on or prior to June 30, 2003, non-recurring charges incurred relating to restructurings, plant closings, or similar actions in connection with our acquisition of Uniplast, the cash portion of which may not exceed the lesser of $15 million and the amount accrued prior to April 2, 2002; and for purposes of calculating the financial covenants for any of our four fiscal

quarters ending on or after March 31, 2002, and on or prior to September 30, 2003, other similar charges, which may not exceed $20 million (excluding non-recurring charges incurred relating to our acquisition of Uniplast) and the cash portion of which (excluding non-recurring charges incurred relating to our acquisition of Uniplast) may not exceed $15 million during any four consecutive fiscal quarters, plus

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the amount of all non recurring charges incurred pursuant to the agreement with A.T. Kearney for a company-wide supply chain cost initiative, plus

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the amount of all non-cash expenses resulting from the grant of equity-related incentives to any director, officer or employee, plus

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the amount of all compensation expense relating to long-term incentive plans, bonuses and severance payments incurred as a result of the recapitalization and related transactions, plus

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the amount of all nonrecurring transaction and finance expenses incurred as a result of the recapitalization and related transactions and permitted acquisitions, minus

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the amount of all extraordinary gains.

In addition, for purposes of calculating financial covenants (but not the leverage ratio used to determine the interest rate applicable to the tranche A term loans, the tranche B term loans, the Mexico term loans and/or the revolving loans), Consolidated EBITDA also excludes the effect of a limited amount of certain other nonrecurring charges relating to restructurings, plant closings, early termination and modification of leases and similar actions. The definition of Consolidated EBITDA contained in our credit facilities is different from the definition of EBITDA contained in our indentures. Further, the definitions of EBITDA contained in our credit facilities and our indentures are significantly different from the presentation of EBITDA for all other purposes in this prospectus, including under “Summary—Summary financial data” and “Selected financial data.”

Events of default

The credit facilities contain customary events of default, including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross default to certain other indebtedness, bankruptcy events, ERISA events, material judgments and liabilities, actual or asserted invalidity of security interests and change of control. In addition, the invalidity or unenforceability of the Equity Commitment and the failure of any party thereto to comply with the provisions of the Equity Commitment are events of default under our credit facilities.

2003 Notes

We issued $250 million aggregate principal amount of the 2003 Notes in May 2003 to repay a portion of our indebtedness under our credit facilities. The 2003 Notes will mature on September 1, 2009. We are required to pay interest on the 2003 Notes semiannually on March 1 and September 1 of each year, commencing September 1, 2003. The 2003 Notes were issued under an indenture dated as of May 30, 2003, by and among us, the subsidiary guarantors party thereto and Wilmington Trust Company, as trustee.

Guarantees; security

The 2003 Notes are guaranteed on a senior secured basis by each of our existing and future domestic restricted subsidiaries and, to the extent that they also guarantee any debt (other than a foreign subsidiary that guarantees the debt of another foreign subsidiary), by each of our existing and future foreign restricted subsidiaries.

Our obligations and the obligations of the note guarantors under the 2003 Notes and guarantees thereof are secured, on a second-priority lien basis, by:

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all of the capital stock or other equity interests of our existing and future domestic subsidiaries and 65% of the capital stock or other equity interests of our existing and future first-tier foreign subsidiaries owned directly by us or our domestic subsidiaries but, in each case, only to the extent that the aggregate principal amount, par value, book value as carried by us or market value (which ever is greatest), or any capital stock, equity interests or other securities of any such subsidiary is not greater than 19.99% of the aggregate principal amount of the 2003 Notes outstanding; and

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substantially all of the other assets held by us or any of the guarantors, but only to the extent that any of our or any such guarantor’s obligations under our credit facilities, certain interest rate protection and other hedging agreements and certain cash management arrangements or any designated future indebtedness are secured by a first-priority lien thereon.

Pursuant to an intercreditor agreement, the liens securing the 2003 Notes will be expressly second in priority to all liens that secure

•

obligations under our senior bank facilities,

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any other future indebtedness permitted to be incurred under the indenture governing the 2003 Notes that we designate as first-priority lien indebtedness and

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certain obligations under interest rate protection and other hedging agreements and certain cash management obligations.

The second-priority liens securing the 2003 Notes may not be enforced at any time when obligations secured by the first-priority liens are outstanding, except for certain limited exceptions. A release of, or an amendment of the collateral documents relating to, the first-priority liens may adversely affect the status of the second-priority liens securing the 2003 Notes.

In addition to the additional indebtedness that may be secured by the first-priority liens as described above, any future indebtedness permitted to be incurred under the indenture governing the 2003 Notes may be secured by liens upon any or all of the collateral securing the 2003 Notes on an equal and ratable basis with the second-priority liens securing the same.

Ranking

The 2003 Notes rank equally with our existing and future senior debt, including our obligations under the credit facilities, and rank senior to our existing and future subordinated indebtedness, including the Notes. Because the 2003 Notes are secured on a second- priority lien basis, the 2003 Notes effectively rank junior to

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our obligations under our credit facilities and any other existing and future obligations secured by a first-priority lien on the collateral securing the 2003 Notes to the extent of the value of such collateral, and

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our obligations under our credit facilities and any other existing and future 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.

Optional redemption

Prior to June 1, 2006, we may, on one or more occasions, redeem up to a maximum of 35% of the original aggregate principal amount of the 2003 Notes with the net cash proceeds of certain equity offerings by us at a redemption price equal to 111.125% of the principal amount thereof, plus accrued interest, provided, however, that after giving effect to such redemption

•

at least 65% of the original aggregate amount of the 2003 Notes remains outstanding and

•

any such redemption by us is made within 120 days of such equity offering.

Otherwise, we may not redeem the 2003 Notes prior to June 1, 2007. On or after that date, we may redeem the 2003 Notes in whole or in part, on not less than 30 nor more than 60 days’ prior notice, at the following redemption prices (expressed as percentages of the principal amount), plus accrued and unpaid interest (including additional interest, if any), to the redemption date (subject to the right of holders of record of the 2003 Notes on the relevant record date to receive interest (including additional interest, if any) due on the relevant interest payment date) if redeemed during the twelve-month period commencing on June 1 of the years set forth below:

Year	Redemption Price
2007	105.563	%
2008	102.781	%
2009	100.000	%

Change of control

If we experience a change of control, we may be required to repurchase all or a portion of the then outstanding 2003 Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest (including additional interest, if any), to the date or repurchase (subject to the right of holders of record of the 2003 Notes on the relevant record date to receive interest (including additional interest, if any) due on the relevant interest payment date).

Covenants

The indenture governing the 2003 Notes contains covenants that restrict our ability and the ability of our restricted subsidiaries to:

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incur more indebtedness, including guarantees;

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create liens;

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pay dividends and make distributions in respect of our capital stock;

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enter into agreements that restrict our subsidiaries’ ability to pay dividends or make distributions;

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redeem or repurchase our capital stock or subordinated debt;

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make investments;

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sell assets;

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sell capital stock of restricted subsidiaries;

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enter into transactions with affiliates; and

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merge or consolidate.

These covenants are subject to a number of important exceptions.

Description of the notes

Definitions of certain terms used in this Description of the Notes may be found under the heading “—Certain definitions.” For the purposes of this section, the term “Company” refers only to Pliant Corporation and not any of its subsidiaries. Certain of the Company’s Subsidiaries guarantee the Notes. In addition, certain of the Company’s Subsidiaries formed or acquired in the future, if any, will be required to guarantee the Notes and therefore will be subject to many of the provisions contained in this Description of the Notes. Each company which guarantees the Notes is referred to in this section as a “Note Guarantor.” Each such guarantee is termed a “Note Guarantee.”

The Company issued $320 million aggregate principal amount of its 13% Senior Subordinated Notes due 2010 under two separate indentures. The Company issued $100 million aggregate principal amount of the 2002 Notes under the 2002 Indenture, and issued $220 million aggregate principal amount of the 2000 Notes under the 2000 Indenture. In this section, the 2002 Notes and the 2000 Notes are referred to collectively as the “Notes,” and the 2002 Indenture and the 2000 Indenture are referred to collectively as the “Indentures.” We have combined the discussion of the Indentures in this section because the covenants and other material provisions of the Indentures are substantially identical. However, the 2000 Notes are governed by the 2000 Indenture and the 2002 Notes are governed by the 2002 Indenture. The Indentures are filed or incorporated by reference as exhibits to the registration statement of which this prospectus forms a part.

The Indentures contain provisions which define your rights under the Notes. In addition, the Indentures govern the obligations of the Company and of each Note Guarantor under the Notes. The terms of the Notes include those stated in the Indentures and those made a part of the Indentures by reference to the TIA.

The following description is meant to be only a summary of certain provisions of the Indentures. It does not restate the terms of the Indentures in their entirety. We urge that you carefully read the Indentures as they, and not this description, govern your rights as Holders.

Overview of the notes and the note guarantees

The notes

The Notes are:

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general unsecured obligations of the Company;

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subordinated in right of payment to all existing and any future Senior Indebtedness of the Company;

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pari passu in right of payment with all existing and any future Senior Subordinated Indebtedness of the Company;

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senior in right of payment to any future Subordinated Obligations of the Company;

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effectively subordinated to any Secured Indebtedness of the Company and its Subsidiaries to the extent of the value of the assets securing such Indebtedness; and

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effectively subordinated to all liabilities (including trade payables) and Preferred Stock of each Subsidiary of the Company which is not guaranteeing the Notes, and any other future Subsidiaries which do not guarantee the Notes.

The note guarantors

The Notes are guaranteed by each of the following domestic Restricted Subsidiaries of the Company:

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Pliant Corporation International;

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Pliant Film Products of Mexico, Inc.;

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Pliant Solutions Corporation;

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Pliant Packaging of Canada, LLC;

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Uniplast Holdings, Inc.;

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Uniplast U.S., Inc.;

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Turex, Inc.;

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Pierson Industries, Inc.; and

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Uniplast Midwest, Inc.

The Notes are not guaranteed by Restricted Subsidiaries which also do not guarantee any Senior Indebtedness, currently consisting of the following:

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Aspen Industrial S.A. de C.V.;

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Pliant Corporation of Canada Ltd.;

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Pliant Film Products GmbH;

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Pliant Corporation Pty, Ltd.;

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Pliant Film Products, UK, Limited;

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Pliant Corporation Asia & Pacific Rim Pte Ltd.;

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Jacinto Mexico, S.A. de C.V.;

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Nepsa de Mexico S.A. de C.V.;

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Uniplast Industries Co.;

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Uniplast Films, Inc.; and

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1292789 Ontario Inc.

The Notes are not guaranteed by Pliant Investment Inc., which is an Unrestricted Subsidiary. Pliant Investment Inc. has a 50% interest in Alliant Company LLC, a joint venture with a European plastics manufacturer.

The Restricted Subsidiaries that are not Note Guarantors generated 15.4% of the Company’s net sales for the year ended December 31, 2002, and accounted for 12.2% of the assets of the Company and its Subsidiaries on a consolidated basis as of December 31, 2002.

The note guarantees

The Note Guarantee of each Note Guarantor and all Note Guarantees, if any, made by future Restricted Subsidiaries of the Company are:

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general unsecured obligations of the applicable Note Guarantor;

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subordinated in right of payment to all existing and future Senior Indebtedness of such Note Guarantor;

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pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of such Note Guarantor;

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senior in right of payment to any future Subordinated Obligations of such Note Guarantor; and

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effectively subordinated to any Secured Indebtedness of such Note Guarantor and its Subsidiaries to the extent of the value of the assets securing such Indebtedness.

Principal, maturity and interest

We issued the Notes in an aggregate principal amount of $320 million under two separate indentures, relating to $220 million aggregate principal amount of 2000 Notes and $100 million aggregate principal amount of 2002 Notes, respectively. The Notes will mature on June 1, 2010. The Notes are in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. Each Note bears interest at a rate of 13% per annum from the most recent date to which interest has been paid or provided for. We pay interest semiannually on June 1 and December 1 of each year to Holders of record at the close of business on May 15 or November 15 immediately preceding the interest payment date. We will pay interest on overdue principal at the rate borne by the Notes and, to the extent lawful, overdue installments of interest at such rate.

Paying agent and registrar

We will pay the principal of, premium, if any, interest and liquidated damages, if any, on the Notes at any office of ours or any agency designated by us which is located in the Borough of Manhattan, The City of New York. We have initially designated the corporate trust office of the Trustee to act as our agent in such matters. The location of the corporate trust office is 15 Broad Street, New York, New York 10007. We, however, reserve the right to pay interest to Holders by check mailed directly to Holders at their registered addresses. Holders may exchange or transfer their Notes at the same location given above. No service charge will be made for any registration of transfer or exchange of Notes.

We, however, may require Holders to pay any transfer tax or other similar governmental charge payable in connection with any such transfer or exchange.

Optional redemption

Except as set forth in the following paragraph, the Company may not redeem the Notes prior to June 1, 2005. On or after that date, the Company may redeem the Notes, in whole or in part, on not less than 30 nor more than 60 days’ prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date), if redeemed during the 12-month period commencing on June 1 of the years set forth below:

Year	Redemption Price
2005	106.500	%
2006	104.333	%
2007	102.167	%
2008 and thereafter	100.000	%

Prior to June 1, 2003, the Company may, on one or more occasions, also redeem up to a maximum of 35% of the original aggregate principal amount of the Notes issued under the applicable Indenture with the Net Cash Proceeds of one or more Equity Offerings by the Company at a redemption price equal to 113% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that after giving effect to any such redemption:

(1) at least 65% of the original aggregate principal amount of the Notes issued under the applicable Indenture remains outstanding; and

(2) any such redemption by the Company must be made within 120 days of such Equity Offering and must be made in accordance with certain procedures set forth in the Indentures.

Selection

If we partially redeem Notes under the applicable Indenture, the Trustee will select the Notes to be redeemed under that Indenture on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Note of $1,000 in original principal amount will be redeemed in part. If we redeem any Note in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancelation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption so long as we have deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest and liquidated damages, if any, on, the Notes to be redeemed.

Ranking

The Notes are unsecured Senior Subordinated Indebtedness of the Company, subordinated in right of payment to all existing and future Senior Indebtedness of the Company, pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of the Company and senior in right of payment to all future Subordinated Obligations of the Company. The Notes also are effectively subordinated to any Secured Indebtedness of the Company and its Subsidiaries to the extent of the value of the assets securing such Indebtedness. However, payment from the money or the proceeds of U.S. Government Obligations held in any defeasance trust described below under the caption “—Defeasance” will not be subordinated to any Senior Indebtedness or subject to the restrictions described herein.

The Company currently conducts certain of its operations through its Subsidiaries. To the extent any existing or future Subsidiary does not Guarantee the Notes, creditors of such Subsidiaries, including trade creditors and preferred stockholders (if any), generally will have priority with respect to the assets and earnings of such Subsidiaries over the claims of the Company’s creditors, including Holders. The Notes, therefore, are effectively subordinated to claims of creditors, including trade creditors, and preferred stockholders (if any) of Subsidiaries of the Company, including those formed or acquired in the future, that do not Guarantee the Notes. As of December 31, 2002, the Subsidiaries of the Company, other than those Subsidiaries that are Note Guarantors, had total liabilities, including trade payables, of approximately $57.1 million (excluding liabilities owed to the Company). As of December 31, 2002, there were outstanding:

(1) approximately $424.7 million of Senior Indebtedness of the Company, all of which was Secured Indebtedness (exclusive of unused commitments of $67.6 million under the Revolving Credit Facility);

(2) in addition to the Senior Subordinated Indebtedness of the Company represented by the Notes, no indebtedness of the Company that is subordinate or junior in right of payment to the Notes;

(3) no Senior Indebtedness of the Note Guarantors (other than the guarantees of Indebtedness under the Credit Agreement); and

(4) in addition to the Senior Subordinated Indebtedness of the Note Guarantors represented by the Note Guarantees, no Indebtedness of the Note Guarantors that is subordinate or junior in right of payment to the Note Guarantees.

Subject to certain conditions, the Indentures permit us to incur substantial amounts of additional Indebtedness. Such Indebtedness may be Senior Indebtedness. See “—Certain covenants—Limitation on Indebtedness” below.

“Senior Indebtedness” of the Company or any Note Guarantor, as the case may be, means the principal of, premium (if any) and accrued and unpaid interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company or any Note Guarantor, as applicable, regardless of whether or not a claim for post-filing interest is allowed in such proceedings), and fees and all other amounts owing in respect of, Bank Indebtedness and all other Indebtedness of the Company or any Note Guarantor, as applicable, whether outstanding on the 2000 Notes Closing Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Notes or such Note Guarantor’s Note Guarantee; provided, however, that Senior Indebtedness shall not include:

(1) any obligation of the Company to any Subsidiary of the Company or of any Note Guarantor to the Company or any other Subsidiary of the Company;

(2) any liability for Federal, state, local or other taxes owed or owing by the Company or any Note Guarantor;

(3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities);

(4) any Indebtedness or obligation of the Company or any Note Guarantor (and any accrued and unpaid interest in respect thereof) that by its terms is subordinate or junior in right of payment to any other Indebtedness or obligation of the Company or such Note Guarantor, as applicable, including any Senior Subordinated Indebtedness and any Subordinated Obligations;

(5) any obligations with respect to any Capital Stock; or

(6) any Indebtedness Incurred in violation of the Indentures, unless such Indebtedness was Incurred based on an Officers’ Certificate of the Company (delivered in good faith after reasonable investigation) to the effect that the Incurrence of such Indebtedness did not violate the provisions of the Indentures.

Only Indebtedness of the Company that is Senior Indebtedness will rank senior to the Notes. The Notes will rank pari passu in all respects with all other Senior Subordinated Indebtedness of the Company. The Company has agreed in the Indentures that it will not Incur, directly or indirectly, any Indebtedness which is subordinate or junior in right of payment to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness merely because it is unsecured.

The Company may not pay principal of, premium (if any) or interest on the Notes, or make any deposit pursuant to the provisions described under “— Defeasance” below, and may not otherwise repurchase, redeem or otherwise retire any Notes (collectively, “pay the Notes”) if:

(1) any principal of, interest on, unpaid drawings for letters of credit in respect of, or regularly accruing fees with respect to any, Designated Senior Indebtedness of the Company is not paid when due, or

(2) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case,

(x) the default has been cured or waived and any such acceleration has been rescinded, or

(y) such amounts due under Designated Senior Indebtedness have been paid in full;

provided, however, that the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Designated Senior Indebtedness with respect to which either of the events set forth in clause (1) or (2) above has occurred and is continuing.

During the continuance of any default (other than a default described in clause (1) or (2) above) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, we may not pay the Notes for a period (a “Payment Blockage Period”) commencing upon the receipt by the Trustee (with a copy to us) of written notice, specified as a “Notice of Default” and describing with particularity the default under such Designated Senior Indebtedness (a “Blockage Notice”), of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated:

(1) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice,

(2) by repayment in full of such Designated Senior Indebtedness, or

(3) because the default giving rise to such Blockage Notice is no longer continuing).

Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the second preceding sentence and in the immediately succeeding paragraph), unless the holders of such Designated Senior Indebtedness or the Representative of such holders have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the end of such Payment Blockage Period, including any missed payments.

Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this paragraph, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days.

Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property:

(1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full of such Senior Indebtedness before the Holders of the Notes are entitled to receive any payment of principal of or interest on the Notes; and

(2) until such Senior Indebtedness is paid in full, any payment or distribution to which Holders would be entitled but for the subordination provisions of the Indentures will be made to holders of such Senior Indebtedness as their interests may appear, except that Holders of the Notes may receive:

(i) Capital Stock; and

(ii) debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Notes.

If a payment or distribution is made to Holders of the Notes that due to the subordination provisions of the Indentures should not have been made to them, such Holders will be required to hold it in trust for the

benefit of the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear.

If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or their Representative) of the acceleration. If any such Designated Senior Indebtedness is outstanding, the Company may not pay the Notes until five Business Days after such holders or the Representative of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the subordination provisions of the Indentures otherwise permit payment at that time.

By reason of the subordination provisions of the Indentures, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness of the Company may recover more, ratably, than the Holders of the Notes, and creditors of the Company who are not holders of Senior Indebtedness of the Company or Senior Subordinated Indebtedness of the Company (including the Notes) may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the holders of the Notes.

Note guarantees

The Note Guarantors and certain future Subsidiaries of the Company (as described below), as primary obligors and not merely as sureties, have jointly and severally unconditionally Guaranteed, or, in the case of future Subsidiaries, will jointly and severally unconditionally Guarantee, on an unsecured senior subordinated basis the performance and full and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under the Indentures (including obligations to the Trustee) and the Notes, whether for payment of principal of or interest on or liquidated damages in respect of the Notes, expenses, indemnification or otherwise (all such obligations guaranteed by such Note Guarantors being herein called the “Guaranteed Obligations”). Such Note Guarantors have agreed, or, in the case of future Subsidiaries, will agree, to pay, in addition to the amount stated above, any and all costs and expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under the Note Guarantees. Each Note Guarantee is, or, in the case of future Subsidiaries, will be, limited to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Note Guarantor without rendering the Note Guarantee, as it relates to such Note Guarantor, void or voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. The Company will cause each Domestic Subsidiary and any other Restricted Subsidiary that guarantees any Senior Indebtedness (other than a Foreign Subsidiary that guarantees Senior Indebtedness Incurred by another Foreign Subsidiary) to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes. See “—Certain covenants—Future Note Guarantors” below.

The obligations of a Note Guarantor under its Note Guarantee are senior subordinated obligations. As such, the rights of Holders to receive payment by a Note Guarantor pursuant to its Note Guarantee will be subordinated in right of payment to the rights of holders of Senior Indebtedness of such Note Guarantor. The terms of the subordination provisions described above with respect to the Company’s obligations under the Notes apply equally to a Note Guarantor and the obligations of such Note Guarantor under its Note Guarantee.

Each Note Guarantee is a continuing guarantee and shall (a) remain in full force and effect until payment in full of all the Guaranteed Obligations or such Note Guarantee is released upon the merger or the sale of all the Capital Stock or assets of the Note Guarantor in compliance with the conditions set forth in the Indentures under “—Merger and consolidation” or “—Certain covenants—Limitation on Sales of Assets and Subsidiary Stock,” (b) be binding upon each Note Guarantor and its successors and (c) inure to the benefit of, and be enforceable by, the Trustee, the Holders and their successors, transferees and assigns.

Change of control

Upon the occurrence of any of the following events (each a “Change of Control”), each Holder will have the right to require the Company to repurchase all or any part of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date); provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to repurchase the Notes under the applicable Indenture pursuant to this section in the event that it has exercised its right to redeem all the Notes outstanding under that Indenture under the terms of the section titled “Optional redemption:”

(1) prior to the first public offering of common stock of the Company, the Permitted Holders cease to be the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (1) and clause (2) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of an entity (the “specified entity”) held by any other entity (the “parent entity”) so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity);

(2) (A) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (1) above, except that for purposes of this clause (2) a person (including a Permitted Holder) shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately, only after the passage of time, upon the happening of any event or otherwise), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company and (B) the Permitted Holders “beneficially own” (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company (for the purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in this clause (2)), directly or indirectly, of more than 50% of the voting power of the Voting Stock of such parent entity and the Permitted Holders “beneficially own” (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent entity);

(3) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors (A) selected in accordance with the Stockholders Agreement so long as such agreement is in effect or otherwise nominated by the Permitted Holders or (B) whose election by the Board of Directors of the Company or whose nomination for election by the stockholders of the Company was approved by a vote of at least a majority of the members of the Board of Directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved by the Board of Directors or in accordance with the Stockholders Agreement or otherwise by the Permitted Holders) cease for any reason to constitute a majority of the Board of Directors of the Company then in office;

(4) the adoption of a plan relating to the liquidation or dissolution of the Company; or

(5) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person or transferee that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person or transferee.

In the event that at the time of such Change of Control the terms of any agreement governing Bank Indebtedness of the Company or its Subsidiaries restrict or prohibit the repurchase of Notes pursuant to this covenant, then prior to the mailing of the notice to Holders provided for in the immediately following paragraph but in any event within 30 days following any Change of Control, the Company shall:

(1) repay in full all such Bank Indebtedness or offer to repay in full all such Bank Indebtedness and repay the Indebtedness of each lender who has accepted such offer, or

(2) obtain the requisite consent of the lenders under such agreements to permit the repurchase of the Notes as provided for below.

If the Company does not obtain such consents or repay such Bank Indebtedness, the Company will remain prohibited from repurchasing the Notes pursuant to this covenant. In such event the Company’s failure to make an offer to purchase Notes pursuant to this covenant would constitute an Event of Default under the Indentures which in turn would constitute a default under the Credit Agreement. In such circumstances, the subordination provisions of the Indentures would likely prohibit payments to Holders of the Notes.

Within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee (the “Change of Control Offer”) stating:

(1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or a portion (in integral multiples of $1,000) of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, on the relevant interest payment date);

(2) the circumstances and relevant facts and financial information regarding such Change of Control;

(3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and

(4) the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes purchased.

The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indentures applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof.

The Change of Control purchase feature is a result of negotiations between the Company and the initial purchasers of the Notes. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company would decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indentures, but that could increase the amount of indebtedness outstanding at such time or otherwise affect the Company’s capital structure or credit ratings. Restrictions on the ability of the Company to incur additional Indebtedness are contained in the covenants described under “—Certain covenants—Limitation on Indebtedness.” Such restrictions can only be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indentures do not contain any covenants or provisions that may afford Holders protection in the event of a highly leveraged transaction.

The occurrence of certain of the events which would constitute a Change of Control would constitute a default under the Credit Agreement. Future Senior Indebtedness of the Company may contain prohibitions of certain events which would constitute a Change of Control or require such Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the Notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company’s ability to pay cash to the Holders upon a repurchase may be limited by the Company’s then existing financial resources. There can be no assurance that the Company will have sufficient funds available when necessary to make any required repurchases. The provisions under the applicable Indenture relative to the Company’s obligation to make an offer to repurchase the Notes outstanding under that Indenture as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes outstanding under that Indenture.

Certain covenants

The Indentures contain covenants including, among others, the following:

Limitation on Indebtedness. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company or any Restricted Subsidiary that is a Note Guarantor may Incur Indebtedness if on the date of such Incurrence and after giving effect thereto the Consolidated Coverage Ratio would be greater than 2.00:1.00 if such Indebtedness is Incurred on or prior to December 31, 2002 and 2.25:1.00 if such Indebtedness is Incurred thereafter.

(b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness:

(1) Indebtedness Incurred pursuant to the Credit Agreement in an aggregate principal amount not to exceed $580.0 million at any one time outstanding less the aggregate amount of all repayments of principal of such Indebtedness pursuant to the covenant described under “—Limitation on Sales of Assets and Subsidiary Stock;”

(2) Indebtedness of the Company owed to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or any Restricted Subsidiary; provided, however, that (A) any subsequent issuance or transfer of any Capital Stock or any other event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof, (B) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes, (C) if a Restricted Subsidiary is the obligor on such Indebtedness,

such Indebtedness is made pursuant to an intercompany note and (D) if a Note Guarantor is the obligor on such Indebtedness and the Company is not the obligee, such Indebtedness is subordinated in right of payment to the Note Guarantee of such Note Guarantor;

(3) Indebtedness (A) represented by the Notes and the Note Guarantees, (B) outstanding on the 2000 Notes Closing Date (other than the Indebtedness described in clauses (1) and (2) above) or Incurred pursuant to Section 4.03(a) of the 2000 Notes Indenture prior to the Closing Date, (C) consisting of Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (3) (including Refinancing Indebtedness) or the foregoing paragraph (a) and (D) consisting of Guarantees of any Indebtedness otherwise permitted by the terms of the Indentures;

(4) (A) Indebtedness Incurred pursuant to Section 4.03(b)(iv) of the 2000 Notes Indenture, (B) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, 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 Restricted Subsidiary became a Subsidiary of or was otherwise acquired by the Company) and (C) Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause (4);

(5) Indebtedness of the Company or a Restricted Subsidiary (A) in respect of performance bonds, bankers’ acceptances, letters of credit and surety or appeal bonds provided by the Company and its Restricted Subsidiaries in the ordinary course of their business, and (B) under Commodity Agreements, Interest Rate Agreements and Currency Agreements entered into for bona fide hedging purposes of the Company or any Restricted Subsidiary in the ordinary course of business; provided, however, that such Interest Rate Agreements or Currency Agreements do not increase the principal amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in interest rates or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;

(6) (A) Indebtedness Incurred pursuant to Section 4.03(b)(vi) of the 2000 Notes Indenture and (B) Indebtedness (including Capitalized Lease Obligations and Attributable Debt) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal), equipment or other assets (in each case whether through the direct purchase of assets or the Capital Stock of any Person owning such assets); provided that the aggregate principal amount of all Indebtedness Incurred pursuant to subclauses (A) and (B) of this clause (6) and all Refinancing Indebtedness Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to subclauses (A) and (B) of this clause (6), at any time outstanding, does not exceed the greater of (x) 5.0% of Tangible Assets and (y) $30.0 million;

(7) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course, provided that such Indebtedness is extinguished within five Business Days of Incurrence;

(8) Indebtedness of the Company and its Restricted Subsidiaries arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case incurred or assumed in connection with the disposition of any business, assets or a Subsidiary of the Company in accordance with the terms of the Indentures, other than Guarantees by the Company or any Restricted Subsidiary of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary of the Company for the purpose of financing such acquisition; provided, however, that the maximum aggregate liability in respect of all such Indebtedness shall not exceed the gross proceeds, including the fair market value as determined in good faith by a majority of the Board of Directors of noncash proceeds (the fair market value of such noncash proceeds being measured at the time it is received and without giving effect to any subsequent changes in

value), actually received by the Company and its Restricted Subsidiaries in connection with such disposition;

(9) the Incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is not recourse to the Company or any Restricted Subsidiary of the Company (except for Standard Securitization Undertakings);

(10) (A) Indebtedness incurred pursuant to Section 4.03(b)(x) of the 2000 Notes Indenture and (B) Indebtedness of Foreign Subsidiaries; provided that the aggregate outstanding amount of Indebtedness incurred by such Foreign Subsidiaries under subclauses (A) and (B) of this clause (10) does not exceed at any one time an amount equal to the sum of (A) 80% of the consolidated book value of the accounts receivable of all Foreign Subsidiaries and (B) 60% of the consolidated book value of the inventory of all Foreign Subsidiaries;

(11) Indebtedness under any Domestic Overdraft Facility; or

(12) (A) Indebtedness incurred pursuant to Section 4.03(b)(xii) of the 2000 Notes Indenture and (B) Indebtedness of the Company and its Restricted Subsidiaries (in addition to Indebtedness permitted to be Incurred pursuant to the foregoing paragraph (a) or any other clause of this paragraph (b)); provided that the aggregate principal amount on the date of Incurrence, when added to all other Indebtedness Incurred pursuant to subclauses (A) and (B) of this clause (12) and then outstanding, will not exceed $20.0 million.

(c) Notwithstanding the foregoing, the Company may not Incur any Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness will be subordinated to the Notes to at least the same extent as such Subordinated Obligations. The Company may not Incur any Indebtedness pursuant to paragraphs (a) or (b) above if such Indebtedness is subordinate or junior in right of payment to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. In addition, the Company may not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Notes) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien, except for Senior Subordinated Indebtedness and Subordinated Obligations secured by Liens on the assets of any entity existing at the time such entity is acquired by, and becomes a Restricted Subsidiary of, the Company, whether by merger, consolidation, purchase of assets or otherwise, provided that such Liens (x) are not created, incurred or assumed in connection with, or in contemplation of such entity being acquired by the Company and (y) do not extend to any other assets of the Company or any of its other Subsidiaries. A Note Guarantor may not Incur any Indebtedness if such Indebtedness is by its terms expressly subordinate or junior in right of payment to any Senior Indebtedness of such Note Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such Note Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Note Guarantor. In addition, a Note Guarantor may not Incur any Secured Indebtedness that is not Senior Indebtedness of such Note Guarantor unless contemporaneously therewith effective provision is made to secure the Note Guarantee of such Note Guarantor equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Note Guarantee) such Secured Indebtedness for as long as such Secured Indebtedness is secured by a Lien, except for Senior Subordinated Indebtedness and Subordinated Obligations of such Note Guarantor secured by Liens on the assets of any entity existing at the time such entity is acquired by such Note Guarantor, whether by merger, consolidation, purchase of assets or otherwise, provided that such Liens (x) are not created, incurred or assumed in connection with or in contemplation of such assets being acquired by such Note Guarantor and (y) do not extend to any other assets of the Company or any of its other Subsidiaries.

(d) Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rates of currencies. For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this covenant:

(1) Indebtedness Incurred pursuant to the Credit Agreement prior to or on the 2000 Notes Closing Date shall be treated as Incurred pursuant to clause (1) of paragraph (b) above,

(2) Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness which is otherwise included in the determination of a particular amount of Indebtedness shall not be included,

(3) If obligations in respect of letters of credit are Incurred pursuant to the Credit Agreement and are being treated as Incurred pursuant to clause (1) of paragraph (b) above and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included,

(4) The principal amount of any Disqualified Stock of the Company or a Restricted Subsidiary or Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor will be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the maximum liquidation preference,

(5) The principal amount of Indebtedness, Disqualified Stock of the Company or a Restricted Subsidiary or Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor issued at a price less than the principal amount thereof, the maximum fixed redemption or repurchase price thereof or liquidation preference thereof, as applicable, will be equal to the amount of the liability or obligation in respect thereof determined in accordance with GAAP,

(6) If such Indebtedness is denominated in a currency other than U.S. dollars, the U.S. dollar equivalent principal amount thereof will be calculated based on the relevant currency exchange rates in effect on the date such Indebtedness was Incurred,

(7) The accrual of interest, accrual of dividends, the accretion of accreted value, the payment of interest in the form of additional Indebtedness and the payment of dividends or distributions in the form of additional Capital Stock will not be deemed an Incurrence of Indebtedness for purposes of this covenant,

(8) Indebtedness permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness, and

(9) In the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in this covenant (including references to Indebtedness incurred pursuant to certain sections of the 2000 Notes Indenture), the Company, in its sole discretion, will classify (or later reclassify) such Indebtedness and only be required to include the amount of such Indebtedness in one of such clauses.

Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to:

(1) declare or pay any dividend or make any distribution of any kind on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) or similar payment to the holders (solely in their capacities as such) of its Capital Stock except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable to the Company or another Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis),

(2) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary,

(3) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations (other than (A) the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition and (B) Indebtedness described in clause (2) of paragraph (b) of the covenant described under “—Limitation on Indebtedness”), or

(4) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to as a “Restricted Payment”) if at the time the Company or such Restricted Subsidiary makes such Restricted Payment:

(A) a Default will have occurred and be continuing (or would result therefrom);

(B) the Company could not Incur at least $1.00 of additional Indebtedness under paragraph (a) of the covenant described under “—Limitation on Indebtedness;” or

(C) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the 2000 Notes Closing Date would exceed the sum, without duplication, of:

(i) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the 2000 Notes Closing Date occurred to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which consolidated financial statements of the Company are publicly available (or, in case such Consolidated Net Income will be a deficit, minus 100% of such deficit);

(ii) 100% of the aggregate Net Cash Proceeds (other than in respect of an Excluded Contribution) received by the Company (x) as capital contributions to the Company after the 2000 Notes Closing Date or (y) from the issue or sale of its Capital Stock (other than Disqualified Stock) subsequent to the 2000 Notes Closing Date (other than a capital contribution from or an issuance or sale to (a) a Subsidiary of the Company or (b) an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries);

(iii) 100% of the fair market value (as determined in good faith by the Board of Directors of the Company) of shares of Qualified Stock of the Company or any Restricted Subsidiary issued after the 2000 Notes Closing Date to acquire assets from a third party;

(iv) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the 2000 Notes Closing Date of any Indebtedness of the Company or its Restricted Subsidiaries issued after the 2000 Notes Closing which is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or the fair market value of other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange);

(v) 100% of the aggregate amount received by the Company or any Restricted Subsidiary in cash from the sale or other disposition (other than to (x) the Company or a Subsidiary of the Company or (y) an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries) of Restricted Investments made by the Company or any Restricted Subsidiary after the 2000 Notes Closing Date and from repurchases and redemptions of such Restricted

Investments from the Company or any Restricted Subsidiary by any Person (other than (x) the Company or any of its Subsidiaries or (y) an employee equity ownership or participation plan or other trust established by the Company or any of its Restricted Subsidiaries) and from repayments of loans or advances which constituted Restricted Investments;

(vi) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries since the 2000 Notes Closing Date, resulting from (x) payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (y) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of “Investment”) not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments; and

(vii) $5.0 million.

(b) The provisions of the foregoing paragraph (a) will not prohibit:

(1) any purchase, repurchase, retirement or other acquisition or retirement for value of, or other distribution in respect of, Capital Stock of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company or capital contributions to the Company after the 2000 Notes Closing Date (other than Disqualified Stock and other than Capital Stock issued or sold to, or capital contributions from, a Subsidiary of the Company or an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries); provided, however, that:

(A) such Restricted Payment will be excluded in the calculation of the amount of Restricted Payments, and

(B) the Net Cash Proceeds from such sale or capital contribution applied in the manner set forth in this clause (1) will be excluded from the calculation of amounts under clause (4)(C)(ii) of paragraph (a) above;

(2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, (x) Capital Stock of the Company or a Restricted Subsidiary or (y) Subordinated Obligations of the Company or a Restricted Subsidiary that are permitted to be Incurred pursuant to the covenant described under “—Limitation on Indebtedness;” provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value will be excluded in the calculation of the amount of Restricted Payments;

(3) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under “—Limitation on Sales of Assets and Subsidiary Stock;” provided, however, that such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments;

(4) Investments that are made with Excluded Contributions; provided, however, that such Investments shall be excluded in the calculation of the amount of Restricted Payments;

(5) dividends or other distributions paid to holders of, or redemptions from holders of, Capital Stock within 60 days after the date of declaration thereof, or the giving of formal notice of redemption, if at such date of declaration such dividends or other distributions or redemptions would have complied with this covenant; provided, however, that such dividends, distributions or redemptions will be included in the calculation of the amount of Restricted Payments;

(6) any repurchase of Capital Stock owned by former officers, directors, consultants or employees of the Company or its Subsidiaries or their assigns, estates and heirs or entities controlled by them,

provided, however, that the amount of such repurchases since the 2000 Notes Closing Date shall not, in the aggregate, exceed the sum of (A) $10.0 million (which amount shall be increased by the amount of any Net Cash Proceeds to the Company from (i) sales of Capital Stock of the Company to management, other employees or Permitted Holders subsequent to the 2000 Notes Closing Date to the extent such amounts are not included under clause 4(C)(ii) of paragraph (a) above and (ii) any “key-man” life insurance policies which are used to make such repurchases) and (B) $2.0 million per fiscal year of the Company commencing with fiscal year 2000 (which amount may be used in a subsequent fiscal year to the extent not used during a fiscal year); provided further, however, that the cancelation of Indebtedness owing to the Company from such former officers, directors, consultants or employees of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Capital Stock of the Company will not be deemed to constitute a Restricted Payment under the Indentures, provided further, however, that such repurchase will be included in the calculation of the amount of Restricted Payments;

(7) any of the transactions pursuant to the Recapitalization Agreement; provided, however, that such amounts will be excluded in the calculation of the amount of Restricted Payments;

(8) repurchases of Capital Stock deemed to occur upon the exercise of stock options, warrants or other convertible securities if such Capital Stock represents a portion of the exercise price thereof; provided, however, that such repurchases will be excluded in the calculation of the amount of Restricted Payments; or

(9) so long as no Default or Event of Default shall have occurred and be continuing, payments not to exceed $500,000 in the aggregate since the 2000 Notes Closing Date to enable the Company to make payments to holders of its Capital Stock in lieu of the issuance of fractional shares of its Capital Stock; provided, however, that such payments will be excluded in the calculation of the amount of Restricted Payments.

Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company or any of its Restricted Subsidiaries (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);

(2) make any loans or advances to the Company (it being understood that the subordination of loans or advances made to the Company to other Indebtedness Incurred by the Company shall not be deemed a restriction on the ability to make loans or advances); or

(3) transfer any of its property or assets to the Company, except:

(A) any encumbrance or restriction pursuant to applicable law or any applicable rule, regulation or order, or an agreement in effect at or entered into on the 2000 Notes Closing Date (including the Credit Agreement);

(B) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Capital Stock or Indebtedness of such Restricted Subsidiary, in each case Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Capital Stock 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 Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company) and outstanding on such date;

(C) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A) or (B) of this covenant or this clause (C) or contained in any amendment to an agreement referred to in clause (A) or (B) of this covenant or this clause (C); provided, however, that the encumbrances 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 such predecessor agreements;

(D) in the case of clause (3), any encumbrance or restriction

(i) that restricts in a customary manner the assignment of any lease, license or similar contract or the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract,

(ii) that is or was created by virtue of any transfer of, agreement to transfer or option or right with respect to any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indentures,

(iii) contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements, or

(iv) encumbrances or restrictions relating to Indebtedness permitted to be Incurred pursuant to clause (b)(6) of the covenant described under “—Limitation on Indebtedness” for property acquired in the ordinary course of business that only imposes encumbrances or restrictions on the property so acquired (it being agreed that any such encumbrance or restriction may also secure other Indebtedness permitted to be Incurred by the Company and provided by the same financing source providing the Indebtedness Incurred pursuant to such clause (b)(6));

(E) with respect to a Restricted Subsidiary, any restriction imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition;

(F) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business;

(G) Indebtedness or other contractual requirements of a Securitization Entity in connection with a Qualified Securitization Transaction; provided, that such restrictions apply only to such Securitization Entity;

(H) net worth provisions in leases and other agreements entered into by the Company or any Restricted Subsidiary in the ordinary course of business; and

(I) any agreement or instrument governing Indebtedness (whether or not outstanding) of Foreign Subsidiaries of the Company permitted to be Incurred pursuant to clause (a) or (b)(10) under the caption “—Limitation on Indebtedness.”

Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless:

(1) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value of the Capital Stock and assets subject to such Asset Disposition,

(2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of (A) cash or Temporary Cash Investments, (B) properties and assets to be owned by the Company or any Restricted Subsidiary and used in a Permitted Business or (C) Capital

Stock in one or more Persons engaged in a Permitted Business that are or thereby become Restricted Subsidiaries of the Company, and

(3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be)

(A) first, (i) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase (x) Bank Indebtedness or (y) other Senior Indebtedness of the Company or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (in the case of clause (y), other than Indebtedness owed to the Company or an Affiliate of the Company and other than Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor) or (ii) to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary or the application by the Company of the Net Available Cash received by a Restricted Subsidiary of the Company), in each case within 365 days (or, in the case of Foreign Subsidiary Asset Dispositions, 545 days) from the later of such Asset Disposition or the receipt of such Net Available Cash, provided that pending the final application of any such Net Available Cash, the Company and its Restricted Subsidiaries may temporarily reduce Indebtedness or otherwise invest such Net Available Cash in any manner not prohibited by the Indentures;

(B) second, within 365 days from the later of such Asset Disposition or the receipt of such Net Available Cash (or, in the case of Foreign Subsidiary Asset Dispositions, 545 days), to the extent of the balance of such Net Available Cash after such application in accordance with clause (A), to make an Offer (as defined below) to purchase Notes pursuant to and subject to the conditions set forth in section (b) of this covenant; provided, however, that if the Company elects (or is required by the terms of any Senior Subordinated Indebtedness), such Offer may be made ratably to purchase the Notes and other Senior Subordinated Indebtedness of the Company; and

(C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) (other than the proviso thereof) and (B), for any general corporate purpose not restricted by the terms of the Indentures;

provided, however that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (B) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased.

Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions since the 2000 Notes Closing Date that is not applied in accordance with this covenant or Section 4.06 of the 2000 Notes Indenture exceeds $10.0 million since the 2000 Notes Closing Date.

For the purposes of this covenant, the following are deemed to be cash:

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the assumption of any liabilities of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such liabilities in connection with such Asset Disposition, and

•

securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash.

(b) In the event of an Asset Disposition that requires the purchase of Notes (and other Senior Subordinated Indebtedness) pursuant to clause (a)(3)(B) of this covenant, the Company will be required to purchase Notes (and other Senior Subordinated Indebtedness) tendered pursuant to an offer by the Company for the Notes (and other Senior Subordinated Indebtedness) (the “Offer”) at a purchase price of

100% of their principal amount plus accrued and unpaid interest and liquidated damages thereon, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) in accordance with the procedures (including prorating in the event of oversubscription), set forth in the Indentures. If the aggregate purchase price of Notes (and other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Notes (and other Senior Subordinated Indebtedness), the Company may apply the remaining Net Available Cash for any general corporate purpose not restricted by the terms of the Indentures. The Company will not be required to make an Offer for Notes (and other Senior Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash available therefor (after application of the proceeds as provided in clause (a)(3)(A)) is less than $10.0 million for any particular Asset Disposition since the 2000 Notes Closing Date (which lesser amount will be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). Upon completion of the Offer, the amount of Net Available Cash shall be reduced to zero.

(c) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. The provisions under the applicable Indenture relative to the Company’s obligation to make an offer to repurchase the Notes outstanding under that Indenture as a result of an Asset Disposition may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes outstanding under that Indenture.

Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an “Affiliate Transaction”) unless such transaction is on terms:

(1) that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm’s-length dealings with a Person who is not such an Affiliate,

(2) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $5.0 million,

(A) are set forth in writing, and

(B) except as provided in clause (a)(3) below, have been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction (if any such members exist), and

(3) that, in the event (i) such Affiliate Transaction involves an amount in excess of $10.0 million, or (ii) if there are no members of the Board of Directors having no personal stake in such Affiliate Transaction and such Affiliate Transaction involves an aggregate amount in excess of $5.0 million, have been determined by a nationally recognized appraisal, accounting or investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries.

(b) The provisions of the foregoing paragraph (a) will not prohibit:

(1) any Restricted Payment permitted to be paid pursuant to the covenant described under “—Limitation on Restricted Payments,”

(2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, options to purchase Capital Stock of the

Company and equity ownership, restricted stock plans, long-term incentive plans, stock appreciation rights plans, participation plans or similar employee benefits plans approved by the Board of Directors,

(3) the grant of options (and the exercise thereof) to purchase Capital Stock of the Company or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors,

(4) loans or advances to officers, directors or employees in the ordinary course of business, but in any event not to exceed $2.0 million in the aggregate outstanding at any one time with respect to all loans or advances made since the 2000 Notes Closing Date,

(5) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries and other reasonable fees, compensation, benefits and indemnities paid or entered into by the Company or its Restricted Subsidiaries in the ordinary course of business to or with the officers, directors or employees of the Company and its Restricted Subsidiaries,

(6) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries,

(7) the provision by Persons who may be deemed Affiliates or stockholders of the Company (other than J.P. Morgan Partners, LLC and Persons directly or indirectly controlled by J.P. Morgan Partners, LLC) of investment banking, commercial banking, trust, lending or financing, investment, underwriting, placement agent, financial advisory or similar services to the Company or its Subsidiaries performed after the 2000 Notes Closing Date,

(8) sales of Capital Stock to Permitted Holders approved by a majority of the members of the Board of Directors who do not have a material direct or indirect financial interest in or with respect to the transaction being considered, or

(9) the existence or performance by the Company or any Restricted Subsidiary under any agreement as in effect as of the 2000 Notes Closing Date (including the Recapitalization Agreement and the agreements to be entered into pursuant thereto or any amendment thereto) or replacement agreement therefor or any transaction contemplated thereby (including pursuant to any amendment thereto or replacement agreement therefor) so long as such amendment or replacement is not more disadvantageous to the Holders of the Notes in any material respect than the original agreement as in effect on the 2000 Notes Closing Date.

SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC (if permitted by SEC practice and applicable law and regulations) and provide the Trustee and Holders and prospective Holders (upon request) within 15 days after it files them with the SEC (or if not permitted, within 15 days after it would have otherwise been required to file them with the SEC), copies of the Company’s annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act. In addition, following the existence of a Public Market, the Company will furnish to the Trustee and the Holders, promptly upon their becoming available, copies of the annual report to shareholders and any other information provided by the Company to its shareholders generally. The Company also will comply with the other provisions of Section 314(a) of the TIA.

Future Note Guarantors. The Company will cause each Domestic Subsidiary and any other Restricted Subsidiary that guarantees any Senior Indebtedness (other than a Foreign Subsidiary that guarantees Senior Indebtedness Incurred by another Foreign Subsidiary) to become a Note Guarantor, and, if applicable, execute and deliver to the Trustee a supplemental indenture in the form set forth in the Indentures pursuant to which such Domestic or other Restricted Subsidiary will Guarantee payment of the Notes. Each Note Guarantee will be limited to an amount not to exceed the maximum amount that can be Guaranteed by that Domestic or other Restricted Subsidiary without rendering the Note Guarantee, as it

relates to such Domestic or other Restricted Subsidiary, void or voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

Limitation on Lines of Business. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business, other than a Permitted Business, except that the Company and any of its Restricted Subsidiaries may engage in a new business so long as the Company and its Restricted Subsidiaries, taken as a whole, remain substantially engaged in a Permitted Business.

Merger and consolidation

The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless:

(1) the resulting, surviving or transferee Person (the “Successor Company”) will be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) will expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indentures;

(2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing;

(3) immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness under paragraph (a) of the covenant described under “—Certain covenants—Limitation on Indebtedness;” and

(4) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indentures.

The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indentures, but the predecessor Company in the case of a conveyance, transfer or lease of all or substantially all its assets will not be released from the obligation to pay the principal of and interest on the Notes.

In addition, the Company will not permit any Note Guarantor to consolidate with or merge with or into any Person unless either

(1) (A) the resulting, surviving or transferee Person will be a corporation, partnership or limited liability company organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such Person (if not such Note Guarantor) will expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Note Guarantor under its Note Guarantee; (B) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Person or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; and (C) the Company will have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indentures; or

(2) such transaction results in the Company receiving cash or other property (other than Capital Stock representing a controlling interest in the successor entity), and the transaction is made in compliance with the covenant described under “—Certain covenants—Limitation on Sales of Assets and Subsidiary Stock.”

Notwithstanding any of the foregoing:

(1) any Restricted Subsidiary may consolidate with, merge into or transfer or lease all or part of its properties and assets to the Company or a Subsidiary that is a Note Guarantor, and

(2) the Company may merge with an Affiliate incorporated solely for (i) the purpose of incorporating the Company or (ii) organizing the Company in another jurisdiction to realize tax or other benefits.

Defaults

Each of the following is an Event of Default:

(1) a default in any payment of interest or liquidated damages on any Note when due and payable, whether or not prohibited by the provisions described under “—Ranking” above, continued for 30 days,

(2) a default in the payment of principal of any Note when due and payable at its Stated Maturity, upon required redemption or repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions described under “—Ranking” above,

(3) the failure by the Company or any Note Guarantor to comply with its obligations under the covenant described under “—Merger and consolidation” above,

(4) the failure by the Company or any Restricted Subsidiary to comply for 45 days after written notice (specifying the default and demanding that the same be remedied) with any of its obligations under the covenants described under “—Change of control” or “—Certain covenants” above (in each case, other than a failure to purchase Notes),

(5) the failure by the Company or any Restricted Subsidiary to comply for 60 days after written notice (specifying the default and demanding that the same be remedied) with its other agreements contained in the Notes or the Indentures,

(6) the failure by the Company or any Restricted Subsidiary of the Company to pay the principal amount of any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the aggregate principal amount of such Indebtedness unpaid or accelerated exceeds $10.0 million or its foreign currency equivalent (the “cross acceleration provision”) and such failure continues for 30 days after receipt of the notice specified in the Indentures,

(7) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the “bankruptcy provisions”),

(8) the rendering of any judgment or decree for the payment of money in excess of $10.0 million (net of any amounts with respect to which a reputable and creditworthy insurance company has acknowledged liability in writing) or its foreign currency equivalent against the Company, or a Restricted Subsidiary of the Company if such judgment or decree becomes final and nonappealable and remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed (the “judgment default provision”) or

(9) any Note Guarantee of a Material Subsidiary ceases to be in full force and effect (except as contemplated by the terms thereof) or any Note Guarantor or Person acting by or on behalf of such Note Guarantor denies or disaffirms such Note Guarantor’s obligations under the Indentures or any Note Guarantee and such Default continues for 10 days after receipt of the notice specified in the Indentures.

The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

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However, a default under clauses (4), (5), (6) or (9) will not constitute an Event of Default under the applicable Indenture until the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes under that Indenture notify the Company of the default and the Company or the Note Guarantor, as applicable, does not cure such default within the time specified in clauses (4), (5), (6) or (9) hereof after receipt of such notice.

If an Event of Default (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) occurs and is continuing under the applicable Indenture, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes under that Indenture by written notice to the Company and the Trustee specifying the Event of Default and that it is a “notice of acceleration” may declare the principal of and accrued but unpaid interest and liquidated damages on all the Notes to be due and payable. Upon such a declaration, such principal and interest and liquidated damages will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs under the applicable Indenture, the principal of and interest and liquidated damages on all the Notes outstanding under that Indenture will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes under the applicable Indenture may rescind any such acceleration with respect to the Notes outstanding under that Indenture and its consequences.

Subject to the provisions of the applicable Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the applicable Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity or security reasonably satisfactory to it against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the applicable Indenture or the Notes unless:

(1) such Holder has previously given the Trustee notice that an Event of Default is continuing,

(2) Holders of at least 25% in principal amount of the outstanding Notes under the applicable Indenture have requested the Trustee in writing to pursue the remedy,

(3) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense,

(4) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and

(5) the Holders of a majority in principal amount of the outstanding Notes under the applicable Indenture have not given the Trustee a direction inconsistent with such request within such 60-day period.

Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes under the applicable Indenture will be given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indentures or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indentures, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

If a Default occurs and is continuing under the applicable Indenture and is known to the Trustee, the Trustee must mail to each Holder of Notes outstanding under that Indenture notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of,

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premium (if any) or interest on any Note (including payments pursuant to the redemption provisions of such Note), the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Holders under that Indenture. In addition, the Company will be required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company will also be required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Events of Default, their status and what action the Company is taking or proposes to take in respect thereof.

Amendments and waivers

Subject to certain exceptions, the applicable Indenture or the Notes under that Indenture may be amended with the written consent of the Holders of a majority in principal amount of the Notes then outstanding under that Indenture and any past default or compliance with any provisions may be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding under that Indenture. However, without the consent of each Holder of an outstanding Note affected under the applicable Indenture, no amendment may, among other things:

(1) reduce the amount of Notes whose Holders must consent to an amendment,

(2) reduce the rate of or extend the time for payment of interest or any liquidated damages on any Note,

(3) reduce the principal of or extend the Stated Maturity of any Note,

(4) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under “— Optional redemption” above,

(5) make any Note payable in money other than that stated in the Note,

(6) make any change to the subordination provisions of the applicable Indenture that adversely affects the rights of any Holder,

(7) impair the right of any Holder to receive payment of principal of, and interest or any liquidated damages on, such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes,

(8) make any change in the amendment provisions which require each Holder’s consent or in the waiver provisions or

(9) modify the Note Guarantees in any manner adverse to the Holders.

Without the consent of any Holder, the Company, the Note Guarantors and the Trustee may amend the Indentures to:

•

cure any ambiguity, omission, defect or inconsistency,

•

provide for the assumption by a successor corporation of the obligations of the Company under the Indentures,

•

provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code),

•

make any change in the subordination provisions of the Indentures that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company or a Note Guarantor (or any representative thereof) under such subordination provisions,

•

add additional Guarantees with respect to the Notes,

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•

secure the Notes,

•

add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company,

•

make any change that does not materially and adversely affect the rights of any Holder, or

•

comply with any requirement of the SEC in connection with the qualification of the Indentures under the TIA.

The consent of the Holders will not be necessary to approve the particular form of any proposed amendment. It will be sufficient if such consent approves the substance of the proposed amendment.

After an amendment becomes effective, the Company is required to mail to Holders a notice briefly describing such amendment. However, the failure to give such notice to all Holders, or any defect therein, will not impair or affect the validity of the amendment.

Transfer and exchange

Subject to compliance with the restrictions on transfer and exchange set forth in the Indentures, a Holder will be able to transfer or exchange Notes. Upon any transfer or exchange, the registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes required by law or permitted by the Indentures. The Company will not be required to transfer or exchange any Note selected for redemption or to transfer or exchange any Note for a period of 15 days prior to a selection of Notes to be redeemed. The Notes will be issued in registered form and the Holder will be treated as the owner of such Note for all purposes.

Defeasance

The Company may at any time terminate all its obligations under the Notes and the Indentures (“legal defeasance”), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. In addition, the Company may at any time terminate:

(1) its obligations under the covenants described under “—Change of control” and “—Certain covenants,”

(2) the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries, the judgment default provision and the Note Guarantee provision described under “—Defaults” above and the limitations contained in clause (3) under the first paragraph of “—Merger and consolidation” above (“covenant defeasance”).

In the event that the Company exercises its legal defeasance option or its covenant defeasance option, each Note Guarantor will be released from all of its obligations with respect to its Note Guarantee.

The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (4), (5), (6), (7) (with respect to Significant Subsidiaries only), (8) or (9) under “—Defaults” above or because of the failure of the Company to comply with clause (3) under the first paragraph of “—Merger and consolidation” above.

In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the “defeasance trust”) with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on and liquidated damages (if any) in respect of the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the

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Trustee of an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law).

Concerning the trustee

The Bank of New York is the Trustee under each of the Indentures and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes.

Governing law

The Indentures and the Notes are governed by and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.

Certain definitions

“2000 Note Guarantee” means each Guarantee of the obligations with respect to the 2000 Notes issued by a Person pursuant to the 2000 Notes Indenture.

“2000 Notes” means the $220,000,000 aggregate principal amount of the Company’s 13% Senior Subordinated Notes due 2010 issued under the 2000 Notes Indenture.

“2000 Notes Closing Date” means May 31, 2000.

“2000 Notes Indenture” means the indenture dated as of May 31, 2000, among the Company, the subsidiary guarantors party thereto and The Bank of New York, as trustee, under which the 2000 Notes were issued, as amended, modified or supplemented from time to time.

“2002 Notes” means the $100,000,000 aggregate principal amount of the Company’s 13% Senior Subordinated Notes due 2010 issued under the 2002 Notes Indenture.

“2002 Notes Indenture” means the indenture dated as of April 10, 2002, among the Company, the subsidiary guarantors party thereto and The Bank of New York, as trustee, under which the 2002 Notes were issued, as amended, modified or supplemented from time to time.

“Additional Assets” means:

(1) any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Permitted Business or any improvement to any property or assets that are used by the Company or a Restricted Subsidiary in a Permitted Business;

(2) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or

(3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clauses (2) or (3) above is primarily engaged in a Permitted Business.

“Affiliate” of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. For purposes of the provisions described under “—Certain covenants—Limitation on Transactions with Affiliates” and “—Certain covenants—Limitation on Sales of Assets and Subsidiary

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Stock” only, “Affiliate” shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof.

“Asset Disposition” means any sale, lease (other than an operating lease entered into in the ordinary course of business), transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation, or similar transaction (each referred to for the purposes of this definition as a “disposition”), of:

(1) any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary),

(2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or

(3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary other than, in the case of (1), (2) and (3) above,

(A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary,

(B) for purposes of the provisions described under “—Certain covenants—Limitation on Sales of Assets and Subsidiary Stock” only, the making of a Permitted Investment or a disposition subject to the covenant described under “—Certain covenants—Limitation on Restricted Payments,”

(C) sales of accounts receivable and related assets (including contract rights) of the type specified in the definition of “Qualified Securitization Transaction” to a Securitization Entity for the fair market value thereof,

(D) a disposition of obsolete or worn out property or equipment or property or equipment that is no longer used or useful in the conduct of business of the Company and its Restricted Subsidiaries,

(E) any other disposition of assets with a fair market value, as conclusively determined by senior management of the Company in good faith, of less than $1.0 million,

(F) sales or grants of licenses to use the Company’s or any Restricted Subsidiary’s patents, trade secrets, know-how and technology to the extent that such license does not prohibit the licensor from using the patent, trade secret, know-how or technology or require the licensor to pay any fees for such use,

(G) the disposition of all or substantially all of the assets of the Company in compliance with the covenant described under the heading “—Merger and consolidation,” and

(H) the disposition of any Capital Stock or other ownership interest in or assets or property of an Unrestricted Subsidiary.

“Attributable Debt” in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended).

“Average Life” means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing:

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(1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by

(2) the sum of all such payments.

“Bank Indebtedness” means any and all amounts payable under or in respect of the Credit Agreement and any Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof.

“Board of Directors” means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of the Board of Directors of the Company.

“Business Day” means each day which is not a Legal Holiday.

“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

“Capitalized Lease Obligations” means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.

“Closing Date” means April 10, 2002.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commodity Agreement” means any commodity futures contract, commodity option or other similar agreement or arrangement entered into by the Company or any of its Subsidiaries designed to protect the Company or any of its Subsidiaries against fluctuations in the price of commodities actually at the time used in the ordinary course of business of the Company or its Subsidiaries.

“Consolidated Coverage Ratio” as of any date of determination means the ratio of:

(1) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which financial statements are publicly available ending prior to the date of such determination to

(2) Consolidated Interest Expense for such four fiscal quarters; provided, however, that:

(A) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period,

(B) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred

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under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness,

(C) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition in excess of $10.0 million, which constitutes all or substantially all of an operating unit of a business, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale),

(D) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary or is merged with and into the Company) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period, and

(E) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period.

For purposes of this definition, whenever pro forma effect is to be given to an Investment or acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. Any such pro forma calculations may include operating expense reductions for such period resulting from the acquisition which is being given pro forma effect that (a) would be permitted pursuant to Article 11 of Regulation S-X under the Securities Act or (b) have been realized or for which the steps necessary for realization have been taken or are reasonably expected to be taken within six months following any such acquisition, including, but not limited to, the execution or termination of any contracts, the termination of any personnel or the closing (or approval by the Board of Directors of any closing) of any facility, as applicable, provided that, such adjustments are set forth in an Officers’ Certificate signed by the Company’s chief financial officer and another Officer which states (i) the amount of such adjustment or adjustments, (ii) that such adjustment or adjustments are based on the reasonable good faith beliefs of the

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officers executing such Officers’ Certificate at the time of such execution and (iii) that any related Incurrence of Indebtedness is permitted pursuant to the Indentures.

If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement or Currency Agreement applicable to such Indebtedness if such Interest Rate Agreement or Currency Agreement has a remaining term as at the date of determination in excess of 12 months).

“Consolidated Interest Expense” means, for any period, the total interest expense of the Company and its Consolidated Restricted Subsidiaries plus, to the extent Incurred by the Company and its Restricted Subsidiaries in such period but not included in such interest expense:

(1) interest expense attributable to Capitalized Lease Obligations and the interest expense attributable to operating leases constituting part of a Sale/Leaseback Transaction,

(2) amortization of debt discount and debt issuance costs,

(3) capitalized interest,

(4) non-cash interest expense,

(5) commissions, discounts and other fees and charges attributable to letters of credit and bankers’ acceptance financing,

(6) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary,

(7) net costs associated with Hedging Obligations (including amortization of fees) provided, however, that if Hedging Obligations result in net benefits rather than costs, such benefits shall be credited in determining Consolidated Interest Expense unless, pursuant to GAAP, such net benefits are otherwise reflected in Consolidated Net Income,

(8) dividends and distributions declared in respect of all Disqualified Stock of the Company and dividends and distributions declared and paid in respect of all Preferred Stock of any of the Subsidiaries of the Company that is not a Note Guarantor, to the extent held by Persons other than the Company or a Wholly Owned Subsidiary,

(9) interest Incurred in connection with investments in discontinued operations and

(10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust.

Notwithstanding anything to the contrary contained herein, commissions, discounts, yield and other fees and charges Incurred in connection with any transaction pursuant to which the Company or any Subsidiary of the Company may sell, convey or otherwise transfer or grant a security interest in any accounts receivable or related assets shall be included in Consolidated Interest Expense.

“Consolidated Net Income” means, for any period, the net income (loss) of the Company and its Consolidated Subsidiaries for such period; provided, however, that there shall not be included in such Consolidated Net Income:

(1) any net income (loss) of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that:

(A) subject to the limitations contained in clauses (4), (5) and (6) below, the Company’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the

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Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to a Restricted Subsidiary, to the limitations contained in clause (3) below) and

(B) the Company’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary;

(2) other than for purposes of clauses (D) and (E) of the definition of Consolidated Coverage Ratio, any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition;

(3) any net income (or loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions or loans or intercompany advances by such Restricted Subsidiary, directly or indirectly, to the Company, except that:

(A) subject to the limitations contained in clauses (4), (5) and (6) below, the Company’s equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed, loaned or advanced by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend, distribution, loan or advance (subject, in the case of a dividend, distribution, loan or advance made to another Restricted Subsidiary, to the limitation contained in this clause) and

(B) the Company’s equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income;

(4) any gain (loss) realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person;

(5) any extraordinary gain or loss; and

(6) the cumulative effect of a change in accounting principles.

Notwithstanding the foregoing, for the purpose of the covenant described under “—Certain covenants—Limitation on Restricted Payments” only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(4)(C)(vi) thereof.

“Consolidation” means the consolidation of the amounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that “Consolidation” will not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will be accounted for as an investment. The term “Consolidated” has a correlative meaning.

“Credit Agreement” means the credit agreement dated as of the 2000 Notes Closing Date among the Company, the lenders named therein, Bankers Trust Company, as administrative agent and collateral agent, The Bank of Nova Scotia, as documentation agent, and JPMorgan Chase Bank, as syndication agent, together with related documents thereto including any guarantee agreements and security documents, as amended, modified, supplemented, restated, renewed, refunded, replaced, restructured, repaid or refinanced from time to time (including any agreement extending the maturity thereof or increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) whether with the original agents and lenders or otherwise and whether provided under the original credit agreement or other credit agreements or otherwise.

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“Currency Agreement” means with respect to any Person any foreign exchange contract, currency swap agreements or other similar agreement or arrangement to which such Person is a party or of which it is a beneficiary.

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Designated Senior Indebtedness” of the Company means

(1) the Bank Indebtedness and

(2) any other Senior Indebtedness of the Company that, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to at least $15.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as “Designated Senior Indebtedness” for purposes of the Indentures. “Designated Senior Indebtedness” of a Note Guarantor has a correlative meaning.

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which 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:

(1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,

(2) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary, provided, that any such conversion or exchange shall be deemed an issuance of Indebtedness or an issuance of Disqualified Stock, as applicable) or

(3) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to 91 days after the Stated Maturity of the Notes; provided, however, that only the portion of Capital Stock that so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed Disqualified Stock; provided, further, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” shall not constitute Disqualified Stock if the “asset sale” or “change of control” provisions applicable to such Capital Stock provide that such Person may not repurchase or redeem such Capital Stock pursuant to such provisions unless such Person has first complied with the provisions described under “—Change of control” and the provisions of the covenant described under “—Certain covenants—Limitation on Sales of Assets and Subsidiary Stock,” as applicable; and provided, further, that any class of Capital Stock of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or other payment obligations or otherwise by delivery of Capital Stock that is not Disqualified Stock, and that is not convertible, puttable or exchangeable for Disqualified Stock or Indebtedness, shall not be deemed Disqualified Stock so long as such Person satisfies its obligations with respect thereto solely by the delivery of Capital Stock that is not Disqualified Stock.

“Domestic Overdraft Facility” means an overdraft line of credit in a maximum principal amount of $10.0 million at any time outstanding.

“Domestic Subsidiary” means any Restricted Subsidiary of the Company other than a Foreign Subsidiary.

“EBITDA” for any period means the Consolidated Net Income for such period, excluding the following to the extent included in calculating such Consolidated Net Income:

(1) income tax expense of the Company and its Consolidated Restricted Subsidiaries,

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(2) Consolidated Interest Expense,

(3) depreciation expense of the Company and its Consolidated Restricted Subsidiaries,

(4) amortization expense of the Company and its Consolidated Restricted Subsidiaries (but excluding amortization expense attributable to a prepaid cash item that was paid in a prior period),

(5) other noncash charges of the Company and its Consolidated Restricted Subsidiaries (excluding any such noncash charge to the extent it represents an accrual of or reserve for cash expenditures in any future period),

(6) income or loss from discontinued operations,

(7) plant closing costs (as defined by GAAP), and

(8) noncash stock-based compensation expense.

Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and noncash charges of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income (loss) of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended, loaned or advanced to the Company by such Restricted Subsidiary without prior approval of Persons other than the Board of Directors or holders of the Company’s Capital Stock (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders.

“Equity Offering” means any public or private sale of the common stock of the Company, other than any public offering with respect to the Company’s common stock registered on Form S-8 or other issuances upon exercise of options by employees of the Company or any of its Restricted Subsidiaries.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Contribution” means net cash proceeds received by the Company from (a) contributions to its common equity capital and (b) the sale (other than to a Subsidiary of the Company or to any Company or Subsidiary management equity plan or stock option plan or any other management or employee benefit plan or agreement) of Capital Stock (other than Disqualified Stock) of the Company, in each case designated as Excluded Contributions pursuant to an Officers’ Certificate executed on the date such capital contributions are made or the date such Capital Stock is sold, as the case may be, which are excluded from the calculation set forth in clause (a)(4)(C) under “—Certain covenants—Limitation on Restricted Payments.”

“Existing Management Stockholders” means each of Richard P. Durham, Jack E. Knott, Scott K. Sorensen and Ronald G. Moffitt.

“Foreign Subsidiary” means any Restricted Subsidiary of the Company organized and conducting its principal operations outside the United States.

“Foreign Subsidiary Asset Disposition” means any direct or indirect sale, issuance, conveyance, transfer, lease, assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale/Leaseback Transaction) to any Person other than the Company or a Restricted Subsidiary of the Company of the Capital Stock of any Foreign Subsidiary or any of the property or assets of any Foreign Subsidiary.

“GAAP” means generally accepted accounting principles in the United States of America as in effect as of May 31, 2000, including those set forth in:

(1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants,

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(2) statements and pronouncements of the Financial Accounting Standards Board,

(3) such other statements by such other entities as are approved by a significant segment of the accounting profession, and

(4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC.

All ratios and computations based on GAAP contained in the Indentures shall be computed in conformity with GAAP.

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person:

(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or

(2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);

provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning. The term “Guarantor” shall mean any Person Guaranteeing any obligation.

“Hedging Obligations” of any Person means the obligations of such Person pursuant to any Commodity Agreement, Interest Rate Agreement or Currency Agreement.

“Holder” means the Person in whose name a Note is registered on the Registrar’s books.

“Incur” means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary. The term “Incurrence” when used as a noun shall have a correlative meaning.

“Indebtedness” means, with respect to any Person on any date of determination (without duplication):

(1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money;

(2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(3) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto);

(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables and other accrued liabilities arising in the ordinary course of business), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services;

(5) all Capitalized Lease Obligations and all Attributable Debt of such Person;

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(6) all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person that is not a Note Guarantor, any Preferred Stock (but excluding, in each case, any accrued dividends);

(7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of:

(A) the fair market value of such asset at such date of determination and

(B) the amount of such Indebtedness of such other Persons;

(8) to the extent not otherwise included in this definition, the net obligations under Hedging Obligations of such Person;

(9) to the extent not otherwise included, the amount then outstanding (i.e., advanced, and received by, and available for use by, such Person) under any receivables financing (as set forth in the books and records of such Person and confirmed by the agent, trustee or other representative of the institution or group providing such receivables financing); and

(10) all obligations of the type referred to in clauses (1) through (9) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee.

Notwithstanding the foregoing, “Indebtedness” shall not include unsecured indebtedness of the Company and its Restricted Subsidiaries Incurred to finance insurance premiums in a principal amount not in excess of the insurance premiums to be paid by the Company and its Restricted Subsidiaries for a three-year period beginning on the date of Incurrence of any such Indebtedness.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date.

“Intangible Assets” means goodwill, patents, trademarks and other intangibles as determined in accordance with GAAP.

“Interest Rate Agreement” means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary.

“Investment” in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property (excluding Capital Stock of the Company) to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of “Unrestricted Subsidiary” and the covenant described under “—Certain covenants—Limitation on Restricted Payments”:

(1) “Investment” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to:

(A) the Company’s “Investment” in such Subsidiary at the time of such redesignation less

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(B) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation;

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by (i) the senior management of the Company if the amount thereof is less than $2.0 million and (ii) the Board of Directors if in excess thereof; and

(3) the amount of any Investment shall be the original cost as of the date of determination of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value or writeups, write-downs or write-offs with respect to such Investments.

“Legal Holiday” means a Saturday, Sunday or other day on which banking institutions in New York State are authorized or required by law to close.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof).

“Material Subsidiary” means, at any date of determination, any Subsidiary of the Company that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company accounted for more than 10.0% of the consolidated revenues of the Company or (ii) as of the end of such fiscal year, was the owner of 10.0% of the consolidated assets of the Company, all as set forth on the most recently available consolidated financial statement of the Company and its consolidated Subsidiaries for such fiscal year prepared in conformity with GAAP.

“Net Available Cash” from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of:

(1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition,

(2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition,

(3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition,

(4) the decrease in proceeds from Qualified Securitization Transactions which results from such Asset Disposition, and

(5) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition.

“Net Cash Proceeds,” with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees and expenses actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

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“Note Guarantee” means each Guarantee of the obligations with respect to the Notes issued by a Person pursuant to the terms of the Indentures.

“Note Guarantor” means any Person that has issued a Note Guarantee.

“Officer” means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.

“Officers’ Certificate” means a certificate signed by two Officers.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.

“Permitted Business” means the design, manufacture and/or marketing of films and flexible packaging products for food, personal care, medical, retail, agricultural, industrial and other applications or any businesses that are reasonably related, ancillary or complementary thereto.

“Permitted Holders” means each of (i) JP Morgan Partners, LLC and its Affiliates, (ii) Southwest Industrial Films, LLC and its Affiliates, (iii) the Christena Karen H. Durham Trust, (iv) the Existing Management Stockholders and their Related Parties and (v) any Person acting in the capacity of an underwriter in connection with a public or private offering of the Company’s Capital Stock.

“Permitted Investment” means an Investment by the Company or any Restricted Subsidiary in:

(1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that after giving effect to such Investment the Company is still in compliance with the covenant under the heading “—Certain covenants—Limitation of Lines of Business;”

(2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that after giving effect to such Investment the Company is still in compliance with the covenant under the heading “—Certain covenants—Limitation of Lines of Business;”

(3) Temporary Cash Investments;

(4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;

(5) payroll, travel and similar advances or loans 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;

(6) loans or advances to officers, directors, consultants or employees made (a) in the ordinary course of business and not exceeding $3.0 million in any year or (b) to fund purchases of stock under the Company’s 2000 Stock Incentive Plan and any similar plans or employment arrangements;

(7) Capital Stock, obligations or other securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of a debtor;

(8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition that was made pursuant to and in compliance with the covenant described under “—Certain covenants—Limitation on Sale of Assets and Subsidiary Stock;”

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(9) any Investment by the Company or a Restricted Subsidiary in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a purchase money note or an equity interest;

(10) Hedging Obligations entered into in the ordinary course of business;

(11) endorsements of negotiable instruments and documents in the ordinary course of business;

(12) assets or securities of a Person acquired by the Company or a Restricted Subsidiary to the extent the consideration for such acquisition consists of Capital Stock (other than Disqualified Stock) of the Company;

(13) Investments in existence on the 2000 Notes Closing Date;

(14) Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time such Person merges or consolidates with the Company or any of its Restricted Subsidiaries, in either case in compliance with the Indentures, provided that such Investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such merger or consolidation;

(15) Investments in Unrestricted Subsidiaries or joint ventures not to exceed $30.0 million since the 2000 Notes Closing Date, plus (A) the aggregate net after-tax amount returned since the 2000 Notes Closing Date to the Company or any Restricted Subsidiary in cash on or with respect to any Investments made since the 2000 Notes Closing Date in Unrestricted Subsidiaries and joint ventures whether through interest payments, principal payments, dividends or other distributions or payments (including such dividends, distributions or payments made concurrently with such Investment), (B) the net after-tax cash proceeds received since the 2000 Notes Closing Date by the Company or any Restricted Subsidiary from the disposition of all or any portion of such Investments (other than to the Company or a Subsidiary of the Company) and (C) upon redesignation since the 2000 Notes Closing Date of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary; and

(16) additional Investments since the 2000 Notes Closing Date in an aggregate amount not to exceed $15.0 million.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Preferred Stock,” as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person.

“Principal” of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time.

“Public Market” means any time after:

(1) an Equity Offering has been consummated and

(2) at least 15% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act.

“Qualified Securitization Transaction” means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer pursuant to customary terms to (a) a Securitization Entity (in the

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case of a transfer by the Company or any of its Subsidiaries) and (b) any other Person (in the case of transfer by a Securitization Entity), or may grant a security interest in any accounts receivable (whether now existing or arising or acquired in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable.

“Qualified Stock” means any Capital Stock that is not Disqualified Stock.

“Recapitalization Agreement” means the Recapitalization Agreement dated as of March 31, 2000, between the Company, the selling stockholders listed therein and Chase Domestic Investments, L.L.C., as amended to and in effect at the 2000 Notes Closing Date.

“Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness exchange or replacement for, such Indebtedness. “Refinanced” and “Refinancing” shall have correlative meanings.

“Refinancing Indebtedness” means Indebtedness that is Incurred to Refinance any Indebtedness of the Company or any Restricted Subsidiary existing on the 2000 Notes Closing Date or Incurred in compliance with the 2000 Notes Indenture (if incurred prior to the Closing Date) or, if incurred on or after the Closing Date, the Indenture (including Indebtedness of the Company or a Restricted Subsidiary that Refinances Refinancing Indebtedness); provided, however, that:

(1) the Refinancing Indebtedness (if Refinancing any Indebtedness existing on the 2000 Notes Closing Date) has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced,

(2) the Refinancing Indebtedness (if Refinancing any Indebtedness existing on the 2000 Notes Closing Date) has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced,

(3) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) (whether in U.S. dollars or a foreign currency) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) (in U.S. dollars or such foreign currency, as applicable) then outstanding (plus, without duplication, accrued interest, premium and defeasance costs required to be paid under the terms of the Indebtedness being Refinanced and the fees, expenses, discounts, commissions and other issuance costs incurred in connection with the Refinancing Indebtedness) of the Indebtedness being Refinanced and

(4) if the Indebtedness being Refinanced is subordinated in right of payment to the Notes or a Note Guarantee of a Note Guarantor, such Refinancing Indebtedness is subordinated in right of payment to the Notes or the Note Guarantee at least to the same extent as the Indebtedness being Refinanced;

provided further, however, that Refinancing Indebtedness shall not include:

(A) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor that Refinances Indebtedness of the Company or

(B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.

“Related Parties” means with respect to a Person (a) that is a natural person (1) any spouse, parent or lineal descendant (including adopted children) of such Person or (2) the estate of such Person during any period in which such estate holds Capital Stock of the Company for the benefit of any person referred to

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in clause (a)(1) and (b) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially owning an interest of more than 50% of which consist of such Person and/or such other Persons referred to in the immediately preceding clause (a).

“Representative” means the trustee, agent or representative (if any) for an issue of Senior Indebtedness.

“Restricted Investment” means any Investment other than a Permitted Investment.

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“Sale/Leaseback Transaction” means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than (a) leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries or (b) any arrangement whereby the transfer involves fixed or capital assets and is consummated within 120 days after the date the Company or a Restricted Subsidiary acquires or finishes construction of such fixed or capital assets.

“SEC” means the Securities and Exchange Commission.

“Secured Indebtedness” means any Indebtedness of the Company secured by a Lien. “Secured Indebtedness” of a Note Guarantor has a correlative meaning.

“Securitization Entity” means a Wholly Owned Subsidiary of the Company (or another Person in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of the Company (as provided below) as a Securitization Entity (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any Subsidiary of the Company (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity and (c) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee, by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing conditions.

“Senior Subordinated Indebtedness” of the Company means the Notes, the 2000 Notes, the 2002 Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. “Senior Subordinated Indebtedness” of a Note Guarantor has a correlative meaning.

“Significant Subsidiary” means any Restricted Subsidiary that would be a “Significant Subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.

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“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are reasonably customary in an accounts receivable securitization transaction.

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).

“Stockholders Agreement” means the Stockholders Agreement among the Company and the holders of the Company’s Capital Stock party thereto, as in effect at the 2000 Notes Closing Date as amended from time to time, so long as the Permitted Holders own a majority of the Capital Stock subject to such agreement.

“Subordinated Obligation” means any Indebtedness of the Company (whether outstanding on the Closing Date or thereafter Incurred) that is subordinate or junior in right of payment to the Notes pursuant to a written agreement. “Subordinated Obligation” of a Note Guarantor has a correlative meaning.

“Subsidiary” of any Person means any corporation, association, partnership, limited liability company or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, representatives, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by:

(1) such Person,

(2) such Person and one or more Subsidiaries of such Person or

(3) one or more Subsidiaries of such Person.

“Tangible Assets” means Total Assets less Intangible Assets.

“Temporary Cash Investments” means any of the following:

(1) any investment in direct obligations of the United States of America or any agency or instrumentality thereof or obligations Guaranteed or insured by the United States of America or any agency or instrumentality thereof,

(2) investments in checking accounts, savings accounts, time deposit accounts, certificates of deposit, bankers’ acceptances and money market deposits maturing within 360 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act),

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above,

(4) investments in commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of “P-1” (or higher) according to Moody’s Investors Service, Inc. or “A-1” (or higher) according to Standard and Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. (“S&P”),

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(5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P or “A” by Moody’s Investors Service, Inc., and

(6) investments in money market funds that invest substantially all of their assets in securities of the types described in clauses (1) through (5) above.

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the Closing Date.

“Total Assets” means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company.

“Trade Payables” means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services.

“Trustee” means the party named as such in the Indentures until a successor replaces it and, thereafter, means the successor.

“Trust Officer” means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters.

“Unrestricted Subsidiary” means:

(1) Pliant Investment, Inc. and any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company), to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock in or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either:

(A) the Subsidiary to be so designated at the time of designation has total Consolidated assets of $1,000 or less or

(B) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled “—Certain covenants—Limitation on Restricted Payments.”

The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation:

(x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under “—Certain covenants—Limitation on Indebtedness” and

(y) no Default shall have occurred and be continuing.

Any such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality

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thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer’s option.

“Voting Stock” of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.

“Wholly Owned Subsidiary” means a Restricted Subsidiary of the Company all the Capital Stock of which (other than directors’ qualifying Capital Stock) is owned by the Company or another Wholly Owned Subsidiary.

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Book-entry; delivery and form

The Notes are represented by one or more permanent global notes in definitive, fully registered book-entry form, without interest coupons, that have been deposited with, or on behalf of, DTC and registered in the name of DTC or its nominee, on behalf of the acquirers of Notes represented thereby for credit to the respective accounts of the acquirers, or to such other accounts as they may direct, at DTC.

Except as set forth below, the global notes may be transferred, in whole and not in part, solely to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for Notes in physical, certificated form except in the limited circumstances described below.

All interests in the global notes may be subject to the procedures and requirements of DTC.

Certain book-entry procedures for the global notes

The descriptions of the operations and procedures of DTC set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC and are subject to change by DTC from time to time. We will take no responsibility for these operations or procedures, and investors are urged to contact DTC or its participants directly to discuss these matters.

DTC has advised us that it is

(1) a limited purpose trust company organized under the laws of the State of New York,

(2) a “banking organization” within the meaning of the New York Banking Law,

(3) a member of the Federal Reserve System,

(4) a “clearing corporation” within the meaning of the Uniform Commercial Code, as amended, and

(5) a “clearing agency” registered pursuant to Section 17A of the Exchange Act.

DTC was created to hold securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC’s participants include securities brokers and dealers, banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants.

We expect that pursuant to procedures established by DTC ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of participants) and the records of participants and the indirect participants (with respect to the interests of persons other than participants).

The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the Notes represented by a global note to such persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an interest in Notes represented by a global note to pledge or transfer such interest to persons or entities that do not participate in DTC’s system, or to otherwise take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest.

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So long as DTC or its nominee is the registered owner of a global note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by the global note for all purposes under the indentures. Except as provided below, owners of beneficial interests in a global note

•

will not be entitled to have Notes represented by such global note registered in their names,

•

will not receive or be entitled to receive physical delivery of certificated Notes, and

•

will not be considered the owners or holders thereof under the indentures for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee thereunder.

Accordingly, each holder owning a beneficial interest in a global note must rely on the procedures of DTC and, if such holder is not a participant or an indirect participant, on the procedures of the participant through which such holder owns its interest, to exercise any rights of a holder of Notes under the indentures or such global note. We understand that under existing industry practice, in the event that we request any action of holders of Notes, or a holder that is an owner of a beneficial interest in a global note desires to take any action that DTC, as the holder of such global note, is entitled to take, DTC would authorize the participants to take such action and the participants would authorize holders owning through such participants to take such action or would otherwise act upon the instruction of such holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to such Notes.

Payments with respect to the principal of, and premium, if any, and interest on, any Notes represented by a global note registered in the name of DTC or its nominee on the applicable record date will be payable by the trustee to or at the direction of DTC or its nominee in its capacity as the registered holder of the global note representing the Notes under the indentures. Under the terms of the indentures, we and the trustee may treat the persons in whose names the Notes, including the global notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the trustee has or will have any responsibility or liability for the payment of such amounts to owners of beneficial interests in a global note (including principal, premium, if any, liquidated damages, if any, and interest). Payments by the participants and the indirect participants to the owners of beneficial interests in a global note will be governed by standing instructions and customary industry practice and will be the responsibility of the participants or the indirect participants and DTC.

Transfers between participants in DTC will be effected in accordance with DTC’s procedures, and will be settled in same-day funds.

Certificated notes

If,

•

we notify the trustee in writing that DTC is no longer willing or able to act as a depositary or DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days of such notice or cessation,

•

we, at our option, notify the trustee in writing that we elect to cause the issuance of Notes in definitive form under the indentures or

•

upon the occurrence of certain other events as provided in the indentures,

then, upon surrender by DTC of the global notes, certificated notes will be issued to each person that DTC identifies as the beneficial owner of the notes represented by the global notes. Upon any such issuance, the trustee is required to register such certificated notes in the name of such person or persons (or the nominee of any thereof) and cause the same to be delivered thereto.

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Neither we nor the trustee shall be liable for any delay by DTC or any participant or indirect participant in identifying the beneficial owners of the related Notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes.

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Plan of distribution

This prospectus has been prepared for use by J.P. Morgan Securities Inc. in connection with offers and sales of the Notes in market-making transactions effected from time to time. J.P. Morgan Securities Inc. may act as a principal or agent in these transactions and may receive compensation in the form of discounts and commissions. These sales will be made at prices related to prevailing market prices at the time of sale. We will not receive any of the proceeds of these sales. We have agreed to indemnify J.P. Morgan Securities Inc. against certain liabilities, including liabilities under the Securities Act, and to contribute payments which J.P. Morgan Securities Inc. might be required to make in respect thereof.

As of June 30, 2003, affiliates of J.P. Morgan Securities Inc., beneficially owned approximately 55% of our outstanding common stock, 75% of our preferred stock warrants to purchase common stock and 59% of our outstanding preferred stock, subject to certain preemptive rights with respect to 10,000 shares of preferred stock issued on March 25, 2003. In addition, certain of our directors are employed by an affiliate of J.P. Morgan Securities Inc. See “Security ownership of certain beneficial owners and management” and “Certain relationships and related transactions — Transactions between us and new stockholders — Credit facilities and note offerings.”

We have been advised by J.P. Morgan Securities Inc. that, subject to applicable laws and regulations, J.P. Morgan Securities Inc. currently intends to continue to make a market in the Notes. However, J.P. Morgan Securities Inc. is not obligated to do so and any such market-making may be interrupted or discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. There can be no assurance that an active trading market will develop or be sustained. See “Risk factors.”

Legal matters

The validity of the Notes and the Note Guarantees has been passed upon for us by O’Melveny & Myers LLP (formerly, O’Sullivan LLP), New York, New York.

Experts

The consolidated financial statements and financial statement schedule of Pliant Corporation as of and for the year ended December 31, 2002 and the consolidated financial statements of Decora Industries, Inc. as of and for the year ended March 31, 2002 appearing in this prospectus have been audited by Ernst & Young LLP, independent public accountants, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements and financial statement schedule of Pliant Corporation included in this prospectus as of December 31, 2001 and for the two years then ended have been audited by Arthur Andersen LLP, independent public accountants, as set forth in its report with respect thereto appearing herein, and are included herein in reliance upon the authority of said firm as experts in giving said report.

After completing its audit and issuing its report, Arthur Andersen was convicted of obstruction of justice for activities relating to its previous work for Enron Corp. In May 2002 both our audit committee and our board of directors approved the appointment of Ernst & Young LLP as our independent public accountants to audit our financial statements for fiscal year 2002. Ernst & Young replaced Arthur Andersen, which had served as our independent auditors since 1997. We had no disagreements required to be disclosed pursuant to Item 304 of Regulation S-K with Arthur Andersen on any matter of accounting principle or practice, financial statement disclosure or auditing scope or procedure.

125

two years then ended, as required by Section 7 of the Securities Act of 1933. Accordingly, we have dispensed with the requirement to file such consent in reliance upon Rule 437a of the Securities Act. Because Arthur Andersen has not consented to the inclusion of its report in this prospectus, you may have no effective remedy against Arthur Andersen under Section 11 of the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen, or any omissions to state a material fact required to be stated therein.

The consolidated financial statements of Decora Industries, Inc. as of March 31, 2001 and for the two years then ended included in this Prospectus have been so included in reliance on the reports (which contain an explanatory paragraph relating to the ability of Decora Industries, Inc. to continue as a going concern as described in Note 1 to the financial statements of Decora Industries, Inc.) of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.

Where you can find more information

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the “SEC” or the “Commission”). You can inspect and copy these materials at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of these materials can also be obtained by mail at prescribed rates from the SEC’s Public Reference Room at the above address. You can obtain information about the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC’s Internet site is http://www.sec.gov.

We provide copies to the holders of the Notes of the annual, quarterly and current reports that we file with the SEC. The annual reports contain financial information that has been examined and reported on, with an opinion expressed, by an independent public accountant.

We have filed a Registration Statement on Form S-1 to register with the Commission offers and sales of the Notes made by J.P. Morgan Securities Inc. in market-making transactions effected from time to time. This prospectus is part of that Registration Statement. As allowed by the Commission’s rules, this prospectus does not contain all of the information you can find in the Registration Statement or the exhibits to the Registration Statement.

We have not authorized anyone to give you any information or to make any representations about us or the transactions we discuss in this prospectus other than those contained in this prospectus. If you are given any information or representations about these matters that is not discussed in this prospectus, you must not rely on that information. This prospectus is not an offer to sell or a solicitation of an offer to buy securities anywhere or to anyone where or to whom we are not permitted to offer or sell securities under applicable law. Subject to our obligation to amend or supplement this prospectus as required by law and the rules and regulations of the Commission, the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus.

126

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES


Pliant Corporation and Subsidiaries Financial Statements and Financial Statement Schedule:

As of December 31, 2002 and 2001 and for the three years ended December 31, 2002, 2001 and 2000:

Report of Independent Public Accountants		F-3

Report of Independent Public Accountants		F-4

Consolidated Balance Sheets as of December 31, 2002 and 2001		F-5

Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000		F-6

Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2002, 2001 and 2000		F-7

Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000		F-9

Notes to Consolidated Financial Statements		F-11

Schedule II – Valuation and Qualifying Accounts		F-44

As of March 31, 2003 and December 31, 2002 and for the three months ended March 31, 2003 and 2002 (unaudited):

Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002		F-45

Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002		F-46

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002		F-47

Condensed Consolidated Statement of Stockholders’ Deficit for the three months ended March 31, 2003		F-48

Notes to Unaudited Condensed Consolidated Financial Statements		F-49

Decora Industries, Inc. and Subsidiaries Financial Statements:

As of and for the year ended March 31, 2002:

Report of Independent Auditors		F-60

Consolidated Balance Sheet as of March 31, 2002		F-61

Consolidated Statement of Operations for the year ended March 31, 2002		F-62

Consolidated Statement of Shareholders’ Deficit for the year ended March 31, 2002		F-63

Consolidated Statement of Cash Flows for the year ended March 31, 2002		F-64

Notes to Consolidated Financial Statements		F-65

As of and for the year ended March 31, 2001:

Report of Independent Accountants		F-77

F-1


Consolidated Balance Sheet as of March 31, 2001		F-78

Consolidated Statement of Operations for the year ended March 31, 2001		F-79

Consolidated Statement of Changes in Shareholders’ Deficit for the year ended March 31, 2001		F-80

Consolidated Statement of Cash Flows for the year ended March 31, 2001		F-81

Notes to Financial Statements		F-82

For the year ended March 31, 2000:

Report of Independent Accountants		F-92

Consolidated Statement of Income for the year ended March 31, 2000		F-93

Consolidated Statement of Cash Flows for the year ended March 31, 2000		F-94

Notes to Consolidated Financial Statements		F-95

Pliant Corporation Unaudited Pro Forma Consolidated Financial Statement:

For the year ended December 31, 2002:

Introduction to Unaudited Pro Forma Consolidated Financial Statement		F-106

Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2002		F-107

Notes to Unaudited Pro Forma Consolidated Financial Statement		F-108

F-2

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of

Pliant Corporation

We have audited the accompanying consolidated balance sheet of Pliant Corporation as of December 31, 2002, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. Our audit also included the financial statement schedule for the year ended December 31, 2002 listed in the Index at page F-1. These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audit. The financial statements and schedule of Pliant Corporation as of December 31, 2001 and for the two years then ended were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those statements and schedule in their report dated January 28, 2002, before the restatement and inclusion of additional disclosures referred to in the last paragraph of this report.

We conducted our audit in accordance with auditing standards generally accepted in the 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements and schedule referred to above present fairly, in all material respects, the consolidated financial position of Pliant Corporation as of December 31, 2002, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

As discussed in Notes 1 and 5 to the financial statements, in the year ended December 31, 2002 the Company changed its method of accounting for goodwill.

As discussed above, the financial statements of Pliant Corporation as of December 31, 2001 and for the two years in the period then ended were audited by other auditors who have ceased operations. As described in Note 5, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, (SFAS 142) Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to the disclosures in Note 5 with respect to 2001 and 2000 included (a) agreeing the previously reported net income (loss) to the previously issued financial statements and the adjustments to reported net income (loss) representing amortization expense (including any related tax effects) recognized in those periods related to goodwill to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of adjusted net income (loss) to reported net income (loss). In our opinion the disclosures relating to adjusted net income (loss) for 2001 and 2000 in Note 5 are appropriate. Also, as described in Note 14, the Company changed the composition of its reportable segments in 2003, and the amounts in the 2001 and 2000 financial statements relating to reportable segments have been restated to conform to the 2003 composition of reportable segments. We audited the adjustments that were applied to restate the disclosures for reportable segments reflected in the 2001 and 2000 financial statements. Our procedures included (a) agreeing the adjusted amounts of segment net sales, segment profit (loss), segment depreciation and amortization, segment interest expense, segment capital expenditures and segment total assets to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliations of segment amounts to the consolidated financial statements. In our opinion, such adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review or apply any procedures to the 2001 or 2000 financial statements of the Company other than with respect to such SFAS 142 transition disclosures and segment adjustments, accordingly, we do not express an opinion or any other form of assurance on the 2001 or 2000 financial statements taken as a whole.

/s/ Ernst & Young LLP

Chicago, Illinois

February 28, 2003, except for Note 6, as to

which the date is March 25, 2003, and

Notes 5 and 14, as to which the date is May 7, 2003

F-3

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Pliant Corporation:

We have audited the accompanying consolidated balance sheets of Pliant Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2001. These financial statements and schedule referred to below 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 generally accepted in the 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pliant Corporation and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Chicago, Illinois

January 28, 2002

This report is a copy of the previously issued report covering 2000 and 2001. The predecessor auditor has ceased operations and has not reissued their report.

F-4

PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2002 and 2001 (Dollars in Thousands, Except per Share Data)

	2002			2001
ASSETS
CURRENT ASSETS :
Cash and cash equivalents	$	1,635		$	4,818
Receivables:
Trade accounts, net of allowances of $5,583 and $2,438, respectively		104,157			111,768
Other		14,866			13,668
Inventories		98,022			83,948
Prepaid expenses and other		4,149			3,026
Income taxes receivable		2,368			985
Deferred income taxes		8,182			2,563

Total current assets		233,379			220,776
PLANT AND EQUIPMENT, net:		350,479			369,324
GOODWILL		203,997			204,426
OTHER INTANGIBLE ASSETS, net:		27,034			26,773
OTHER ASSETS		38,314			30,384

Total assets	$	853,203		$	851,683

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
CURRENT LIABILITIES:
Trade accounts payable	$	113,988		$	101,508
Accrued liabilities:
Interest payable		16,175			10,392
Customer rebates		10,439			7,571
Other		32,263			25,134
Current portion of long-term debt		14,745			17,767

Total current liabilities		187,610			162,372
LONG-TERM DEBT, net of current portion		721,636			695,556
OTHER LIABILITIES		26,977			18,944
DEFERRED INCOME TAXES		23,836			26,156

Total liabilities		960,059			903,028

MINORITY INTEREST		192			271
COMMITMENTS AND CONTINGENCIES (Notes 7 and 12)		—			—
REDEEMABLE STOCK:
Preferred stock – 200,000 shares authorized, 130,973 shares outstanding as of December 31, 2002, and 2001 and designated as Series A, no par value with a redemption and liquidation value of $1,000 per share plus accumulated dividends		150,816			126,149
Common stock – 60,000 shares authorized, no par value; 34,240 shares outstanding as of December 31, 2002 and 53,996 outstanding as of December 31, 2001 net of related stockholders’ notes receivable of $6,754 at December 31, 2002 and $12,720 at December 31, 2001		13,008			16,778

Total redeemable stock		163,824			142,927

STOCKHOLDERS’ DEFICIT:
Common stock – no par value; 10,000,000 shares authorized, 542,638 and 542,571 shares outstanding as of December 31, 2002 and December 31, 2001, respectively		103,376			103,362
Warrants to purchase common stock		38,676			38,715
Accumulated deficit		(394,420	)		(326,356	)
Stockholders’ notes receivable		(660	)		(616	)
Accumulated other comprehensive loss		(17,844	)		(9,648	)

Total stockholders’ deficit		(270,872	)		(194,543	)

Total liabilities and stockholders’ deficit	$	853,203		$	851,683

See notes to consolidated financial statements.

F-5

PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2002, 2001 and 2000 (Dollars in Thousands)

	2002		2001		2000
NET SALES	$	879,197	$	840,360	$	843,797
COST OF SALES		714,463		665,092		696,716

Gross profit		164,734		175,268		147,081

OPERATING EXPENSES:

UNIPLAST US INC S-1/A