PLIANT CORPORATION 2005 MANAGEMENT INCENTIVE COMPENSATION PLAN

 

 

                                                                    Exhibit 10.1

 

                               PLIANT CORPORATION

                   2005 MANAGEMENT INCENTIVE COMPENSATION PLAN

 

GENERAL

 

     1.1  PURPOSE.  The  purpose  of  the  Pliant  Corporation  2005  Management

Incentive  Compensation  Plan (the  "Plan") is to advance the  interests  of the

shareholders  of Pliant  Corporation  ("Pliant") by providing  performance-based

incentives to eligible management associates of Pliant.

 

     1.2 EFFECTIVE  DATE.  The Plan shall be effective for the Incentive  Period

beginning January 1, 2005.

 

     1.3 PLAN NOT FUNDED.  Incentive  Plan Awards  shall be made solely from the

general  assets  of Pliant or its  wholly-owned  subsidiaries,  as the Board may

determine in its sole  discretion.  To the extent any person acquires a right to

receive  payments  under the Plan, the right is no greater than the right of any

other unsecured general creditor.

 

DEFINITIONS

 

     2.1 "BOARD" means the Board of Directors of Pliant.

 

     2.2 "COMPANY" means Pliant, its predecessors and affiliates.

 

     2.3 "CHANGE OF CONTROL" means a transaction pursuant to which a majority of

the capital stock or assets of Pliant are sold.

 

     2.4  "EMPLOYMENT  AGREEMENT"  means  any  applicable  employment  agreement

entered into between Participant and Pliant or any affiliate of Pliant.

 

     2.5 "INCENTIVE PERCENTAGE" means the percentage amount determined by adding

the  Organizational  Goals  Incentive  Percentage  for a Participant  determined

pursuant  to  EXHIBIT  A and  the  Personal  Goals  Incentive  Percentage  for a

Participant  determined pursuant to EXHIBIT B, provided,  however, the Board may

establish  different  Incentive  Percentages  for  individual   Participants  or

different  classes  of  Participants,  and/or  the  achievement  levels  of  the

Performance Goals.

 

     2.6 "INCENTIVE  PERIOD" means the twelve month period  beginning on January

1, 2005 and ending on December 31, 2005.

 

     2.7 "INCENTIVE PLAN AWARD" means the incentive  compensation  award granted

under  the Plan  which is  contingent  and  based  upon  the  attainment  of the

Performance Goals with respect to the Incentive Period.

 

     2.8.  "LONG TERM  INCENTIVE  PLAN"  means the 2004 MIP Long Term  Incentive

Plan.

 

     2.9   "NONCOMPETITION   AGREEMENT"  means  any  applicable   noncompetition

agreement or similar covenant entered into between Participant and Pliant.

 

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     2.10  "PARTICIPANT"  means a  management  employee  of the  Company  or its

affiliates participating in the Plan as provided in Section 3.1 hereof.

 

     2.11  "PERFORMANCE  GOALS" means the performance  goals  established by the

Board for the Incentive  Period.  The Performance  goals shall be based upon the

overall  EBITDA of the Company during the Incentive  Period,  and may differ for

individual and/or different classes of Participants. Additionally, the Board may

establish  such  other  subjective  or  objective  goals,  including  individual

Performance Goals,  which it deems appropriate.  The determination of EBITDA and

other  Performance  Goal measures  shall be based upon  components  and criteria

established from time to time by the Board in its sole and absolute  discretion,

and  the  Board's  determination  regarding  these  items  shall  be  final  and

conclusive.

 

PARTICIPATION

 

     3.1.  ELIGIBILITY.  Associates  eligible to  participate  in the Plan shall

consist of  officers  and other key  management  personnel  of the  Company  and

certain of its  subsidiaries  as the Board  determines.  At any time,  including

during  the  Incentive  Period  while the Plan is in  effect,  the Board may add

additional  individuals or classes of individuals  for or delete  individuals or

classes of individuals from participation in the Plan as it deems appropriate.

 

INCENTIVE PLAN AWARDS

 

     4.1.  DETERMINATION  OF INCENTIVE  PLAN AWARDS.  The Board shall,  promptly

after the date on which the necessary financial, individual or other information

for the Incentive Period becomes available with a desired  determination date of

January 15, 2006,  certify whether the Performance  Goals have been attained for

the Incentive  Period.  If the Performance  Goals have been attained,  the Board

shall  certify  the  amount  of  the  Incentive   Plan  Award  payable  to  each

Participant.  Any such  determination by the Board shall be final and conclusive

on all parties,  but shall be based on such  objective  information or financial

data as is relevant to the Performance  Goals.  Performance  Goals shall, to the

extent applicable,  be based upon generally accepted accounting principles.  The

Board may rely  conclusively on any such  information  provided by the Company's

certified public accountants.

 

     4.2. ELIGIBILITY AND AMOUNT OF INCENTIVE PLAN AWARD .

 

     (a) To be eligible for payment of any Incentive Plan Award, the Participant

must satisfy each of the following  conditions:  (i) be actively employed by the

Company or a Pliant  affiliate  during the  Incentive  Period to which the award

pertains,  as well as on the date of payment of the award;  (ii) have  performed

the  Participant's  duties to the  satisfaction  of the  Board;  (iii)  have not

engaged in any act deemed by the Board to be inimical to the best  interests  of

the  Company or any  affiliate;  (iv)  otherwise  complied  with the  applicable

employment  policies at all times prior to the date the Incentive  Plan Award is

actually   paid;   and  (v)  not  breached  any  provision  of  this  Plan,  any

Noncompetition  Agreement or any Employment  Agreement.  No Incentive Plan Award

shall  be paid  to any  Participant  who  does  not  satisfy  each of the  above

conditions.  In the event of a  Participant's  death,  the Incentive  Plan Award

shall be prorated  based upon the number of full payroll  periods  worked during

such Incentive Period when such Participant's death occurs.

 

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     (b) The  Incentive  Plan  Award  shall be  determined  by  multiplying  the

Participant's aggregate base salary during the Incentive Period by the Incentive

Percentage  determined  pursuant to EXHIBIT A and EXHIBIT B. The Incentive  Plan

Awards shall be subject to a resin pricing  adjustment  and a currency  exchange

adjustment  determined  by the  Board  and  shall  be  self-funding  at  100% of

Organizational Goals and above.

 

     4.3 PAYMENT OF AWARD.  The Incentive  Plan Award for the  Incentive  Period

shall be paid to a participant after  determination of the Incentive Plan Awards

pursuant to SECTION  4.1 hereof,  with a target pay date of January 31, 2006 and

shall be based upon the level of achievement of the Organizational Goals for the

Incentive Period pursuant to EXHIBIT A and achievement of the Personal Goals for

the  Incentive  Period  pursuant to EXHIBIT B. In  addition,  an amount equal to

one-half  (1/2) of any Incentive  Plan Award for the  Incentive  Period for each

Participant  will be  added to the  long  term  incentive  plan  award  for such

Participant pursuant to the Long Term Incentive Plan.

 

     4.4 CHANGE OF CONTROL.  It is the intent of the Plan that in the event of a

successful Change of Control during the Incentive Period, (i) all Incentive Plan

Awards will be determined based upon the achievement of Organizational Goals and

Personal Goals for the portion of the Incentive  Period  beginning on January 1,

2005 and ending on the date immediately preceding the closing date of any Change

of Control transaction,  (ii) such partial Incentive Plan Awards will be paid on

the closing date of any such Change of Control transaction and (iii) immediately

following  the payment of such partial  Incentive  Plan  Awards,  this Plan will

terminate and be of no further force and effect.

 

ADMINISTRATION

 

     5.1 ADMINISTRATION. The Plan shall be administered by the Board. Subject to

the provisions of the Plan, the Board shall have full discretionary authority to

administer  and interpret  the Plan, to exercise all powers either  specifically

granted  to  it  under  the  Plan  or as  are  necessary  or  advisable  in  the

administration  of  the  Plan,  to  prescribe,   amend  and  rescind  rules  and

regulations relating to the Plan, and to make all other determinations necessary

or advisable for the  administration  of the Plan, all of which shall be binding

on all persons,  including the Company,  its affiliates and the Participants (or

any person claiming any rights under the Plan from or through any  Participant).

A majority  of the Board  shall  constitute  a quorum,  and the Board  shall act

pursuant to a majority vote or by unanimous  written  consent.  No member of the

Board or the Board shall be liable for any action taken or determination made in

good faith with respect to the Plan or any Incentive Plan Award paid hereunder.

 

     5.2   DELEGATION.   The  Board  may  delegate  its   responsibilities   for

administering the Plan to one or more persons as the Board deems necessary.

 

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PARTICIPANT COVENANTS

 

     6.1 Each  Participant,  as a condition to  participation in the Plan and in

consideration  of Participant's  continued  employment by the Company and/or its

affiliates,  agrees that for a period of time beginning on the date  Participant

executes a copy of the Plan and continuing for a period ending on the date which

is the  earlier  of (i) one (1) year  after  the  termination  of  Participant's

employment  with the  Company,  (ii) the  closing  date of any Change of Control

transaction, or (iii) the termination of Participant's employment by the Company

for any reason other than a breach of this Plan or any Noncompetition Agreement,

such Particip