I was laid off in 01-07. I received my employee stock option plan Employee Cash Bal Ret Plan which I cashed out and something from Fidelity Onvestments which I also cashed out. They were not IRA's. The reason I cashed them out was to pay my COBRA and to start my own consulting business. In 09-07 I took a full time position. Can I reduce this to 0% on either one or both?
The criteria defined for this seems that I meet criteria number 7.
Thank you!

What do you mean by "criteria number 7"? Did you receive a 1099-R form for these distributions, and if so, what reason code do they show?

The 10% penalty can not be forgiven unless you meet specific criteria. If you are under 55 years of age, are not disabled , and aren't using this money because of very high medical bills (> 7.5% of iincome) then you owe the 10% penalty.