Exhibit 10.1

 

AMENDED AND RESTATED

POLYMER GROUP, INC.

SHORT-TERM INCENTIVE COMPENSATION PLAN

 

1.0      Establishment, Objectives, and Duration

 

1.1   Establishment of the Plan.   Polymer Group, Inc., a Delaware corporation
(“PGI” or the “Company”), hereby establishes an incentive compensation plan to
be known as the “Polymer Group, Inc. Short-Term Incentive Compensation Plan”
(the “Plan”), as set forth herein and as it may be amended from time to time.
The Plan shall become effective as of the date the Company’s shareholders first
approve the Plan (the “Effective Date”), and shall remain in effect as provided
in Section 1.3 hereof.

 

1.2   Plan Objectives.

 

1.2.1   To provide annual incentive compensation to key employees of the Company
and its operating units by directly linking financial rewards to corporate
performance and increases in shareholder value.

 

1.2.2   To provide competitive levels of compensation to enable the Company to
attract and retain employees who are expected to be able to exert a positive
impact on the Company’s financial results.

 

1.2.3   To encourage global teamwork and cooperation in the achievement of
Company goals.

 

1.3   Duration of the Plan.   The Plan shall commence on the Effective Date and
shall remain in effect, subject to the right of the Committee to amend or
terminate the Plan at any time pursuant to Article 10 hereof, until the close of
business on the date of the Company’s annual meeting of shareholders in the year
2015, at which time the right to grant Awards under the Plan shall terminate.

 

2.0      Definitions

 

2.1   “Award” means an award described in Article 5 hereof.

 

2.2   “Award Pool” means, with respect to a Plan Year, an amount determined by
the Board.

 

2.3   “Board” or “Board of Directors” means the Board of Directors of the
Company.

 

2.4   “Cause” means the occurrence of one or more of the following events:
(i) conviction of a felony or any crime or offense lesser than a felony
involving the property of the Company or any of its Subsidiaries; or (ii) a
breach of Employee’s duty of loyalty to the Company or any of its Subsidiaries;
or (iii) the commission by Employee of a felony, a crime involving moral
turpitude or other act or omission causing material harm to the standing and
reputation of the Company and its Subsidiaries; or (iv) reporting to work under
the influence of alcohol or illegal drugs, the use of illegal drugs (whether or
not at the workplace) or other repeated conduct causing the Company or any of it
Subsidiaries substantial public disgrace or disrepute or economic harm; or
(v) any act or omission aiding or abetting a competitor, supplier or customer of
the Company or any of its Subsidiaries to the material disadvantage or detriment
of the Company and its Subsidiaries.

 

2.5   “Change of Control” means the occurrence of one of the following events:

 

(i)    if any “person” or “group” as those terms are used in Sections 13(d) and
14(d) of the Exchange Act or any successors thereto, other than an Exempt
Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act or any successor thereto), directly or indirectly, of securities of
the Company representing 50% or more of the combined voting power of the
Company’s then outstanding securities, other than an acquisition by an Exempt
Person; or

 

(ii)    during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new directors whose
election by the Board or nomination for election by the Company’s stockholders
was approved by at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or

 

(iii)  the consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation (A) which would result
in all or a portion of the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining

 

--------------------------------------------------------------------------------

 

outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation or (B) by which the corporate existence of the Company is not
affected and following which the Company’s chief executive officer and directors
retain their positions with the Company (and constitute at least a majority of
the Board); or

 

(iv)  the consummation of a plan of complete liquidation of the Company or
consummation of the sale or disposition by the Company of all or substantially
all the Company’s assets, other than a sale to an Exempt Person.

 

2.6   “Code” means the Internal Revenue Code of 1986, as amended from time to
time.

 

2.7   “Committee” means the Compensation Committee of the Board or any other
committee appointed by the Board to administer the Plan and Awards to
Participants hereunder, as specified in Article 3 hereof.

 

2.8   “Company” means Polymer Group, Inc., a Delaware corporation, and any
successor thereto as provided in Article 11 hereof.

 

2.9   “Directors” means any individual who is a member of the Board.

 

2.10 “Effective Date” shall have the meaning ascribed to such term in
Section 1.1 hereof.

 

2.11 “Employee” means any employee of the Company or of a Subsidiary.

 

2.12 “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute.

 

2.13 “Exempt Person” means (i) MatlinPatterson Global Opportunities Fund L.P.,
MatlinPatterson Global Opportunities Partners, L.P., MatlinPatterson Global
Opportunities Partners B, L.P., Matlin Patterson LLC, MatlinPatterson Asset
Management LLC, MatlinPatterson Global Advisers LLC, MatlinPatterson Global
Opportunities Partners(Bermuda), L.P., MatlinPatterson Global Partners LLC and
any of their respective affiliated entities, (ii) any person, entity or group
under the control of any party included in clause (i), or (iii) any employee
benefit plan of the Company or a trustee or other administrator or fiduciary
holding securities under an employee benefit plan of the Company.

 

2.14 “Named Executive Officers” means the Chief Executive Officer and the four
most highly compensated executive officers of the Company other than the Chief
Executive Officer as determined by the Company for purposes of Item 402 of
Regulation SK.

 

2.15 “Participant” means a key Employee who has been selected to receive an
Award or who holds an outstanding Award.

 

2.16 “Payment Date” shall have the meaning ascribed to such term in
Section 5.5.4 hereof.

 

2.17 “Performance-Based Exception” means the performance-based exception from
the tax deductibility limitation imposed by Code Section 162(m), as set forth in
Code Section 162(m)(4)(C).

 

2.18 “Plan” means the Polymer Group, Inc. Short-Term Incentive Compensation
Plan, as set forth herein and as it may be amended from time to time.

 

2.19 “Plan Year” means the Company’s fiscal year.

 

2.20 “Subsidiary” means (a) a corporation, partnership, joint venture, or other
entity in which the Company has an ownership interest of at least fifty percent
(50%), and (b) a corporation, partnership, joint venture, or other entity in
which the Company holds an ownership interest, where the ownership interest is
less than fifty percent (50%), but which, in the discretion of the Committee, is
treated as a Subsidiary for purposes of the Plan.

 

3.0      Administration

 

3.1   General.   Except as otherwise determined by the Board in its discretion,
the Plan shall be administered by the Committee, which shall consist exclusively
of two (2) or more non-employee directors within the meaning of the
rules promulgated by the Securities and Exchange Commission under Section 16

 

--------------------------------------------------------------------------------

 

of the Exchange Act who also qualify as outside directors within the meaning of
Code Section 162(m) and the related regulations under the Code. The members of
the Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board.

 

3.2   Authority of the Committee.   Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions hereof, the Committee in its discretion shall select the key
Employees who participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any Award, document, or instrument
issued under the Plan; establish, amend, or waive rules and regulations for the
Plan’s administration; and (subject to the provisions of Article 10 hereof)
amend the terms and conditions of any outstanding Award as provided in the Plan.
Further, the Committee shall make all other determinations that may be necessary
or advisable for the administration of the Plan. The Committee shall have the
authority to delegate administrative duties to officers of the Company;
provided, however, that the Committee may not delegate its authority with
respect to the eligibility, participation, and Awards for the Company’s Named
Executive Officers.

 

3.3   Decisions Binding.   All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee shall be final, conclusive and binding on all
persons, including the Company, its shareholders, Directors, Employees,
Participants, and their estates and beneficiaries.

 

3.4   Performance-Based Awards.   For purposes of the Plan, it shall be presumed
that all Awards are intended to qualify for the Performance-Based Exception.

 

4.0      Eligibility and Participation

 

4.1   Eligibility.   All Employees are eligible to participate in the Plan.

 

4.2   Actual Participation.   Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom awards shall be granted and shall determine the nature and amount of each
Award. In general, officers of the Company, division general managers, and
certain other key individuals may actually participate in the Plan. However,
actual participation will depend upon the contribution and impact each eligible
Employee has on the overall success of the Company, as approved by the
Committee.

 

4.3   Nomination and Approval.   The Committee shall determine the Named
Executive Officers’ eligibility and participation under the Plan. For eligible
Employees other than the Named Executive Officers, operating/business unit
executives will nominate Employees to participate in the Plan. The Committee may
delegate to the Chief Executive Officer the authority to approve eligibility and
participation for individuals other than the Named Executive Officers. Selection
normally will take place, and will be communicated to each Participant, within
90 days of the beginning of the Plan Year.

 

5.0      Awards.

 

5.1   Grant of Awards.   All Awards under the Plan shall be granted upon terms
approved by the Committee. However, no Award shall be inconsistent with the
terms of the Plan or fail to satisfy the requirements of applicable law. Each
Award shall relate to a designated Plan Year. The Committee shall determine
Awards for the Named Executive Officers. The Committee may delegate to the Chief
Executive Officer the authority determine Awards for individuals other than the
Named Executive Officers.

 

5.2   Award Pool Limitation.   The sum of the Awards for a single Plan Year
shall not exceed the amount in the Award Pool for that Plan Year.

 

5.3   Participant Target Awards.   Each Participant will have an established
target Award expressed as a percentage of his/her fiscal year base salary
earned. A Participant may earn an Award of more or less than the target down to
a low of zero and up to a maximum of two times target. The total amount of the
maximum Awards for any Plan Year shall not exceed one hundred percent (100%) of
the Award Pool for that Plan Year.

 

--------------------------------------------------------------------------------

 

5.4      Payment.

 

5.4.1   Subject to Article 6 hereof, a Participant shall have no right to
receive an Award payment for a Plan Year unless the Participant is employed by
the Company or a Subsidiary at all times during the Plan Year and on the date of
payment. In addition, only those Participants who are Employees as of the
Payment Date shall be eligible to receive an Award.

 

5.4.2   Notwithstanding the achievement of the targets contained in any Award,
the Committee may, in its discretion, authorize payment to a Participant of less
than the Participant’s otherwise earned Award and may provide that a Participant
shall not receive any payment with respect to an otherwise earned Award. In
exercising its discretion, the Committee shall take into account such factors as
it considers appropriate. The Committee’s decision shall be final and binding
upon any person claiming a right to a payment under the Plan.

 

5.4.3   All Awards will be paid in cash; provided, the Committee may offer
Participants the opportunity to voluntarily accept alternative forms of payment,
including without limitation equity-based awards under the Company’s 2008
Long-Term Stock Incentive Plan or such other equity compensation plan of the
Company specified by the Committee.

 

5.4.4   Payments shall be made on a date prescribed by the Committee following
an audit of the Company’s year end financial results (the “Payment Date”).

 

5.4.5   Awards made under the Plan may be includable in the Participant’s
compensation for purposes of the Company’s 401k retirement savings
plan(s) subject to overall plan rules and regulatory limits.

 

5.4.6   The Company and its Subsidiaries shall have the power and the right to
deduct or withhold, or to require a Participant to remit to the Company or to a
Subsidiary, an amount that the Company or a Subsidiary reasonably determines to
be required to comply with federal, state, local, or foreign tax withholding
requirements.

 

6.0       Changes in Status.

 

6.1   New Hires and Transfers.   Participants newly hired during the Plan Year
and Participants transferred, promoted, or reassigned during the Plan Year to a
position qualifying for participation or to a position resulting in a change in
the level of participation may receive a pro-rata Award based on the percentage
of the Plan Year the employee is in each qualifying position. In such a
circumstance, the Employee will be notified by the Committee at the time of hire
or reassignment of the eligibility for potentially receiving an Award.

 

6.2   Resignation.   An employee who resigns during the Plan Year or subsequent
to the end of the Plan Year but prior to the Payment Date shall not be eligible
for an Award.

 

6.3   Death, Disability, or Retirement.   Participants whose employment
terminates subsequent to the end of a Plan Year shall be eligible for the entire
Award earned in the completed Plan Year if the termination was due to death,
disability, or retirement.

 

6.4   Leave of Absence.   A Participant whose status as an active Employee is
changed during a Plan Year as a result of an approved leave of absence may be
eligible for a pro-rata Award based on the number of full months of service he
or she worked in the year that the leave of absence occurred.

 

6.5   Discharge for Cause.   A Participant discharged for Cause during the Plan
Year or subsequent to the Plan Year but prior to the Payment Date shall not be
eligible for an Award.

 

7.0      Beneficiary Designation.

 

Each Participant may name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under this Plan is to be paid
in case of the Participant’s death. Each such designation shall revoke all prior
designations by the Participant, shall be in the form prescribed by the Company,
and shall be effective only when filed by the Participant in writing with the
Company during his or her lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant’s death shall be paid to the
Participant’s estate.

 

--------------------------------------------------------------------------------

 

8.0       No Right to Employment or Participation.

 

The Plan shall not interfere with or limit in any way the right of the Company
or of any Subsidiary to terminate any Participant’s employment at any time, and
the Plan shall not confer upon any Participant the right to continue in the
employ of the Company or of any Subsidiary. Further, no Employee shall have the
right to be selected to receive an Award or, having been so selected, to be
selected to receive a future Award.

 

9.0       Change of Control.

 

9.1   Outstanding Awards.   Notwithstanding any contrary terms, conditions, or
provisions of the Plan or any Award, upon a Change in Control, all
then-outstanding Awards (determined on the basis of the assumption that the
relevant performance targets have been achieved) under the Plan shall become
immediately nonforfeitable and payable at the normal payment date established by
the Committee before the Change in Control and any provision requiring a
Participant to be employed on the Payment Date in order to receive an Award
shall be waived, other than that related to a termination for Cause. If the
Participant’s Award is based on a performance percentage, his or her Award for
the Plan Year in which a Change in Control occurs shall be determined by using a
performance percentage that is not less than the Participant’s target percentage
under the Plan for that Plan Year. If the Participant’s Award is based on a
performance percentage, his or her Award for any earlier Plan Year for which the
Participant’s Award has not been finally determined at the time the Change in
Control occurs, shall be determined by using a performance percentage that is
not less than the Participant’s target percentage under the Plan for that
earlier Plan Year. If the Participant is involuntarily terminated without Cause
following a Change of Control, he or she shall be entitled to receive a
pro-rated Award under this Section 9.1 based on the number of full months of
service he or she worked in the year that the Change in control occurred.

 

9.2   Modification of Awards.   Upon the occurrence of, or after, a Change in
Control, the Committee may not under any circumstances change any determination
of the basis on which any previously granted Awards shall be measured or paid or
change any other terms, conditions or provisions affecting any previously
granted Awards, if the change would reduce or adversely affect the previously
granted Award or the Participant’s rights thereto.

 

9.3   Award Terms and Conditions.   Without limiting the provisions of
Section 9.1 and 9.2 hereof, the Committee may, in its discretion, include in an
Award provisions that the Committee considers to be appropriate to assure fair
and equitable treatment of the Participant or a beneficiary in the event of a
Change in Control, including, but not limited to, provisions that:
(i) accelerate the time period for purposes of vesting in, or realizing gain
from, any Award and (ii) make adjustments or modifications to an Award that the
Committee deems appropriate to maintain and protect the rights and interests of
the Participant or a beneficiary following a Change in Control. Any such action
by the Committee shall be conclusive and binding on the Company, Participants,
beneficiaries, and all other parties.

 

10.0      Amendment, Modification, and Termination.

 

10.1 Amendment, Modification, and Termination.   Subject to the other terms of
the Plan, including Article 9, the Committee may at any time and from time to
time, alter, amend, suspend, or terminate the Plan in whole or in part; provided
that unless the Committee specifically provides otherwise, any revision or
amendment that would cause the Plan to fail to comply with any requirement of
applicable law, regulation, or rule if such amendment were not approved by the
shareholders of the Company shall not be effective unless and until shareholder
approval is obtained.

 

10.2 Certain Unusual or Non-Recurring Events.   The Committee may make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events affecting the Company or the
financial statements of the Company, or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan;
provided that the Committee shall not be authorized to adjust an Award that the
Committee intends to qualify for the Performance-Based Exception if such
adjustment (or the authority to make such adjustment) would prevent the Award
from qualifying for the Performance-Based Exception.

 

10.3 Awards Previously Granted.   Notwithstanding any other provision of the
Plan to the contrary, no termination, amendment, or modification of the Plan
shall cause any previously granted Awards to be

 

--------------------------------------------------------------------------------

 

forfeited. After the termination of the Plan, any previously granted Award shall
remain in effect and shall continue to be governed by the terms of the Plan and
the Award.

 

11.0    Successors.

 

All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

 

12.0    Miscellaneous

 

12.1 Expenses of the Plan.   The expenses of administering this Plan shall be
borne by the Company.

 

12.2 Severability.   If any provision of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.

 

12.3 Requirements of Law.   The granting of Awards under the Plan shall be
subject to all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies as may be required.

 

12.4 Governing Law.   The Plan and all Awards shall be construed in accordance
with and governed by the laws of the State of Delaware (without regard to the
legislative or judicial conflict of laws rules of any state), except to the
extent superseded by federal law.

 

--------------------------------------------------------------------------------