**Exhibit 10.1**

 

**POLYMER GROUP, INC.**

 

**EXECUTIVEEMPLOYMENT AGREEMENT**

 

THIS AGREEMENT is enteredinto on March     , 2004, between Polymer Group, Inc.,a Delaware corporation (the “Company”), and James L. Schaeffer (“Executive”).

 

In consideration of themutual covenants contained herein and other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the partieshereto agree as follows:

 

# 1.                                       EmploymentPeriod.  The Company shall employExecutive, and Executive hereby accepts employment with the Company, upon theterms and conditions set forth in this Agreement for the period beginning onand as of April 1, 2003 and ending as provided in paragraph 4 hereof (the “EmploymentPeriod”).

#  

# 2.                                       Positionand Duties.

#  

## (a)                                  Duringthe Employment Period, Executive shall serve as the Chief Executive Officer ofthe Company and shall have the normal duties, responsibilities, functions andauthority of the Chief Executive Officer, subject to the power and authority ofthe Board to expand or limit such duties, responsibilities, functions andauthority within the scope of duties, responsibilities, functions and authorityassociated with the position of Chief Executive Officer and to overrule actionsof officers of the Company.  During theEmployment Period, Executive shall render such executive and managerialservices to the Company and its Subsidiaries which are consistent withExecutive’s position and as the Board may from time to time direct.

##  

## (b)                                 Duringthe Employment Period, Executive shall report to the Board and shall devote hisbest efforts and his full business time and attention (except for permittedvacation periods and reasonable periods of illness or other incapacity)exclusively to the business and affairs of the Company and its Subsidiaries.  Executive shall perform his duties,responsibilities and functions to the Company and its Subsidiaries hereunder tothe best of his abilities in a diligent, trustworthy, professional andefficient manner and shall comply with the Company’s and its Subsidiaries’policies and procedures in all material respects.  In performing his duties and exercising hisauthority under the Agreement, Executive shall support and implement thebusiness and strategic plans approved from time to time by the Board and shallsupport and cooperate with the Company’s and its Subsidiaries’ efforts toexpand their businesses and operate profitably and in conformity with thebusiness and strategic plans approved by the Board.  So long as Executive is employed by theCompany, Executive shall not, without the prior written consent of the Board,accept other employment or perform other services for compensation.

##  

## (c)                                  Forpurposes of this Agreement, “Subsidiaries” shall mean any corporation orother entity of which the securities or other ownership interests having thevoting power to elect a majority of the board of directors or other governingbody are, at the time of determination, owned by the Company, directly orthrough one of more Subsidiaries.

 

----

 

# 3.                                       Compensationand Benefits.

#  

## (a)                                  Duringthe Employment Period, Executive’s base salary shall be $500,000 per annum orsuch higher rate as the Board may determine from time to time (as adjusted fromtime to time, the “Base Salary”), which salary shall be payable by theCompany in regular installments in accordance with the Company’s generalpayroll practices (in effect from time to time).  The Board shall undertake an annual review ofExecutive’s Base Salary.  In addition,during the Employment Period, Executive shall be entitled to participate in allof the Company’s employee benefit programs for which senior executive employeesof the Company and its Subsidiaries are generally eligible, and Executive shallbe entitled to four weeks of paid vacation each calendar year in accordancewith the Company’s policies, which if not taken during any year may not becarried forward to any subsequent calendar year and no compensation shall bepayable in lieu thereof.  During theEmployment Period, the Company shall provide Executive with a car comparable tothat which he is using on the date of this Agreement (“Car”).  The Employee shall take good care of the Carand ensure that the provisions and conditions of any policy of insurancerelating thereto are observed (including the provision with respect toprotection of the Car), and in the event that the Employee’s employmentterminates for whatever reason, he shall forthwith return the Car with the keysand all licenses and other documentation relating to the Car, to theCompany.  The Employee shall not have anylien right in the Car or in any document or property relating thereto.

##  

## (b)                                 Duringthe Employment Period, the Company shall reimburse Executive for all reasonablebusiness expenses incurred by him in the course of performing his duties andresponsibilities under this Agreement which are consistent with the Company’spolicies in effect from time to time with respect to travel, entertainment andother business expenses, subject to the Company’s requirements with respect toreporting and documentation of such expenses.

##  

## (c)                                  Inaddition to the Base Salary, the Board may, in its sole discretion, award abonus to Executive following the end of each fiscal year during the EmploymentPeriod based upon Executive’s performance and the Company’s operating resultsduring such year; provided, that as long as Executive shall remainemployed by the Company on January 4, 2004, Executive shall be entitled toa minimum performance bonus equal to 25% of his Base Salary for fiscal 2003.

##  

## (d)                                 Inaddition to the Base Salary and any bonuses payable to Executive pursuant tothis paragraph, Executive shall be entitled to health insurance and disabilityinsurance of such coverage as reasonably determined by the Board and term lifeinsurance in an amount equal to two times Executive’s Base Salary.

##  

## (e)                                  Duringthe Employment Period, Executive shall also be entitled to reasonable periodsof sick leave (without loss of pay) in accordance with the Company’s policiesas in effect from time to time.

##  

## (f)                                    Allamounts payable to Executive as compensation hereunder shall be subject to allrequired and customary withholding by the Company.

 

2

----

 

# 4.                                       Term.

#  

## (a)                                  Unlessrenewed by the mutual agreement of the Company and Executive, the EmploymentPeriod shall end on March 31, 2005. The Employment Period shall automatically be renewed on the same termsand conditions set forth herein as modified from time to time by the partieshereto for additional one-year periods beginning on April 1, 2005, unlessthe Company or Executive gives the other party written notice of the electionnot to renew the Employment Period at least 120 days prior to any such renewaldate; provided that (i) the Employment Period shall terminate prior tosuch date immediately upon Executive’s resignation (with or without GoodReason, as defined below), death or Disability and (ii) the EmploymentPeriod may be terminated by the Company at any time prior to such date forCause (as defined below) or without Cause. Except as otherwise provided herein, any termination of the EmploymentPeriod by the Company shall be effective as specified in a written notice, ororal notice later confirmed in writing, from the Company to Executive.

##  

## (b)                                 Ifthe Employment Period is terminated by the Company without Cause or uponExecutive’s resignation with Good Reason prior to the second anniversary of thedate of this Agreement, Executive shall be entitled to continue to receive hisBase Salary payable in regular installments as special severance payments fromthe date of termination through the 9 month anniversary of the date oftermination****(the “SeverancePeriod”), if and only if Executive has executed and delivered to theCompany the General Release substantially in form and substance as set forth inExhibit A attached hereto and only so long as Executive has notbreached the provisions of paragraphs 5, 6 and 7 hereof and does not apply forunemployment compensation chargeable to the Company during the SeverancePeriod, and Executive shall not be entitled to any other salary, compensationor benefits after termination of the Employment Period, except as specificallyprovided for in the Company’s employee benefit plans or as otherwise expresslyrequired by applicable law.  The BaseSalary payable pursuant to this paragraph 4(b) shall be payable in regularmonthly installments.  The amountspayable pursuant to this paragraph 4(b) shall not be reduced by the amountof any compensation Executive receives with respect to any other employmentduring the Severance Period.

##  

## (c)                                  Ifthe Employment Period is terminated by the Company for Cause or is terminatedpursuant to clause (a)(i) above (other than termination with Good Reason)or expires and is not renewed hereunder, Executive shall only be entitled toreceive his Base Salary through the date of termination or expiration and shallnot be entitled to any other salary, compensation or benefits from the Companyor its Subsidiaries thereafter, except as otherwise specifically provided forunder the Company’s employee benefit plans or as otherwise expressly requiredby applicable law.

##  

## (d)                                 Fortwelve months following the date of Executive’s termination, the Company shall,at its expense, continue on behalf of the Executive and his or her dependantsand beneficiaries, the life insurance, disability, medical, dental andhospitalization benefits provided to the Executive immediately prior to thedate of termination.  The coverage andbenefits (including deductibles and costs) provided in this Section 4(d) shallbe no less favorable to the Executive and his or her dependants andbeneficiaries, than the coverage and benefits provided to Executive immediatelyprior to his termination.  The Company’sobligation hereunder with

 

3

----

 

respect to the foregoingbenefits shall be limited to the extent that the Executive obtains any suchbenefits pursuant to a subsequent employer’s benefit plans, in which case theCompany may reduce the coverage of any benefits it is required to provide theExecutive hereunder so long as the aggregate coverage and benefits of thecombined benefit plans is no less favorable to the Executive than the coveragesand benefits required to be provided hereunder. This subsection (d) shall not be interpreted so as to limitany benefits to which the Executive, his or her dependants or beneficiaries mayotherwise be entitled under any of the Company’s employee benefit plans,programs or practices following the termination of employment of the Executive,including without limitation, any applicable retiree medical and life insurancebenefits.  Except as otherwise expresslyprovided herein, all of Executive’s rights to salary, bonuses, employeebenefits and other compensation hereunder which would have accrued or becomepayable after the termination or expiration of the Employment Period shallcease upon such termination or expiration, other than those expressly requiredunder applicable law (such as COBRA); provided, that for purposes ofdetermining Executive’s rights under COBRA, the date of the later to occur of(x) the date of the termination or expiration of the Employment Period or (y)the date of the final payment of any severance payments made pursuant to Section 4(b) above,shall be deemed to be the qualifying event for such purpose.  The Company may offset any amounts Executiveowes it or its Subsidiaries against any amounts it or its Subsidiaries owesExecutive hereunder.

##  

## (e)                                  Forpurposes of this Agreement, “Cause” shall mean with respect to Executiveone or more of the following:  (i) amaterial breach of this Agreement by Executive; provided, that if such breachis capable of being cured, Executive shall be provided 15 days notice to curesuch breach, (ii) a breach of Executive’s duty of loyalty to the Companyor any of its Subsidiaries or any act of dishonesty or fraud with respect tothe Company or any of its Subsidiaries, (iii) the commission by Executiveof a felony, a crime involving moral turpitude or other act or omission causingmaterial harm to the standing and reputation of the Company and itsSubsidiaries, (iv) reporting to work under the influence of alcohol orillegal drugs, the use of illegal drugs (whether or not at the workplace) orother repeated conduct causing the Company or any of its Subsidiariessubstantial public disgrace or disrepute or economic harm, or (v) any actor omission aiding or abetting a competitor, supplier or customer of theCompany or any of its Subsidiaries to the material disadvantage or detriment ofthe Company and its Subsidiaries.

##  

## (f)                                    Forpurposes of this Agreement, “Disability” shall mean Executive’sinability to perform the essential duties, responsibilities and functions ofhis position with the Company and its Subsidiaries as a result of any mental orphysical disability or incapacity even with reasonable accommodations of suchdisability or incapacity provided by the Company and its Subsidiaries or ifproviding such accommodations would be unreasonable, all as determined by theBoard in its reasonable good faith judgment. Executive shall cooperate in all respects with the Company if a questionarises as to whether he has become disabled (including, without limitation,submitting to an examination by a medical doctor or other health carespecialists selected by the Company and authorizing such medical doctor or suchother health care specialist to discuss Executive’s condition with theCompany).

##  

## (g)                                 Forpurposes of this Agreement, “Good Reason” shall mean if Executiveresigns from employment with the Company and its Subsidiaries prior to the endof the Employment Period as a result of one or more of the followingreasons:  (i) the Company reduces

 

4

----

 

the amount of the BaseSalary, (ii) the Company changes Executive’s title or reduces hisresponsibilities inconsistent with the positions he holds or (iii) Executiveand the Company are unable to agree upon the proper reporting of any financialmatter which Executive reasonably believes is appropriate in order to complywith the rules and regulations of the United States Securities andExchange Commission or in order for the Company’s financial statements to beprepared in conformity with generally accepted accounting principles; providedthat written notice of Executive’s resignation for Good Reason must bedelivered to the Company within 30 days after the occurrence of any such eventin order for Executive’s resignation with Good Reason to be effectivehereunder.

##  

# 5.                                       ConfidentialInformation.

#  

## (a)                                  Obligationto Maintain Confidentiality. Executive acknowledges that the continued success of the Company and itsSubsidiaries, depends upon the use and protection of a large body ofconfidential and proprietary information. All of such confidential and proprietary information existing priorhereto, now existing or to be developed in the future will be referred to inthis Agreement as “Confidential Information.”  Confidential Information will be interpretedas broadly as possible to include all information of any sort (whether merelyremembered or embodied in a tangible or intangible form) that is (i) relatedto the Company’s or its Subsidiaries’ current or potential business and (ii) isnot generally or publicly known. Confidential Information includes, without specific limitation, theinformation, observations and data obtained by him during the course of hisperformance under this Agreement concerning the business and affairs of theCompany and its Subsidiaries, information concerning acquisition opportunitiesin or reasonably related to the Company’s or its Subsidiaries’ business orindustry of which Executive becomes aware during the Employment Period, thepersons or entities that are current, former or prospective suppliers orcustomers of any one or more of them during Executive’s course of performanceunder this Agreement, as well as development, transition and transformationplans, methodologies and methods of doing business, strategic, marketing andexpansion plans, including plans regarding planned and potential sales,financial and business plans, employee lists and telephone numbers, locationsof sales representatives, new and existing programs and services, prices andterms, customer service, integration processes, requirements and costs ofproviding service, support and equipment. Therefore, Executive agrees that he shall not disclose to anyunauthorized person or use for his own account any of such ConfidentialInformation without both Board’s prior written consent, unless and to theextent that any Confidential Information (i) becomes generally known toand available for use by the public other than as a result of Executive’s actsor omissions to act or (ii) is required to be disclosed pursuant to anyapplicable law or court order.  Executiveagrees to deliver to the Company at the end of the Employment Period, or at anyother time the Company may request in writing, all memoranda, notes, plans,records, reports and other documents (and copies thereof) relating to thebusiness of the Company or its Subsidiaries (including, without limitation, allConfidential Information) that he may then possess or have under his control.

##  

## (b)                                 Ownershipof Intellectual Property.  Executiveagrees to make prompt and full disclosure to the Company or its Subsidiaries,as the case may be, of all ideas, discoveries, trade secrets, inventions,innovations, improvements, developments, methods of doing business, processes,programs, designs, analyses, drawings, reports, data, software, firmware, logosand all

 

5

----

 

similar or relatedinformation  (whether or not patentableand whether or not reduced to practice) that relate to the Company’s or itsSubsidiaries’ actual or anticipated business, research and development, orexisting or future products or services and that are conceived, developed,acquired, contributed to, made, or reduced to practice by Executive (eithersolely or jointly with others) while employed by the Company or itsSubsidiaries and for a period of one (1) year thereafter (collectively, “WorkProduct”).  Any copyrightable workfalling within the definition of Work Product shall be deemed a “work made forhire” under the copyright laws of the United States, and ownership of allrights therein shall vest in the Company or its Subsidiary.  To the extent that any Work Product is notdeemed to be a “work made for hire,” Executive hereby assigns and agrees toassign to the Company or such Subsidiary all right, title and interest,including without limitation, the intellectual property rights that Executivemay have in and to such Work Product. Executive shall promptly perform all actions reasonably requested by theBoard (whether during or after the Employment Period) to establish and confirmthe Company’s or such Subsidiary’s ownership (including, without limitation,providing testimony and executing assignments, consents, powers of attorney,and other instruments).

##  

## (c)                                  ThirdParty Information. Executive understands that the Company and itsSubsidiaries will receive from third parties confidential or proprietaryinformation (“Third Party Information”) subject to a duty on the Company’sand its Subsidiaries’ part to maintain the confidentiality of such informationand to use it only for certain limited purposes.  During the Employment Period and thereafter,and without in any way limiting the provisions of Section 5(a) above,Executive will hold Third Party Information in the strictest confidence andwill not disclose to anyone (other than personnel of the Company or itsSubsidiaries who need to know such information in connection with their workfor the Company or such Subsidiaries) or use, except in connection with hiswork for the Company or its Subsidiaries, Third Party Information unlessexpressly authorized by a member of the Board in writing.

##  

# 6.                                       Non-Compete,Non-Solicitation.

#  

## (a)                                  Infurther consideration of the compensation to be paid to Executive hereunder,Executive acknowledges that during the course of his employment with theCompany and its Subsidiaries he shall become familiar with the Company’s tradesecrets and with other Confidential Information concerning the Company and itspredecessors and its Subsidiaries and that his services shall be of special,unique and extraordinary value to the Company and its Subsidiaries, andtherefore, Executive agrees that, during the Employment Period and for suchtime as Executive is receiving any severance payments from the Company, or sixmonths if Executive is not entitled to receive any severance payments hereunder(other than in the specific case in which Executive is terminated for cause asa result of events that occurred prior to December 31, 2002, in which casethis provision shall not apply), (the “Noncompete Period”), he shall notdirectly or indirectly own any interest in, manage, control, participate in,consult with, render services for, or in any manner engage in any businesscompeting with the businesses of the Company or its Subsidiaries, as suchbusinesses exist or are in process during the Employment Period on the date ofthe termination or expiration of the Employment Period, within any geographicalarea in which the Company or its Subsidiaries engage or plan to engage in suchbusinesses.  Nothing herein shallprohibit Executive from being a passive owner of not

 

6

----

 

more than 2% of theoutstanding stock of any class of a corporation which is publicly traded, solong as Executive has no active participation in the business of suchcorporation.

##  

## (b)                                 Duringthe Noncompete Period, Executive shall not directly or indirectly throughanother person or entity (i) induce or attempt to induce any employee ofthe Company or any Subsidiary to leave the employ of the Company or suchSubsidiary, or in any way interfere with the relationship between the Companyor any Subsidiary and any employee thereof, (ii) hire any person who wasan employee of the Company or any Subsidiary at any time during the EmploymentPeriod or (iii) induce or attempt to induce any customer, supplier,licensee, licensor, franchisee or other business relation of the Company or anySubsidiary to cease doing business with the Company or such Subsidiary, or inany way interfere with the relationship between any such customer, supplier,licensee or business relation and the Company or any Subsidiary (including,without limitation, making any negative or disparaging statements orcommunications regarding the Company or its Subsidiaries).

##  

## (c)                                  If,at the time of enforcement of this paragraph 6, a court shall hold that the duration,scope or area restrictions stated herein are unreasonable under circumstancesthen existing, the parties agree that the maximum duration, scope or areareasonable under such circumstances shall be substituted for the statedduration, scope or area and that the court shall be allowed to revise therestrictions contained herein to cover the maximum period, scope and areapermitted by law.  Executive acknowledgesthat the restrictions contained in this paragraph 6 are reasonable and that hehas reviewed the provisions of this Agreement with his legal counsel.

##  

## (d)                                 Inthe event of the breach or a threatened breach by Executive of any of theprovisions of this paragraph 6, the Company would suffer irreparable harm, andin addition and supplementary to other rights and remedies existing in itsfavor, the Company shall be entitled to specific performance and/or injunctiveor other equitable relief from a court of competent jurisdiction in order toenforce or prevent any violations of the provisions hereof (without posting abond or other security).  In addition, inthe event of an alleged breach or violation by Executive of this paragraph 6,the Noncompete Period shall be tolled until such breach or violation has beenduly cured.  Executive acknowledges thatthe restrictions contained in paragraph 6 are reasonable and that he hasreviewed the provisions of this Agreement with his legal counsel.

##  

## (e)                                  Changein Control of the Company.  In theevent of a Change in Control of the Company (as defined in the Company’s 2003Stock Option Plan), the provisions of this Section 6 shall, on and aftersuch time, cease to apply and be of no further force and effect.

##  

# 7.                                       Executive’sRepresentations.  Executive herebyrepresents and warrants to the Company that (i) the execution, deliveryand performance of this Agreement by Executive do not and shall not conflictwith, breach, violate or cause a default under any contract, agreement,instrument, order, judgment or decree to which Executive is a party or by whichhe is bound, (ii) Executive is not a party to or bound by any employmentagreement, noncompete agreement or confidentiality agreement with any otherperson or entity and (iii) upon the execution and delivery of thisAgreement by the Company, this Agreement shall be the valid and bindingobligation of Executive, enforceable in accordance with its terms.  Executive hereby acknowledges and representsthat he has consulted with independent legal counsel regarding his

 

7

----

 

rights and obligationsunder this Agreement and that he fully understands the terms and conditionscontained herein.

#  

# 8.                                       Survival.  Paragraphs 4 through 27 shall survive andcontinue in full force in accordance with their terms notwithstanding theexpiration or termination of the Employment Period.

#  

# 9.                                       Notices.  Any notice provided for in this Agreementshall be in writing and shall be either personally delivered, sent by reputableovernight courier service or mailed by first class mail, return receiptrequested, to the recipient at the address below indicated:

#  

Notices to Executive:

 

James L. Schaeffer8 Ripplemoor LaneCharleston, S.C.  29404

 

With a copy to:

 

Charles F. CastnerParker Poe Adams & Bernstein L.L.P.200 Meeting StreetSuite 301Charleston, S.C.  29401

 

Notices to the Company:

 

Polymer Group, Inc.4055 Faber Place DriveNorth Charleston, S.C.  29405Attn:  General Counsel

 

With a copy to:

 

H. Kurt von Moltke, P.C.Kirkland & Ellis LLP200 East Randolph DriveChicago, IL  60601

 

or such other address orto the attention of such other person as the recipient party shall havespecified by prior written notice to the sending party.  Any notice under this Agreement shall bedeemed to have been given when so delivered, sent or mailed.

 

# 10.                                 Severability. Whenever possible, each provision ofthis Agreement shall be interpreted in such manner as to be effective and validunder applicable law, but if any provision of this Agreement is held to beinvalid, illegal or unenforceable in any respect under any applicable law or rule inany jurisdiction, such invalidity, illegality or unenforceability shall

 

8

----

 

not affect any otherprovision of this Agreement or any action in any other jurisdiction, but thisAgreement shall be reformed, construed and enforced in such jurisdiction as ifsuch invalid, illegal or unenforceable provision had never been containedherein.

#  

# 11.                                 CompleteAgreement.  This Agreement, thosedocuments expressly referred to herein and other documents of even dateherewith, embody the complete agreement and understanding among the parties andsupersede and preempt any prior understandings, agreements or representationsby or among the parties, written or oral, which may have related to the subjectmatter hereof in any way including, without limitation, the Company’s KeyEmployee Retention and Severance Program adopted in 2002.

#  

# 12.                                 NoStrict Construction.  The languageused in this Agreement shall be deemed to be the language chosen by the partieshereto to express their mutual intent, and no rule of strict constructionshall be applied against any party.

#  

# 13.                                 Counterparts.  This Agreement may be executed in separatecounterparts, each of which is deemed to be an original and all of which takentogether constitute one and the same agreement.

#  

# 14.                                 Successorsand Assigns.  This Agreement isintended to bind and inure to the benefit of and be enforceable by Executive,the Company and their respective heirs, successors and assigns, except thatExecutive may not assign his rights or delegate his duties or obligationshereunder without the prior written consent of the Company.

#  

# 15.                                 Choiceof Law.  All issues and questionsconcerning the construction, validity, enforcement and interpretation of thisAgreement and the exhibits and schedules hereto shall be governed by, andconstrued in accordance with, the laws of the State of South Carolina, withoutgiving effect to any choice of law or conflict of law rules or provisions(whether of the State of South Carolina or any other jurisdiction) that wouldcause the application of the laws of any jurisdiction other than the State ofSouth Carolina.

#  

# 16.                                 Amendmentand Waiver.  The provisions of thisAgreement may be amended or waived only with the prior written consent of theCompany (as approved by the Board) and Executive, and no course of conduct orcourse of dealing or failure or delay by any party hereto in enforcing orexercising any of the provisions of this Agreement (including, withoutlimitation, the Company’s right to terminate the Employment Period for Cause)shall affect the validity, binding effect or enforceability of this Agreementor be deemed to be an implied waiver of any provision of this Agreement.

#  

# 17.                                 Insurance.  The Company may, at its discretion, apply forand procure in its own name and for its own benefit life and/or disabilityinsurance on Executive in any amount or amounts considered advisable.  Executive agrees to cooperate in any medicalor other examination, supply any information and execute and deliver anyapplications or other instruments in writing as may be reasonably necessary toobtain and constitute such insurance. Executive hereby represents that he has no reason to believe that hislife is not insurable at rates now prevailing for healthy men of his age.

 

9

----

 

# 18.                                 Indemnificationand Reimbursement of Payments on Behalf of Executive.  The Company and its respective Subsidiariesshall be entitled to deduct or withhold from any amounts owing from the Companyor any of its Subsidiaries to Executive any federal, state, local or foreignwithholding taxes, excise tax, or employment taxes (“Taxes”) imposedwith respect to Executive’s compensation or other payments from the Company orany of its Subsidiaries or Executive’s ownership interest in the Company(including, without limitation, wages, bonuses, dividends, the receipt orexercise of equity options and/or the receipt or vesting of restrictedequity).  In the event the Company or anyof its Subsidiaries does not make such deductions or withholdings, Executiveshall indemnify the Company and its Subsidiaries for any amounts paid withrespect to any such Taxes.

#  

# 19.                                 Waiverof Jury Trial.  AS A SPECIFICALLYBARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THISAGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTYHERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDINGRELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERSCONTEMPLATED HEREBY.

#  

# 20.                                 Executive’sCooperation.  During the Employmentand thereafter, Executive shall cooperate with the Company and its Subsidiariesin any internal investigation or administrative, regulatory or judicialproceeding as reasonably requested by the Company (including, withoutlimitation, Executive being available to the Company upon reasonable notice forinterviews and factual investigations, appearing at the Company’s request togive testimony without requiring service of a subpoena or other legal process,volunteering to the Company all pertinent information and turning over to theCompany all relevant documents which are or may come into Executive’spossession, all at times and on schedules that are reasonably consistent withExecutive’s other permitted activities and commitments). In the event theCompany requires Executive’s cooperation in accordance with this paragraph, theCompany shall reimburse Executive solely for reasonable travel expenses(including lodging and meals, upon submission of receipts).

#  

# 21.                                 Arbitration.  Except with respect to disputes or claimsunder paragraphs 5 and 6 hereof (which may be pursued in any court of competentjurisdiction as specified below and with respect to which each party shall bearthe cost of its own attorney’s fees and expenses except as otherwise requiredby applicable law), each party hereto agrees that the arbitration procedure setforth in Exhibit B hereto shall be the sole and exclusive method forresolving any claim or dispute (“Claim”) arising out of or relating to therights and obligations acknowledged and agreed to in this Agreement and theemployment of Executive by the Company and its Subsidiaries (including, withoutlimitation, disputes and claims regarding employment discrimination, sexualharassment, termination and discharge), whether such Claim arose or the factson which such Claim is based occurred prior to or after the execution anddelivery of adoption of this Agreement. The parties agree that the result of any arbitration hereunder shall befinal, conclusive and binding on all of the parties.  Nothing in this paragraph shall prohibit aparty hereto from instituting litigation to enforce any Final Determination (asdefined in Exhibit B hereto). Each party hereto hereby irrevocably submits to the jurisdiction of anyUnited States District Court or South Carolina state court of competentjurisdiction sitting in Charleston

 

10

----

 

County, South Carolina,and agrees that such court shall be the exclusive forum with respect todisputes and claims under paragraphs 5 and 6 and for the enforcement of anyFinal Determination, and irrevocably and unconditionally waives (i) anyobjection to the laying of venue of any such action, suit or proceeding in suchcourt or (ii) any argument, claim, defense or allegation that any suchaction, suit or proceeding brought in such court has been brought in aninconvenient forum.  Each party heretoirrevocably consents to service of process by registered mail or personalservice and waives any objection on the grounds of personal jurisdiction, venueor inconvenience of the forum.

#  

# 22.                                 Section andHeadings.  The division of thisAgreement into sections and the insertion of headings are for the convenienceof reference only and shall not affect the construction or interpretation ofthis Agreement.  The terms “thisAgreement”, “hereof”, “hereunder” and similar expressions refer to thisAgreement and not to any particular section or other portion hereof.  Unless something in the subject matter orcontext is inconsistent therewith, references to sections and clauses are tosections and clauses of this Agreement.

#  

# 23.                                 Number.  In this Agreement, words importing thesingular number only shall include the plural and vice versa, and wordsimporting the masculine gender shall include the feminine and neuter gendersand vice versa, and words importing persons shall include individuals,partnerships, associations, trusts, unincorporated organizations andcorporations.

#  

# 24.                                 IndependentAdvice.  The Company and theExecutive acknowledge and agree that they have each obtained independent legaladvice in connection with this Agreement and they further acknowledge and agreethat they have read, understand and agree with all of the terms hereof and thatthey are executing this Agreement voluntarily and in good faith.

#  

# 25.                                 Copyof Agreement.  The Executive herebyacknowledges receipt of a copy of this Agreement duly signed by the Company.

#  

# 26.                                 TerminationPrior to Effective Date.  In theevent of a termination of employment of the Executive prior to the EffectiveDate, this Agreement shall be terminated and shall have no further force oreffect.

#  

# 27.                                 Currency.  All dollar amounts set forth or referred toin this Agreement refer to U.S. currency.

#  

# 28.                                 Effectiveness.  Once this Agreement has been duly executedand delivered by each party hereto, all of the provisions shall becomeeffective as of April 1, 2003, as if this Agreement had been entered intoat such time, including the compensation provisions contained in Section 3.

#  

    *   *    *    *

 

11

----

 

IN WITNESS WHEREOF, theparties hereto have executed this Agreement as of the date first written above.

 

 
|   | Polymer Group, Inc. |
|--------|--------------------------|
|   |                     |
|   | By:                      |   |   |
|   |                     |
|   | Its:                     |   |   |
|   |                     |
|   |                     |   |
|   | James  L. Schaeffer      |

 

----

 

Exhibit A

 

GENERAL RELEASE

 

I, James L. Schaeffer,in  consideration of and subject to theperformance by Polymer Group, Inc., a Delaware corporation (together withits subsidiaries, the “Company”), of its obligations under the EmploymentAgreement, entered into on March     , 2004, (the “Agreement”),do hereby release and forever discharge as of the date hereof the Company andits affiliates and all present and former directors, officers, agents,representatives, employees, successors and assigns of the Company and itsaffiliates and the Company’s direct or indirect owners (collectively, the “ReleasedParties”) to the extent provided below.

 

1.                                       Iunderstand that any payments or benefits paid or granted to me under paragraph4(b) of the Agreement represent, in part, consideration for signing thisGeneral Release and are not salary, wages or benefits to which I was alreadyentitled. I understand and agree that I will not receive the payments andbenefits specified in paragraph 4(b) of the Agreement unless I executethis General Release and do not revoke this General Release within the timeperiod permitted hereafter or breach this General Release.  Such payments and benefits will not beconsidered compensation for purposes of any employee benefit plan, program,policy or arrangement maintained or hereafter established by the Company or itsaffiliates.  I also acknowledge andrepresent that I have received all payments and benefits that I am entitled toreceive (as of the date hereof) by virtue of any employment by the Company.

 

2.                                       Exceptas provided in paragraph 4 below and except for the provisions of my EmploymentAgreement which expressly survive the termination of my employment with theCompany, I knowingly and voluntarily (for myself, my heirs, executors,administrators and assigns) release and forever discharge the Company and theother Released Parties from any and all claims, suits, controversies, actions,causes of action, cross-claims, counter-claims, demands, debts, compensatorydamages, liquidated damages, punitive or exemplary damages, other damages,claims for costs and attorneys’ fees, or liabilities of any nature whatsoeverin law and in equity, existing or hereafter arising, based in whole or in partupon any act or omission, transaction, agreement, event or other occurrencetaking place from the beginning of time through the date this General Releasebecomes effective and enforceable and whether known or unknown, suspected, orclaimed against the Company or any of the Released Parties which I, my spouse,or any of my heirs, executors, administrators or assigns, may have, which ariseout of or are connected with my employment with, or my separation ortermination from, the Company (including, but not limited to, any allegation,claim or violation, arising under: Title VII of the Civil Rights Act of 1964,as amended; the Civil Rights Act of 1991; the Age Discrimination in EmploymentAct of 1967, as amended (including the Older Workers Benefit Protection Act);the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of1990; the Family and Medical Leave Act of 1993; the Worker AdjustmentRetraining and Notification Act; the Employee Retirement Income Security Act of1974; any applicable Executive Order Programs; the Fair Labor Standards Act; ortheir state or local counterparts; the South Carolina Human Affairs Law, S.C.Code

 

A-1

----

 

sections 1-13-10 et seq.; S.C. Codesections 41-10-10 et seq. or under any other federal, state orlocal civil or human rights law, or under any other local, state, or federallaw, regulation or ordinance; or under any public policy, contract or tort, orunder common law; or arising under any policies, practices or procedures of theCompany; or any claim for wrongful discharge, breach of contract, infliction ofemotional distress, defamation; or any claim for costs, fees, or otherexpenses, including attorneys’ fees incurred in these matters) (all of theforegoing collectively referred to herein as the “Claims”).

 

3.                                       Irepresent that I have made no assignment or transfer of any right, claim,demand, cause of action, or other matter covered by paragraph 2 above.

 

4.                                       Iagree that this General Release does not waive or release any rights or claimsthat I may have under the Age Discrimination in Employment Act of 1967 whicharise after the date I execute this General Release. I acknowledge and agreethat my separation from employment with the Company in compliance with the termsof the Agreement shall not serve as the basis for any claim or action(including, without limitation, any claim under the Age Discrimination inEmployment Act of 1967).

 

5.                                       Insigning this General Release, I acknowledge and intend that it shall be effectiveas a bar to each and every one of the Claims hereinabove mentioned or implied.I expressly consent that this General Release shall be given full force andeffect according to each and all of its express terms and provisions, includingthose relating to unknown and unsuspected Claims (notwithstanding any statestatute that expressly limits the effectiveness of a general release ofunknown, unsuspected and unanticipated Claims), if any, as well as thoserelating to any other Claims hereinabove mentioned or implied. I acknowledgeand agree that this waiver is an essential and material term of this GeneralRelease and that without such waiver the Company would not have agreed to theterms of the Agreement.  I further agreethat in the event I should bring a Claim seeking damages against the Company,or in the event I should seek to recover against the Company in any Claimbrought by a governmental agency on my behalf, this General Release shall serveas a complete defense to such Claims. I further agree that I am not aware ofany pending charge or complaint of the type described in paragraph 2 as of theexecution of this General Release.

 

6.                                       Iagree that neither this General Release, nor the furnishing of theconsideration for this General Release, shall be deemed or construed at anytime to be an admission by the Company, any Released Party or myself of anyimproper or unlawful conduct.

 

7.                                       Iagree that I will forfeit all amounts payable by the Company pursuant to theAgreement if I challenge the validity of this General Release. I also agreethat if I violate this General Release by suing the Company or the otherReleased Parties, I will pay all costs and expenses of defending against thesuit incurred by the Released Parties, including reasonable attorneys’ fees,and return all payments received by me pursuant to the Agreement.

 

A-2

----

 

8.                                       Iagree that this General Release is confidential and agree not to disclose anyinformation regarding the terms of this General Release, except to my immediatefamily and any tax, legal or other counsel I have consulted regarding themeaning or effect hereof or as required by law, and I will instruct each of theforegoing not to disclose the same to anyone.

 

9.                                       Anynon-disclosure provision in this General Release does not prohibit or restrictme (or my attorney) from responding to any inquiry about this General Releaseor its underlying facts and circumstances by the Securities and ExchangeCommission (SEC), the National Association of Securities Dealers, Inc.(NASD), any other self-regulatory organization or governmental entity.

 

10.                                 Iagree to reasonably cooperate with the Company in any internal investigation oradministrative, regulatory, or judicial proceeding. I understand and agree thatmy cooperation may include, but not be limited to, making myself available tothe Company upon reasonable notice for interviews and factual investigations;appearing at the Company’s request to give testimony without requiring serviceof a subpoena or other legal process; volunteering to the Company pertinentinformation; and turning over to the Company all relevant documents which areor may come into my possession all at times and on schedules that arereasonably consistent with my other permitted activities and commitments. Iunderstand that in the event the Company asks for my cooperation in accordancewith this provision, the Company will reimburse me solely for reasonable travelexpenses, including lodging and meals, upon my submission of receipts.

 

11.                                 Iagree not to disparage the Company, its past and present investors, officers,directors or employees or its affiliates and to keep all confidential andproprietary information about the past or present business affairs of theCompany and its affiliates confidential unless a prior written release from theCompany is obtained.  I further agreethat as of the date hereof, I have returned to the Company any and allproperty, tangible or intangible, relating to its business, which I possessed orhad control over at any time (including, but not limited to, company-providedcredit cards, building or office access cards, keys, computer equipment,manuals, files, documents, records, software, customer data base and otherdata) and that I shall not retain any copies, compilations, extracts, excerpts,summaries or other notes of any such manuals, files, documents, records,software, customer data base or other data.

 

12.                                 Notwithstandinganything in this General Release to the contrary, this General Release shallnot relinquish, diminish, or in any way affect any rights or claims arising outof any breach by the Company or by any Released Party of the Agreement afterthe date hereof.

 

13.                                 Wheneverpossible, each provision of this General Release shall be interpreted in, suchmanner as to be effective and valid under applicable law, but if any provisionof this General Release is held to be invalid, illegal or unenforceable in anyrespect under any applicable law or rule in any jurisdiction, suchinvalidity, illegality or unenforceability shall not affect any other provisionor any other jurisdiction, but this General Release

 

A-3

----

 

shall be reformed, construed and enforced in suchjurisdiction as if such invalid, illegal or unenforceable provision had neverbeen contained herein.

 

BY SIGNING THIS GENERALRELEASE, I REPRESENT AND AGREE THAT:

 

(a)                                  IHAVE READ IT CAREFULLY;

 

(b)                                 IUNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS,INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENTACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED;THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THEEMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

 

(c)                                  IVOLUNTARILY CONSENT TO EVERYTHING IN IT;

 

(d)                                 IHAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVEDONE SO OR, AFTER CAREFUL READING AND CONSIDERATION I HAVE CHOSEN NOT TO DO SOOF MY OWN VOLITION;

 

(e)                                  IHAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASESUBSTANTIALLY IN ITS FINAL FORM ON                                   ,           TO CONSIDER IT AND THE CHANGES MADE SINCE THE                                   ,           VERSION OF THIS RELEASE ARE NOT MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAYPERIOD;

 

(f)                                    THECHANGES TO THE AGREEMENT SINCE                                     ,           EITHER ARE NOT MATERIAL OR WERE MADE AT MY REQUEST.

 

(g)                                 IUNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKEIT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THEREVOCATION PERIOD HAS EXPIRED;

 

(h)                                 IHAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICEOF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

 

(i)                                     IAGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED,WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY ANAUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

 
| DATE: |   |   |   |   |
|-------|--------|--------|--------|--------|

 

A-4

----

 

Exhibit B

 

ARBITRATION PROCEDURE

 

# 1.                                       Noticeof Claim.  A party asserting a Claim(the “Claimant”) shall deliver written notice to each party against whomthe Claim is asserted (collectively, the “Opposing Party”), with a copyto the persons required to receive copies of notices under the Agreement (the “AdditionalNotice Parties”), specifying the nature of the Claim and requesting ameeting to resolve same.  The AdditionalNotice Parties shall be given reasonable notice of and invited and permitted toattend any such meeting.  If noresolution is reached within 10 business days after delivery of such notice,the Claimant or the Opposing Party may, within 45 days after giving suchnotice, invoke the arbitration procedure provided herein by delivering to eachOpposing Party and the Additional Notice Parties a notice of arbitration whichshall specify the Claim as to which arbitration is sought, the nature of theClaim, the basis for the Claim and the nature and amount of any damages orother compensation or relief sought (a “Notice of Arbitration”).  Each party agrees that no punitive damagesmay be sought or recovered in any arbitration, judicial proceeding orotherwise.  Failure to file a Notice ofArbitration within 45 days shall constitute a waiver of any right to relief forthe matters asserted in the notice of Claim. Any Claim shall be forever barred, and no relief may be sought therefor,if written notice of such Claim is not made as provided above within one yearof the date such Claim accrues.

#  

# 2.                                       Selectionof Arbitrator.  Within 20 businessdays after receipt of the Notice of Arbitration, the Executive and a dulyauthorized representative of the Company shall confer, whether in person, bytelephone or in writing, and attempt to agree on an arbitrator to hear anddecide the Claim.  If the Executive andthe Board cannot agree on an arbitrator within ten business days, then theyshall request the American Arbitration Association (the “AAA”) inCharleston, South Carolina to appoint an arbitrator experienced in the area ofdispute who does not have an ongoing business relationship with any of theparties to the dispute.  If thearbitrator selected informs the parties he cannot hear and resolve the Claimwithin the time-frame specified below, the Executive and the Board shallrequest the appointment of another arbitrator by the AAA subject to the samerequirements.

#  

# 3.                                       ArbitrationProcedure.  The following proceduresshall govern the conduct of any arbitration under this section.  All procedural matters relating to theconduct of the arbitration other than those specified below shall be discussedamong counsel for the parties and the arbitrator.  Subject to any agreement of the parties, thearbitrator shall determine all procedural matters not specified herein.

#  

## (a)                                  Within30 days after the delivery of a Notice of Arbitration, each party shall affordthe other, or its counsel, with reasonable access to documents relatingdirectly to the issues raised in the Notice of Arbitration.  All documents produced and all copies thereofshall be maintained as strictly confidential, shall be used for no purposeother than the arbitration hereunder, and shall be returned to the producingparty upon completion of the arbitration. There shall be no other discovery except that, if a reasonable need isshown, limited depositions may be allowed in the discretion of the arbitrator,it being the expressed intention and agreement of each

 

B-1

----

 

party to have thearbitration proceedings conducted and resolved as expeditiously, economicallyand fairly as reasonably practicable, and with the maximum degree ofconfidentiality.

##  

## (b)                                 Allwritten communications regarding the proceeding sent to the arbitrator shall besent simultaneously to each party or its counsel, with a copy to the AdditionalNotice Parties.  Oral communicationsbetween any of the parties or their counsel and the arbitrator shall beconducted only when all parties or their counsel are present and participatingin the conversation.

##  

## (c)                                  Within20 days after selection of the arbitrator, the Claimant shall submit to thearbitrator a copy of the Notice of Arbitration, along with a supporting memorandumand any exhibits or other documents supporting the Claim.

##  

## (d)                                 Within20 days after receipt of the Claimant’s submission, the Opposing Party shallsubmit to the arbitrator a memorandum supporting its position and any exhibitsor other supporting documents.  If theOpposing Party fails to respond to any of the issues raised by the Claimantwithin 20 days of receipt of the Claimant’s submission, then the arbitrator mayfind for the Claimant on any such issue and bar any subsequent consideration ofthe matter.

##  

## (e)                                  Within20 days after receipt of the Opposing Party’s response, the Claimant may submitto the arbitrator a reply to the Opposing Party’s response, or notificationthat no reply is forthcoming.

##  

## (f)                                    Within10 days after the last submission as provided above, the arbitrator shallconfer with the parties to select the date of the hearing on the issues raisedby the Claim.  Scheduling of the hearingshall be within the sole discretion of the arbitrator, but in no event morethan 30 days after the last submission by the parties, and shall take placewithin 50 miles of the corporate headquarters of the Company at a placeselected by the arbitrator or such other place as is mutually agreed.  Both parties shall be granted substantiallyequal time to present evidence at the hearing. The hearing shall not exceed one business day, except for good causeshown.

##  

## (g)                                 Within30 days after the conclusion of the hearing, the arbitrator shall issue awritten decision to be delivered to both parties and the Additional NoticeParties (the “Final Determination”).  TheFinal Determination shall address each issue disputed by the parties, state thearbitrator’s findings and reasons therefor, and state the nature and amount ofany damages, compensation or other relief awarded.

##  

## (h)                                 Theaward rendered by the arbitrator shall be final and non-appealable, except asotherwise provided under the Federal Arbitration Act, and judgment may beentered upon it in accordance with applicable law in such court as hasjurisdiction thereof.

##  

# 4.                                       Costsof Arbitration.  Each party shallbear its own costs of conducting the arbitration, and administrative fees shallbe shared equally among the parties.

#  

# 5.                                       Satisfactionof Award.  If any party fails to paythe amount of the award, if any, assessed against it within 30 days after thedelivery to such party of the Final Determination,

 

B-2

----

 

the unpaid amount shallbear interest from the date of such delivery at the lesser of (i) primelending rate announced by Citibank N.A. plus three hundred basis points and (ii) themaximum rate permitted by applicable usury laws.  In addition, such party shall promptlyreimburse the other party for any and all costs or expenses of any nature orkind whatsoever (including attorneys’ fees) reasonably incurred in seeking tocollect such award or to enforce any Final Determination.

#  

# 6.                                       Confidentialityof Proceedings.  The parties heretoagree that all of the arbitration proceedings provided for herein, includingany notice of claim, the Notice of Arbitration, the submissions of the parties,and the Final Determination issued by the arbitrator, shall be confidential andshall not be disclosed at any time to any person other than the parties, theirrepresentatives, the arbitrator and the Additional Notice Parties; provided,however, that this provision shall not prevent the party prevailing in thearbitration from submitting the Final Determination to a court for the purposeof enforcing the award, subject to comparable confidentiality protections ifthe court agrees; and further provided that the foregoing shall not prohibitdisclosure to the minimum extent reasonably necessary to comply with (i) applicablelaw (or requirement having the force of law), court order, judgment or decree,including, without limitation, disclosures which may be required pursuant toapplicable securities laws, and (ii) the terms of contractual arrangements(such as financing arrangements) to which the Company or any Additional NoticeParty may be subject so long as such contractual arrangements were not enteredinto for the primary purpose of permitting disclosure which would otherwise beprohibited hereunder.

 

B-3

----