Document:

EX-10.1

 

Exhibit 10.1

Execution Copy

EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT (the “Agreement”) dated as of July 6, 2005 by and between Polypore
International, Inc., headquartered in Charlotte, North Carolina (the “Company”) and Robert B. Toth
(the “Executive”), and as acknowledged by PP Holding, LLC (the “LLC”).

     The Company desires to employ Executive and to enter into an agreement embodying the terms of
such employment; and

     Executive desires to accept such employment and enter into such an agreement; therefore

     In consideration of the premises and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:

     1. Term of Employment. Subject to Section 8 of this Agreement, Executive shall be
employed by the Company for a period commencing on July 6, 2005 (the “Commencement Date”) and
ending on July 6, 2008 (the “Employment Term”), on the terms and subject to the conditions set
forth in this Agreement; provided, however, that commencing upon July 6, 2008 and
on each anniversary thereafter (each an “Extension Date”), the Employment Term shall be
automatically extended for an additional one-year period, unless the Company or Executive provides
the other party hereto at least 120 days prior written notice before the next Extension Date that
the Employment Term shall not be so extended. For the avoidance of doubt, the term “Employment
Term” shall include any extension that becomes applicable pursuant to the preceding sentence.

     2. Position.

          a. For so long as Executive is employed by the Company pursuant to this Agreement, Executive
shall serve as the Company’s Chief Executive Officer and President. In such positions, Executive
shall have such duties and authority as shall be determined from time to time by the Board of
Directors of the Company (the “Board”) and Executive shall report solely to the Board. Executive
also agrees to serve, without additional compensation, as a member of the Board, and the Company
shall take all actions necessary to cause Executive to be appointed as a member of the Board. The
Company shall provide Executive with Directors and Officers (“D&O”) and Errors and Omissions
(“E&O”) insurance in limits provided to other directors and officers of the Company. The Company
also agrees to indemnify and defend Executive to the fullest extent permitted by law and the
Company’s corporate bylaws (the “By-Laws”), with respect to any and all claims, which arise from or
relate to Executive’s duties as an officer, member of the Board, if applicable, or employee of the
Company.

          b. For so long as Executive is employed by the Company pursuant to this Agreement, Executive
will devote Executive’s full business time and best efforts to the performance of Executive’s
duties hereunder and will not engage in any other business, profession or occupation for
compensation or otherwise which would conflict or interfere with the rendition of such services
either directly or indirectly, without the prior written consent of the Board. Notwithstanding the
foregoing, nothing herein shall preclude Executive from serving as

 

 

a member of the board of directors or advisory boards (or their equivalents in the case of a
non-corporate entity) of (i) not-for-profit and/or charitable organizations, and (ii) with the
prior written consent of the Board, which consent shall not be unreasonably withheld, non-competing
businesses.

     3. Base Salary. For so long as Executive is employed by the Company pursuant to this
Agreement, the Company shall pay Executive a base salary (the “Base Salary”) at the annual rate of
$450,000, payable in regular installments in accordance with the Company’s usual payment practices;
provided, however, that on January 1, 2006, the Company shall increase Executive’s Base Salary by
five percent (5%). Notwithstanding the foregoing, (a) at least once every twelve (12) months and
(b) upon the occurrence of a material corporate event of the Company (including, without
limitation, a merger, recapitalization, acquisition, consolidation of the Company or other similar
event), the Board shall review Executive’s rate of Base Salary. Executive’s Base Salary shall not
be reduced by the Company at any time during the Employment Term.

     4. Annual Bonus. With respect to each full fiscal year of the Company (each a “Fiscal
Year”) during the Employment Term (for so long as Executive is employed during such Term),
Executive shall be eligible to earn an annual bonus award (an “Annual Bonus”). Such Annual Bonus
shall be based upon the achievement of certain performance targets to be established by the Board
after consultation with Executive and the eligibility amount shall not be less than Executive’s
Base Salary (the “Target Annual Bonus”); provided, however, that Executive’s Annual
Bonus in respect to the current fiscal year shall be guaranteed to be $225,000 (50% of Executive’s
Base Salary) (the “Guaranteed Bonus”). Annual Bonuses shall, to the extent earned, be paid to
Executive no later than March 31 each year.

     5. Equity Arrangements.

          a. On the Commencement Date, subject to the terms of the Company’s 2004 Stock Option Plan (the
“Plan”), the Company shall grant Executive Options (as defined in the Plan) representing 2.25% of
the Company’s Common Stock, determined on a fully diluted basis, with an exercise price per share
equal to the Fair Market Value (as defined in the Plan). The Options shall be vested as to 25% on
the date of grant, and subject to Executive’s continued employment with the Company, the remainder
of the Options shall be eligible to vest upon the achievement of the annual and/or cumulative
performance targets for 2006, 2007 and 2008, in accordance with the terms of the Plan. The
Options shall otherwise be subject to the terms of an option agreement, the form of which is
attached hereto as Exhibit A. The parties hereto shall execute such option agreement
contemporaneously with the execution of this Agreement.

          b. During the one (1) year period following the Commencement Date, Executive shall be given
the opportunity to make one or more cash investments in the LLC, pursuant to which he may purchase
Class A Common Units of the LLC, subject to the terms of a subscription agreement in substantially
the same form executed by other members of the Company’s management team who have invested in the
LLC. As a condition of such purchase, Executive shall be required to execute and become a party to
the LLC’s LLC Agreement, as amended and restated from time to time. The purchase price of Common
Units of the LLC

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purchased
hereunder shall be at $875 per Common Unit. The parties hereto acknowledge that
(i) the LLC shall not engage in any new valuation of the Common Units prior to the sixtieth
(60th) day following the Commencement Date, (ii) the Company and the LLC represent that
the purchase price set forth above accurately represents the fair market value of a Common Unit, as
determined in good faith and upon reasonable belief by the LLC, and (iii) to the extent Executive
makes a purchase hereunder at a time where the purchase price is less than the fair market value of
such Common Units on the date of such purchase, such purchase may result in taxable income to
Executive.

     6. Employee Benefits. For so long as Executive is employed by the Company pursuant to
this Agreement, Executive shall be entitled to participate in the Company’s employee benefit plans,
such as but not limited to life insurance, medical, dental, disability, pension and retirement
plans, as in effect from time to time (collectively “Employee Benefits”). Commencing upon
Executive’s first day of employment, Executive shall be entitled to participate in the medical and
all other Employee Benefits on an equivalent basis to those benefits that are generally made
available to other senior executives of the Company.

     7. Business Expenses, Vacation, Automobile Allowance, Educational Expenses, Temporary
Housing and Relocation Expenses and Attorneys Fees.

          a. Business Expenses. For so long as Executive is employed by the Company pursuant to
this Agreement, reasonable business expenses incurred by Executive in the performance of
Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies
as in effect from time to time.

          b. Vacation. Executive shall be entitled to four (4) weeks of vacation for each
Fiscal Year (including two (2) weeks for the first partial fiscal year) during the Employment Term
(for so long as Executive is employed by the Company pursuant to this Agreement), to be taken at
such times and at such periods as to not interfere with the duties required to be rendered by
Executive under this Agreement. Executive shall be compensated, on a pro-rata basis, for any
unused vacation remaining upon the termination of Executive’s employment with the Company pursuant
to Section 8 of this Agreement.

          c. Automobile Allowance. Executive shall be entitled to a monthly car allowance equal
to $1,000 to cover all expenses relating to the provision and maintenance of a vehicle of
Executive’s choice.

          d. Educational Expenses. To the extent Executive is not reimbursed for tuition
already paid or contracted to be paid by Executive for private educational expenses for any child
of Executive for education in the St. Louis, Missouri area for the 2005-2006 academic year,
Executive shall be reimbursed by the Company for any such expenses.

          e. Temporary Housing and Relocation Expenses. The Company shall reimburse Executive
or pay directly for any temporary housing expenses incurred by Executive until Executive is able to
relocate into a permanent residence in the Charlotte, North Carolina Metropolitan area. In
addition, all relocation expenses, also including trips for obtaining appropriate housing in
Charlotte, North Carolina, shall be paid by the Company. Without

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limitation, Executive shall be promptly reimbursed for any brokerage commissions paid on the
sale of his current residence. All of the foregoing shall be grossed-up for taxes incurred in
respect of such reimbursement.

          f. Attorney Fees. The Company shall reimburse Executive for any attorneys’ fees
incurred by Executive with respect to the negotiation and preparation of this Agreement.

     8. Termination.

          a. By the Company For Cause or Resignation By Executive.

          (i) The Employment Term and Executive’s employment hereunder may be terminated by the Company
for Cause (as defined below) and shall terminate automatically upon Executive’s resignation, which
Executive shall be permitted to do at any time upon at least thirty (30) days’ written notice.

          (ii) For purposes of this Agreement, “Cause” shall mean: (A) gross negligence or willful
misconduct by Executive in connection with Executive’s employment duties or responsibilities
hereunder; (B) a material and continued failure by Executive to perform in any material respect his
duties or responsibilities after notice and reasonable opportunity to cure; (C) misappropriation by
Executive of the assets or business opportunities of the Company or its affiliates; (D)
embezzlement or other financial fraud committed against the Company or its affiliates by Executive
or at his direction, or with his prior personal knowledge; (E) Executive’s conviction of, admission
to, or entry of pleas of no contest to any (I) felony, or (II) any crime involving moral turpitude
that materially interferes with the performance of Executive’s duties; (F) Executive’s abuse of
alcohol and/or any use of illegal drugs that materially interferes with the performance of
Executive’s duties; or (G) Executive’s breach of any material provision of this Agreement. In the
event the Company determines that Cause exists, it shall notify Executive, and termination of
Executive’s employment for Cause shall be effected by at least a majority vote of the Board
(excluding Executive for such purpose) at a meeting occurring at least ten (10) business days after
the Company provides Executive with written notice that the Company intends to terminate
Executive’s employment for Cause, at which meeting Executive shall have the opportunity to be heard
with respect to the conduct giving rise to the termination for Cause.

          (iii) If Executive’s employment is terminated by the Company for Cause, or if Executive
resigns, Executive shall be entitled to receive:

     (A) the Base Salary through the date of termination, to be paid in a lump sum
within ten (10) business days after any termination;

     (B) reimbursement for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of Executive’s
termination, to be paid in a lump sum within ten (10) business days after any
termination; and

     (C) such Employee Benefits, if any, as to which Executive may be entitled (or
may have accrued) as of the date of termination under the employee benefit

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plans of the Company, to be paid in accordance with the terms thereof (the
amounts and benefits described in clauses (A) through (C) hereof, being hereinafter
referred to as the “Accrued Rights”).

     Following any termination of Executive’s employment by the Company for Cause or resignation by
Executive, except as set forth in Section 5 and this Section 8(a)(iii), Executive shall have no
further rights to any compensation or any other benefits under this Agreement.

          b. Disability or Death.

          (i) The Employment Term and Executive’s employment hereunder shall terminate upon Executive’s
death and may be terminated by the Company if Executive becomes physically or mentally
incapacitated and is therefore unable for a period of six (6) consecutive months or for an
aggregate of nine (9) months in any twenty-four (24) consecutive month period to perform
Executive’s duties (such incapacity is hereinafter referred to as “Disability”). Any question as
to the existence of the Disability of Executive as to which Executive and the Company cannot agree
shall be determined in writing by a qualified independent physician mutually acceptable to
Executive and the Company. If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall select a third who
shall make such determination in writing. The determination of Disability made in writing to the
Company and Executive shall be final and conclusive for all purposes of the Agreement.

          (ii) Upon termination of Executive’s employment hereunder for either Disability or death,
Executive or Executive’s estate (as the case may be) shall be entitled to receive:

     (A) the Accrued Rights;

     (B) so long as and to the extent the Company achieves the performance targets
established by the Board in respect of the Fiscal Year in which the date of
termination occurs, an amount equal to the Annual Bonus, if any, to which Executive
would have been entitled to receive pursuant to Section 4 hereof in respect of such
Fiscal Year, pro rated from the first day of such Fiscal Year through the date of
termination and payable when such Annual Bonus would have otherwise been payable had
Executive’s employment not terminated; and

     (C) continuation of medical benefits for Executive (as applicable) and his
covered dependents, at the same cost paid by Executive (and his dependents, as
applicable) immediately prior to the date of such termination, until the earlier of
(x) the twelve (12) month anniversary of the date of such termination, or (y) the
date Executive and/or his dependents elect to cease continuation of such benefits.

     Following Executive’s termination of employment due to death or Disability, except as set
forth in Section 5 and this Section 8(b)(ii), Executive shall have no further rights to any
compensation or any other benefits under this Agreement.

          c. By the Company Without Cause or by Executive for Good Reason.

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          (i) The Employment Term and Executive’s employment hereunder may be terminated by the Company
without Cause (which shall include the Company’s election not to extend the Employment Term
pursuant to Section 1, as set forth in Section 8(d) below) or Good Reason by Executive. For
purposes of this Agreement, a termination without Cause by the Company shall be deemed to mean any
termination of Executive’s employment by the Company which (x) does not constitute a termination
for Cause as defined in Section 8(a)(ii), or (y) is not by reason of Executive’s death or
Disability. For purposes of this Agreement, Good Reason includes, but is not limited to, the
following: (i) any material breach of this Agreement by the Company; (ii) any request by the
Company for Executive to relocate or perform services at a location other than the Charlotte, North
Carolina Metropolitan area; (iii) a substantial and material diminution or reduction, not consented
to by Executive in writing, in the nature or scope of Executive’s responsibilities, authorities,
powers, functions or duties; (iv) any removal, during the Employment Term, from Executive of his
title of President or Chief Executive Officer; or (v) the failure of the Company to obtain the
agreement from any successor to the Company to expressly assume and agree in writing to perform
this Agreement in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.

          (ii) If Executive’s employment is terminated by the Company without Cause, or by Executive for
Good Reason, Executive shall be entitled to receive:

     (A) The Accrued Rights;

     (B) A lump-sum payment equivalent to the greater of (x) the aggregate Base
Salary payable to Executive for the remainder of the then current Employment Term
(assuming no such termination had occurred and no further extension of the
Employment Term), or (y) Executive’s then current Base Salary, in either case, to be
paid within fifteen (15) business days following termination of employment;

     (C) Continuation of Executive’s employee benefits for the later of (x) a period
of twelve (12) months following the date of employment termination or (y) the
expiration of the then current Employment Term (assuming no such termination had
occurred and no further extension of the Employment Term); and

     (D) A lump-sum payment equivalent to the Bonus Severance Amount, such amount to
be paid within fifteen (15) business days following termination of employment;

provided, however, in the event that Executive’s employment is terminated by the Company or any
successor to the Company in anticipation of or within twelve months following any material
corporate event of the Company, including without limitation, a merger, recapitalization,
acquisition, consolidation of the Company or other similar event, Executive shall be entitled to
the lump-sum amounts and benefits described above in Section 8(c)(ii)(B), (C) and (D) for a period
equivalent to two years instead of one year as otherwise set forth therein.

For purposes of this Section 8(c)(ii):

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     “Bonus Multiple” shall be an amount equal to the greater of (x) one (1), or (y)
a fraction, the numerator of which shall equal the number of whole calendar months
remaining in the then current Employment Term (assuming no termination had occurred
and no further extension of the Employment Term), including for such purpose, the
calendar month during which Executive’s termination occurs, and the denominator of
which shall equal twelve (12).

     “Bonus Severance Amount” shall mean an amount equal to the Bonus Multiple
multiplied by the Deemed Bonus.

     “Deemed Bonus” shall mean an amount equal to the greater of (1) Executive’s
Annual Bonus for the fiscal year immediately preceding the fiscal year in which such
termination occurred, or (2) 50% of Executive’s Target Annual Bonus relating to the
year in which such termination occurs; provided however that if such termination
occurs on or before December 31, 2005, the Deemed Bonus shall equal the Guaranteed
Bonus.

          d. Expiration of Employment Term.

          (i) Election Not to Extend the Employment Term. In the event either party elects not
to extend the Employment Term (on the same terms and conditions set forth in this Agreement)
pursuant to Section 1, unless Executive’s employment is earlier terminated pursuant to paragraphs
(a), (b) or (c) of this Section 8, Executive’s termination of employment hereunder (whether or not
Executive continues as an employee of the Company thereafter) shall be deemed to occur on the close
of business on the day immediately preceding the next scheduled Extension Date and Executive shall
be entitled to receive (x) the Accrued Rights plus (y) the Annual Bonus in respect of the
last Fiscal Year of the Employment Term, so long as and to the extent the Company achieves the
performance targets established by the Board in respect of such Fiscal Year. In addition, in the
event the Company elects not to extend the Employment Term (on the same terms and conditions set
forth in this Agreement) pursuant to Section 1, Executive shall also be entitled to the payments
and benefits described in Section 8(c)(ii), above (and as set forth therein).

     Following such termination of Executive’s employment hereunder as a result of either party’s
election not to extend the Employment Term, except as set forth in Section 5 and in this Section
8(d)(i), Executive shall have no further rights to any compensation or any other benefits under
this Agreement.

          (ii) Continued Employment Beyond the Expiration of the Employment Term. Unless the
parties otherwise agree in writing or the Employment Term (on the same terms and conditions set
forth in this Agreement) is extended pursuant to Section 1, continuation of Executive’s employment
with the Company beyond the expiration of the Employment Term shall be deemed an employment at-will
and shall not be deemed to extend any of the provisions of this Agreement and Executive’s
employment may thereafter be terminated at will by either Executive or the Company;
provided that the provisions of Sections 9, 10 and 11 of this Agreement shall survive any
termination of this Agreement or Executive’s termination of employment hereunder.

Page 7 of 12

 

          e. Notice of Termination. Any purported termination of employment by the Company or
by Executive (other than due to Executive’s death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 12(h) hereof. For purposes of
this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of employment under the
provision so indicated.

          f. Board Resignation. Upon termination of Executive’s employment for any reason,
Executive agrees to resign, as of the date of such termination and to the extent applicable, from
the Board and the Board of Directors of any of the Company’s affiliates, if applicable.

     9. Restrictive Covenants. Executive acknowledges and recognizes the highly
competitive nature of the business of the Company and accordingly agrees as follows:

          a. Non-Competition.

               (1) During the Employment Term (but only for so long as Executive remains employed by the
Company pursuant to this Agreement) and, for a period of one year following the date Executive
ceases to be employed by the Company (the “Restricted Period”), Executive will not (i) engage in
any business that is in Competition (as hereinafter defined) with the Company or its subsidiaries,
(ii) enter the employ of, or render any services to, any person engaged in Competition with the
Company; or (iii) acquire a financial interest in, or otherwise become actively involved with, any
person engaged in any business that is in Competition with the Company, as an individual, partner,
shareholder, officer, director, principal, agent, trustee, employee or consultant. For purposes of
this Section 9, “Competition” shall mean the business of producing or selling microporous membrane
products produced or sold, or expressly contemplated to be produced or sold, by the Company or its
subsidiaries as of the date hereof and during the Employment Term.

               (2) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or
indirectly own, solely as an investment, securities of any person engaged in Competition with the
Company or its affiliates which are publicly traded on a national or regional stock exchange or on
the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group
which controls, such person and (ii) does not, directly or indirectly, own 5% or more of any class
of securities of such person.

          b. Non-Solicitation; Non-Interference. During the Restricted Period, Executive shall
not, directly or indirectly, for his own account or for the account of any other individual or
entity, (i) encourage, solicit or induce, or in any manner attempt to solicit or induce, any
individual or entity employed by, as agent of, or a service provider to, the Company to terminate
such person’s employment, agency or service, as the case may be, with the Company; (ii) engage in
Competition with the Company by soliciting business of the type performed by the Company from any
individual or entity for whom the Company provided services or products within the one-year period
immediately preceding the date of Executive’s termination of employment; (iii) engage in
Competition with the Company by soliciting business of the type

Page 8 of 12

 

performed by the Company from any prospective customer or client of the Company who, within
the one-year period immediately preceding the date of Executive’s termination of employment, the
Company had directly solicited; or (iv) assist any person or entity to engage in any activity
prohibited by this subsection (b).

          c. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 9 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.

     10. Confidentiality. Executive will not at any time (whether during or after
Executive’s employment with the Company) disclose or use for Executive’s own benefit or purposes or
the benefit or purposes of any other person, firm, partnership, joint venture, association,
corporation or other business organization, entity or enterprise other than the Company, any trade
secrets, information, data, or other confidential information relating to customers, development
programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial
data, manufacturing processes, financing methods, plans, or the business and affairs of the
Company; provided that the foregoing shall not apply to information which is not unique to
the Company or which is generally known to the industry or the public other than as a result of
Executive’s breach of this covenant. Except as required by law, Executive will not disclose to
anyone, other than his immediate family and legal or financial advisors or financial institutions,
the existence or contents of this Agreement. Executive agrees that upon termination of Executive’s
employment with the Company for any reason, he will return to the Company immediately all
memoranda, books, papers, plans, information, letters and other data, and all copies thereof or
therefrom, in any way relating to the business of the Company, except that he may retain personal
notes, notebooks and diaries that do not contain confidential information of the type described in
the preceding sentence. Executive further agrees that he will not retain or use for Executive’s
account at any time any trade names, trademark or other proprietary business designation used or
owned in connection with the business of the Company.

     11. Specific Performance. Executive acknowledges and agrees that the Company’s
remedies at law for a breach or threatened breach of any of the provisions of Section 9 or Section
10 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of
such a breach or threatened breach, in addition to any remedies at law, the Company shall be
entitled to obtain equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may then be available.

     12. Miscellaneous.

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          a. Governing Law; Jurisdiction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts of laws principles
thereof. The Company and Executive each hereby consents to the jurisdiction of the federal and
state courts in the state in which Executive maintains his principal place of residence, as of the
earlier of the date on which (i) either party brings a claim under this Agreement against the other
party and (ii) Executive’s termination of employment occurs. The Company and Executive also each
hereby irrevocably waives any objection it may now or hereafter have to laying of the venue of any
suit, action or proceeding in connection with this Agreement in any such court, and agrees that
service upon it shall be sufficient if made by registered mail.

          b. Entire Agreement/Amendments. This Agreement contains the entire understanding of
the parties with respect to the employment of Executive by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties hereto.

          c. No Waiver. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.

          d. Severability. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.

          e. Assignment. This Agreement shall not be assignable by Executive. This Agreement
shall be assigned by the Company to a person or entity which is a successor in interest to
substantially all of the business operations of the Company. Upon such assignment, the rights and
obligations of the Company hereunder shall become the rights and obligations of such successor
person or entity.

          f. Mitigation. Executive shall not be required to mitigate the amount of any payment
provided for pursuant to this Agreement by seeking other employment, taking into account the
provisions of Section 9 of this Agreement.

          g. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be
binding upon personal or legal representatives, executors, administrators, successors, heirs,
distributes, devises and legatees.

          h. Notice. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the respective addresses
set forth below Agreement, or to such other address as either party may

Page 10 of 12

 

have furnished to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.

     If to the Company:

     If to Executive:

     To the most recent address of Executive set forth in the personnel records of the
Company.

          i. Executive Representation. Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the Company and the performance by
Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or policy to which Executive
is a party or otherwise bound.

          j. Prior Agreements This Agreement supercedes all prior agreements and understandings
(including verbal agreements), if any, between Executive and the Company regarding the terms and
conditions of Executive’s employment with the Company.

          k. Withholding Taxes. The Company may withhold from any amounts payable under this
Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.

          l. Counterparts. This Agreement may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.

          m. Prevailing Party. The prevailing party shall be entitled to recover all reasonable
attorneys’ fees and costs in any litigation for breach of this Agreement.

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     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.

	 	 	 	 	 
	 

	 	POLYPORE INTERNATIONAL, INC.:
	 	 
	 
	 	/s/ Michael Graff	 	 
	 

	 	 	 	 
	 

	 	By:  Michael Graff	 	 
	 

	 	Title:  Chairman of the
Board	 	 
	 
	 	 	 	 
	 

	 	EXECUTIVE:	 	 
	 
	 	/s/ Robert B. Toth	 	 
	 

	 	 	 	 
	 

	 	Robert B. Toth	 	 
	 
	 	 	 	 
	 

	 	Solely for purposes of its obligations

under Section 5(b) hereof:	 	 
	 
	 	 	 	 
	 

	 	PP HOLDING, LLC:	 	 
	 
	 	/s/ Michael Graff	 	 
	 

	 	 	 	 
	 

	 	By:  Michael Graff	 	 
	 

	 	Title:  Chairman of the
Board	 	 

Page 12 of 12EX-10.2

 

EMPLOYMENT AGREEMENT

     This
EMPLOYMENT AGREEMENT is made and entered into as of this
15th
 day of August , 2005, by and
between Polypore International, Inc., a Delaware corporation (the “Company”), and Frank
Nasisi (the “Executive”).

W I T N E S S E T H :

     WHEREAS, Executive is currently employed as the Chief Executive Officer of the Company; and

     WHEREAS, Executive’s employment with the Company is currently governed by the terms set forth
in term sheet executed by Executive and an behalf of the Company in January 2004 (the “Term
Sheet”); and

     WHEREAS, the Company and Executive have mutually agreed to have Executive resign from his
position as Chief Executive Officer of the Company, and to appoint Executive as the Vice Chairman
of the Company; and

     WHEREAS, the Company and Executive desire to enter into an agreement embodying the terms of
such continued employment with the Company (this “Agreement”).

     NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for
other good and valuable consideration, the receipt of which is mutually acknowledged, the Company
and Executive agree as follows:

     Section 1. Definitions.

     (a) “Accrued Obligations” shall mean (i) all accrued but unpaid Base Salary through
the date of termination of Executive’s employment; (ii) any unpaid Annual Bonus in respect to any
completed fiscal year which has ended prior to the date of termination of Executive’s employment;
(iii) any unpaid or unreimbursed expenses incurred in accordance with Section 6 below; and (iv) any
benefits provided under the Company’s employee benefit plans upon a termination of employment, in
accordance with the terms therein, including rights with respect to stock options in the Company
granted pursuant to the Plan. To the extent payable pursuant to Section 8 below, the Accrued
Obligations shall be paid within five (5) business days of any applicable termination, except
amounts payable with respect to unpaid Annual Bonus, which shall be paid at such time Annual Bonus
amounts are paid to other senior executives.

     (b) “Base Salary” shall mean the salary provided for in Section 4(a) below or any
increased salary granted to Executive pursuant to Section 4(a).

     (c) “Board” shall mean the Board of Directors of the Company.

     (d) “Cause” shall mean a good faith determination by the Board of: (i)
misappropriation by Executive of the assets or business opportunities of the Company or its
affiliates; (ii) embezzlement or other financial fraud committed by Executive or at his direction,
or with his knowledge; (iii) Executive’s indictment for, conviction of, admission to, or entry of

 

 

pleas of no contest to any felony or any crime involving moral turpitude; or (iv) Executive’s
willful and material breach of Sections 3(b) or 9 of this Agreement.

     (e) “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

     (f) “Competitive Activities” shall mean any business activities in which the Company
is engaged or has committed plans to engage either (i) during the Term of Employment, or (ii) for
purposes of Executive’s obligations under Section 9(b) after the Term of Employment, at the time of
termination of Executive’s employment.

(g)
“Confidential Information” shall have the meaning set forth in Section 9(a) below.

     (h) “Plan” shall mean the Polypore International, Inc. 2004 Stock Option Plan, as
amended from time to time.

     (i) “Restricted Period” shall mean the period commencing as of the date hereof and
ending on the eighteen (18) month anniversary of the date of Executive’s termination of employment
for any reason (including expiration of the Term of Employment).

     (j) “Severance Term” shall mean the period specified in Section 8(c)(ii) below.

     (k) “Term of Employment” shall mean the period specified in Section 2 below.

     Section 2. Acceptance and Term of Employment.

     The Company agrees to employ Executive and Executive agrees to serve the Company on the terms
and conditions set forth herein. Unless sooner terminated as provided in Section 8 hereof, the
Term of Employment shall commence immediately following the date hereof and shall continue during
the period ending on December 31, 2006. The Term of Employment may be extended by mutual agreement
of the parties hereto.

     Section 3. Position and Duties and Responsibilities.

     (a) During the Term of Employment, Executive shall be employed and serve as the Vice Chairman
of the Company and shall have such duties typically associated with such title and such other
duties and responsibilities as may be mutually agreed upon by the Board, and the Executive.
During the Term of Employment, Executive shall also continue to serve as a member of the Board.

     (b) Executive shall devote an amount of business time to the performance of his duties under
this Agreement as is mutually agreed upon by the Board and Executive, which shall in no event
constitute less than one-third (1/3) of Executive’s full business time. The parties hereto
acknowledge that Executive may conduct other business activities during the Term of Employment,
subject to the restrictions contained in Section 9 hereof.

 

 

     Section 4. Compensation. During the Term of Employment, Executive shall be entitled to the
following compensation:

     (a) Base Salary. Pursuant to the Term Sheet, Executive shall continue to be paid his
base salary of $435,000 until December 31, 2005. Commencing January 1, 2006, to reflect
Executive’s revised responsibilities and time commitment as set forth in this Agreement,
Executive’s annualized Base Salary shall be changed to $300,000 without further action by the
parties hereto.

     (b) Annual Bonus. Executive shall be eligible for an annual cash incentive bonus
award (the “Annual Bonus”) based upon achievement of the Annual EBITDA Targets, as set
forth in the Plan. For the Company’s 2005 fiscal year, Executive’s Annual Bonus shall be governed
by the terms of the Term Sheet. For the Company’s 2006 fiscal year, Executive’s target Annual
Bonus shall equal to two-thirds (2/3) of Base Salary during such period, with his actual Annual
Bonus continuing to be based upon achievement of the Annual EBITDA Targets, as set forth in the
Plan. Executive shall receive the Annual Bonus in respect of any year at the same time as bonuses
are paid to other executive officers of the Company, but in no event later than ninety (90) days
after the end of the year for which the bonus is payable.

     (c) Stock Options. Executive shall continue to vest in any stock options previously
granted to Executive in accordance with the terms and conditions contained in the Plan.

     Section 5. Employee Benefits.

     During the Term of Employment, Executive shall be entitled to continue to participate in
health, insurance, retirement and other benefits provided to other senior executives of the
Company. Executive shall also be entitled to the same number of holidays, vacation, sick days and
other benefits as are generally allowed to senior executives of the Company in accordance with the
Company policy in effect from time to time.

     Section 6. Reimbursement of Business Expenses.

     Executive is authorized to incur reasonable expenses in carrying out his duties and
responsibilities under this Agreement and the Company shall promptly reimburse him for all business
expenses incurred in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company’s policy, as in effect from time to time.

     Section 7. Indemnification

     The Company shall indemnify Executive to the fullest extent permitted (including payment of
expenses in advance of final disposition of the proceeding) by the laws of the State of Delaware as
in effect at the time of the subject act or omission, and Executive shall be entitled to the
protection of any insurance policies the Company may elect to maintain generally for the benefit of
its directors and officers, against all costs, charges and expenses whatsoever incurred or
sustained by him in connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director, officer or employee of the Company or any of its
subsidiaries. If any action, suit or proceeding is brought or threatened against the

 

 

Executive in respect of which indemnity may be sought against the Company pursuant to the
foregoing, the Executive shall notify the Company promptly in writing of the institution of such
action, suit or proceeding and the Company shall assume the defense hereof and the employment of
counsel and payment of all fees and expenses.

     Section 8. Termination of Employment.

     (a) General. The Term of Employment shall terminate upon expiration of the Term of
Employment (as provided in Section 2) or earlier upon the occurrence of either (i) a termination by
the Company for Cause, (ii) a termination by Executive for any reason, or (iii) the death of
Executive. Upon any termination of Executive’s employment for any reason, except as may otherwise
be requested by the Company, Executive shall resign from any and all directorships, committee
memberships or any other positions Executive holds with the Company or any of its affiliates.

     (b) Termination for Cause or by Executive. The Company may terminate Executive’s
employment hereunder for Cause upon not less than fifteen (15) days written notice by the Board to
Executive of the intention to terminate him for Cause, such notice to state in detail the
particular act or acts or failure or failures to act that constitute the grounds on which the
proposed termination for Cause is based. Executive shall have fifteen (15) days after the date
that such written notice has been given to Executive in which to cure such conduct, to the extent
such cure is possible. If he fails to cure such conduct, the termination shall be effective on the
date immediately following the expiration of the fifteen (15) day notice period. Executive may
terminate his employment hereunder upon not less than fifteen (15) days written notice to the Board
of his intention to terminate his employment.

     (c) Payments Upon Termination. Upon expiration of the Term of Employment, or upon any
earlier termination, Executive shall be entitled to:

          (i) The Accrued Obligations;

          (ii) Continuation of Base Salary at a rate equal to $36,250 per month for a period of eighteen
(18) months following the date of such termination (the “Severance Term”), payable in
accordance with the Company’s payroll practices; provided that the Company shall pay such
amounts over such shorter period of time as it determines to be necessary to comply with
requirements of Section 409A of the Internal Revenue Code of 1986; and

          (iii) Should Executive be eligible for and elect to continue his health insurance pursuant to
COBRA following the date of such termination, payment of COBRA premiums by the Company until the
earlier of: (A) expiration of the Severance Term, or (B) the date Executive commences employment
with any person or entity and is eligible for health insurance benefits.

     Notwithstanding the foregoing, the payments and benefits described in subsections (ii) and
(iii) above shall immediately terminate, and the Company shall have no further obligations to
Executive with respect thereto, in the event that Executive breaches any provision of Section 9
hereof.

 

 

     (d) Mitigation; Offset. In the event of any termination of employment, Executive
shall be under no obligation to mitigate amounts payable under this Section 8 by seeking other
employment or otherwise and there shall be no offset against amounts due to Executive hereunder on
account of subsequent employment or otherwise.

     (e) Release. Notwithstanding any provision herein to the contrary, the Company may
require that, prior to payment of any amount or provision of any benefit pursuant to subsection (c)
of this Section 8, Executive shall have executed a complete release of the Company and its
affiliates and related parties in such form as is reasonably required by the Company, and any
waiting periods contained in such release shall have expired.

     Section 9. Restrictive Covenants. Executive acknowledges and agrees that (A) the agreements
and covenants contained in this Section 9 are (i) reasonable and valid in geographical and temporal
scope and in all other respects, and (ii) essential to protect the value of the Company’s business
and assets, and (B) by his employment with the Company, Executive will obtain knowledge, contacts,
know-how, training and experience and there is a substantial probability that such knowledge,
know-how, contacts, training and experience could be used to the substantial advantage of a
competitor of the Company and to the Company’s substantial detriment. For purposes of this Section
9, references to the Company shall be deemed to include its subsidiaries.

     (a) Confidential Information. At any time during and after the end of the Term of
Employment, without the prior written consent of the Board, except to the extent required by an
order of a court having jurisdiction or under subpoena from an appropriate government agency, in
which event, Executive shall use his best efforts to consult with the Board prior to responding to
any such order or subpoena, and except as required in the performance of his duties hereunder,
Executive shall not disclose any confidential or proprietary trade secrets, customer lists,
drawings, designs, information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information, operating policies or manuals, business
plans, financial records, packaging design or other financial, commercial, business or technical
information (i) relating to the Company, or (ii) that the Company may receive belonging to
suppliers, customers or others who do business with the Company (“Confidential
Information”). Executive’s obligation under this Section 9(a) shall not apply to any
information which is known publicly or hereafter enters the public domain without the breach of the
Executive of this Section 9(a).

     (b) Non-Competition. Executive covenants and agrees that during the Restricted
Period, with respect to any jurisdiction in which the Company is engaged in business at the time of
such termination, Executive shall not, without the prior written consent of the Board, directly or
indirectly, individually or jointly, own any interest in, operate, join, control or participate as
a partner, director, principal, officer, or agent of, enter into the employment of, act as a
consultant to, or perform any services for any entity that engages in Competitive Activities.
Notwithstanding anything herein to the contrary, this Section 9(b) shall not prevent Executive from
acquiring as an investment securities representing not more than three percent (3%) of the
outstanding voting securities of any publicly-held corporation.

 

 

     (c) No Solicitation; No Interference. During the Restricted Period, Executive shall
not, directly or indirectly, for his own account or for the account of any other individual or
entity, nor shall he assist any person or entity to (i) encourage, solicit or induce, or in any
manner attempt to solicit or induce, any person employed by, as agent of, or a service provider to,
the Company to terminate such person’s employment, agency or service, as the case may be, with the
Company; or (ii) divert, or attempt to divert, any person, concern, or entity from doing business
with the Company or any of its subsidiaries, or attempt to induce any such person, concern or
entity to cease being a customer or supplier of the Company.

     (d) Return of Documents. In the event of the termination of Executive’s employment
for any reason, Executive shall deliver to the Company all of (i) the property of the Company, and
(ii) the documents and data of any nature and in whatever medium of the Company, and he shall not
take with him any such property, documents or data or any reproduction thereof, or any documents
containing or pertaining to any Confidential Information.

     (e) Blue Pencil. If any court of competent jurisdiction shall at any time deem the
duration or the geographic scope of any of the provisions of this Section 9 unenforceable, the
other provisions of this Section 9 shall nevertheless stand and the duration and/or geographic
scope set forth herein shall be deemed to be the longest period and/or greatest size permissible by
law under the circumstances, and the parties hereto agree that such court shall reduce the time
period and/or geographic scope to permissible duration or size.

     Section 10. Injunctive Relief.

     Without intending to limit the remedies available to the Company, Executive acknowledges that
a breach of any of the covenants contained in Section 9 hereof may result in material irreparable
injury to the Company or its subsidiaries or affiliates for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely and that, in the
event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent injunction, without the necessity of proving
irreparable harm or injury as a result of such breach or threatened breach of Section 9 hereof,
restraining Executive from engaging in activities prohibited by Section 9 hereof or such other
relief as may be required specifically to enforce any of the covenants in Section 9 hereof.

     Section 11. Taxes.

     The Company may withhold from any payments made under this Agreement all applicable taxes,
including but not limited to income, employment and social insurance taxes, as shall be required by
law.

     Section 12. Successors and Assigns.

     (a) The Company. This Agreement shall inure to the benefit of and be enforceable by,
and may be assigned by the Company to, any purchaser of all or substantially all of the Company’s
business or assets, any successor to the Company or any assignee thereof (whether direct or
indirect, by purchase, merger, consolidation or otherwise). The Company will require any such
purchaser, successor or assignee to expressly assume and agree to perform this

 

 

Agreement in the same manner and to the same extent that the Company would be required to
perform it if no such purchase, succession or assignment had taken place.

     (b) Executive. Executive’s rights and obligations under this Agreement shall not be
transferable by Executive by assignment or otherwise, without the prior written consent of the
Company; provided, however, that if Executive shall die, all amounts then payable
to Executive hereunder shall be paid in accordance with the terms of this Agreement to Executive’s
devisee, legatee or other designee or, if there be no such designee, to Executive’s estate.

     Section 13. Waiver and Amendments.

     Any waiver, alteration, amendment or modification of any of the terms of this Agreement shall
be valid only if made in writing and signed by the parties hereto; provided,
however, that any such waiver, alteration, amendment or modification is consented to on the
Company’s behalf by the Board. No waiver by either of the parties hereto of their rights hereunder
shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions
hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

     Section 14. Severability and Governing Law.

     If any covenants or such other provisions of this Agreement are found to be invalid or
unenforceable by a final determination of a court of competent jurisdiction: (a) the remaining
terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or
provision hereof shall be deemed replaced by a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable term or provision
hereof. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF DELAWARE (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF) APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. The parties hereto consent to venue in the
courts of either the Commonwealth of Massachusetts or the State of New York or in the Federal
courts sitting in the Commonwealth of Massachusetts or the State of New York with respect to any
dispute regarding the subject matter hereof.

     Section 15. Notices.

     (a) Every notice or other communication relating to this Agreement shall be in writing, and
shall be mailed to or delivered to the party for whom it is intended at such address as may from
time to time be designated by it in a notice mailed or delivered to the other party as herein
provided, provided that, unless and until some other address be so designated, all notices or
communications by Executive to the Company shall be mailed or delivered to the Company at its
principal executive office, and all notices or communications by the Company to Executive may be
given to Executive personally or may be mailed to Executive at Executive’s last known address, as
reflected in the Company’s records.

     (b) Any notice so addressed shall be deemed to be given: (i) if delivered by hand, on the
date of such delivery; (ii) if mailed by courier or by overnight mail, on the first

 

 

business day following the date of such mailing; and (iii) if mailed by registered or
certified mail, on the third business day after the date of such mailing.

     Section 16. Section Headings.

     The headings of the sections and subsections of this Agreement are inserted for convenience
only and shall not be deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or of any term or provision hereof.

     Section 17. Entire Agreement.

     This Agreement constitutes the entire understanding and agreement of the parties hereto
regarding the employment of Executive and his termination of employment. This Agreement supersedes
all prior negotiations, discussions, correspondence, communications, understandings and agreements
between the parties relating to the subject matter of this Agreement, including, without
limitation, the Term Sheet, except as expressly set forth herein.

     Section 18. Survival of Operative Sections.

     Upon any termination of Executive’s employment, the provisions of Section 8 through Section 19
of this Agreement shall survive to the extent necessary to give effect to the provisions thereof.

     Section 19. Counterparts.

     This Agreement may be executed in two or more counterparts, each of which shall be deemed to
be an original but all of which together shall constitute one and the same instrument. The
execution of this Agreement may be by actual or facsimile signature.

* * *

[Signatures to appear on the following page.]

 

 

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

	 	 	 	 	 
	 

	 	POLYPORE INTERNATIONAL, INC.
	 	 
	 
	 	/s/ Michael Graff	 	 
	 

	 	 	 	 
	 

	 	By:  Michael Graff	 	 
	 

	 	Title:  Chairman of the
Board	 	 
	 
	 	 	 	 
	 

	 	Executive	 	 
	 
	 	/s/ Frank Nasisi	 	 
	 

	 	 	 	 
	 

	 	Frank Nasisi

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