Document:

Exhibit
10.1

The First

Marblehead

Corporation

 

May 8, 2007

Mr. Stephen E. Anbinder

230 Park Avenue, 10th Floor

New York, NY  10169-1099

Dear Steve:

This letter agreement will confirm the extension of
the Consulting Period, as defined in the agreement dated June 27, 2006
between you and The First Marblehead Corporation, through December 31,
2007.

Please acknowledge your
agreement to this extension by signing below.

	
  Very truly yours,

  
	
  /s/ Peter B. Tarr

  	
   

  
	
  Peter B. Tarr

  
	
  Chairman

  
	
  Agreed:

  
	
  /s/ Stephen E. Anbinder

  	
   

  
	
  Stephen E. Anbinder

  

 

 The First Marblehead Corporation
 800 Boylston Street, 34th Floor
 Boston, MA 02199
 Phone 800.895.4283
 www.firstmarblehead.com
 Creating Solutions for Education FinanceExhibit 10.1

Executive Employment
Agreement

This Executive Employment Agreement
(the “Agreement”) is entered into
between Polymer Group, Inc., (“PGI”) a Delaware corporation, and Veronica M. Hagen (“Executive”) effective as of April 23, 2007
(the “Effective Date”).  PGI and Executive agree as follows:

ARTICLE
1:  EMPLOYMENT, COMPENSATION AND BENEFITS

1.1           Term and Position.  PGI agrees to employ Executive and Executive
agrees to be employed by PGI as Chief Executive Officer of PGI.  As Chief Executive Officer, Executive shall
be a member of PGI’s Board of Directors (the “Board”). 
Executive shall have the normal duties, responsibilities, functions and
authority of the Chief Executive Officer and shall devote full working time to
the successful conduct of the business of PGI; however, Executive shall be
permitted to serve on the board of directors of one for-profit corporation
(provided such corporation is not in competition with PGI) and one
not-for-profit corporation.  Executive
will report directly to the Board and Executive’s specific duties shall be
determined by the Board.  The term of the
Agreement shall be for a period of 3 years, commencing on April 23, 2007 and
ending on April 22, 2010 (the “Term”); provided, however, that the Term shall be
automatically extended for additional one (1) year periods commencing on the
third anniversary of the Effective Date unless written notice of termination of
the automatic extension is provided by either the Executive or PGI at least
three months prior to the third anniversary of the Effective Date, or each
successive anniversary, as applicable; provided further, that if a “Change in
Control” of PGI (as defined below) occurs during the Term (including any
extension thereof), the Term shall automatically extend to the third
anniversary of the Change in Control.

1.2           Compensation.

a.             Base Compensation.  For all services rendered by Executive during
the Term, Executive shall receive base compensation at a rate of $650,000 per
annum (“Base
Compensation”), payable in accordance with PGI’s then existing payroll
practices, less such deductions as are authorized or required by law.  Executive’s Base Compensation shall be
subject to review and potential increase (but no decrease) annually by the
Board.

b.             Bonus. Executive shall be
entitled to participate in the Polymer Group, Inc. Short-Term Incentive
Compensation Plan (the “Bonus Plan”).  Executive’s
annual target cash bonus potential under the Bonus Plan will be, and shall not
exceed, 100% of Base Compensation, and shall be based on annual performance
goals to be mutually agreed upon by the Board and Executive.  Notwithstanding the preceding to the
contrary, Executive’s full annual target cash bonus (without pro-ration) for
the fiscal year ending December 29, 2007 shall be guaranteed (the “2007 Bonus”) provided Executive is an
employee in good standing on the Payment Date (as defined in the Bonus Plan).

c.             Equity Compensation.  On the Effective Date, PGI shall grant
Executive 100,000 restricted shares (the “Initial Grant”) of PGI common stock pursuant to
and in accordance with the Polymer Group, Inc. 2005 Employee Restricted Stock
Plan (the “Equity
Plan”).  The Initial Grant shall vest as follows:  (1) 50,000 of the 100,000 restricted shares
shall vest based on service at a rate of 25% per year on the first four
anniversaries of the award date, and (2) the remaining 50,000 restricted shares

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shall vest over a period of 4
years, at a rate of 25% per year, provided certain performance goals are met as
established by the Board over the 4 year vesting period.

On the first, second, and third
anniversaries of the Effective Date, and upon the satisfaction of certain
performance goals established by the Board for fiscal years 2007, 2008, and
2009 respectively, Executive shall be eligible for an annual target award of
50,000 (with a minimum of zero and a maximum of 100,000) restricted shares of
PGI common stock under the Equity Plan, provided, that for the equity award
opportunity on the first anniversary of the Effective Date (i.e., fiscal year
2007 performance), Executive shall receive no less than 50% of the target award
(i.e., 25,000 restricted shares) (the “Guaranteed Shares”).  The equity awards, if any, for the first,
second, and third anniversaries of the Effective Date shall vest over a period
of 4 years, at a rate of 25% per year, provided certain performance goals are
met as established by the Board over the 4 year vesting period; provided
further, the Guaranteed Shares shall vest based on service at a rate of 25% per
year on the first four anniversaries of the award date.

Sale restrictions and other terms
and conditions for equity awards under the Equity Plan, shall be detailed in a
restricted stock grant agreement to be executed at the time of an equity award
issuance.  If, prior to full vesting of
any equity award, (and regardless of whether the Term has then expired),
Executive is terminated by PGI without “cause” (where “cause” is defined in
Section 2.1.a. of this Agreement), Executive terminates for “good reason”
(where “good reason” is defined in Section 2.2.a. of this Agreement), or
Executive’s employment terminates due to her death or her “disability” (where “disability”
is defined in Section 2.1.c.ii of this Agreement), Executive shall become fully
vested in all restricted shares previously granted to her.  In the event of a “change in control” of PGI
(defined below) at a time while Executive remains Chief Executive Officer of
PGI, Executive shall become fully vested in all restricted shares previously
granted to her as of the date of the “change in control,” such vesting to occur
upon the later to occur of (i) the date of the “change in control” or (ii) the
date upon which Executive completes at least 30 months of continuous employment
with PGI.

For
purposes of any equity awards, “change in control” shall mean that term as it
is defined in the Equity Plan.  For all
other purposes of this Agreement, Change in Control means any of the following
events:

(i)            if any “person” or “group” as those
terms are used in Sections 13(d) and 14(d) of the Exchange Act or any
successors thereto, other than an Exempt Person, is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act or any successor
thereto), directly or indirectly, of securities of PGI representing (A) 50% or
more of the combined voting power of PGI’s then outstanding securities or (B)
30% or more of the combined voting power of the PGI’s then outstanding
securities if at such time, such person or group also beneficially owns more of
the combined voting power of the PGI’s then outstanding securities, other than
an Exempt Person; or

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

(iii)          the consummation of a merger or
consolidation of PGI with any other corporation, other than a merger or
consolidation (A) which would result in all or a portion of the voting

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

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

(v)           For purposes of this Agreement, the
term “Exempt Person” means (1) MatlinPatterson Global Opportunities Fund L.P.,
MatlinPatterson Global Opportunities Partners, L.P., MatlinPatterson Global
Opportunities Partners B, L.P., MatlinPatterson LLC, MatlinPatterson Asset
Management LLC, MatlinPatterson Global Advisers LLC, MatlinPatterson Global
Opportunities Partners (Bermuda), L.P., MatlinPatterson Global Partners LLC and
any of their respective affiliated entities, (2) any person, entity or group
under the control of any party included in clause (1), or (3) any employee
benefit plan of PGI or a trustee or other administrator or fiduciary holding
securities under an employee benefit plan of PGI.

d.             Reimbursement of Expenses.  During the Term, PGI shall reimburse
Executive for all reasonable business expenses incurred by her in the course of
performing her duties and responsibilities under this Agreement which are
consistent with PGI’s policies in effect from time to time with respect to
travel, entertainment and other business expenses, subject to PGI’s
requirements with respect to reporting and documentation of such expenses.

e.             Relocation.  PGI shall pay all costs of relocation of the
Executive and her husband to the Charlotte metropolitan area in accordance with
PGI’s relocation policy supplemented as follows:

(i)            PGI shall reimburse the Executive
for reasonable temporary living expenses (including reasonable travel expenses
between the Executive’s primary residence as of the Effective Date and the
Charlotte metropolitan area) for the Executive and her husband in the Charlotte
metropolitan area for a period not to exceed three months from the Effective
Date;

(ii)           PGI shall provide Executive with a
miscellaneous non-accountable relocation allowance equal to $25,000; and

(iii)          Relocation payments and benefits will
be fully grossed-up for any applicable taxes with respect to any reportable
income, except for any payments and benefits pursuant to Section 1.2.e.(ii)).

1.3           Paid Leave.

a.             Vacation.  Executive shall be entitled to 4 weeks
vacation per calendar year, without carryover, which vacation shall accrue
ratably during the year in accordance with PGI’s policies.

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b.             Sick Leave. Executive shall
be entitled to sick leave in accordance with the policies adopted from time to
time by PGI for its employees.

c.             Holiday Leave.  Executive shall be entitled to paid time off
on such holidays for which PGI is closed for business.

1.4           Benefits.  Executive shall be entitled to participate in
the various employee benefit programs (including health, life, retirement and
disability) which PGI may establish and modify from time to time for the
benefit of all its employees, if and when Executive satisfies the eligibility
requirements for such employee benefit plans.

PGI retains the right to amend,
modify or terminate any employee benefits from time to time in its discretion.

1.5           Company Automobile.  PGI shall provide for Executive’s use a 2006
Infiniti Q45 (the “Infiniti”).  When the lease on the Infiniti expires on or
about April 24, 2009, PGI shall provide for Executive’s use an automobile of
comparable value.  PGI shall maintain
automobile insurance on the automobile, will cover the cost of general
maintenance on the automobile, and reimburse Executive for fuel.  To the extent Executive uses the automobile
for personal purposes, the value of such personal use shall be included in
Executive’s income in accordance with applicable tax law.

ARTICLE
2:  TERMINATION BEFORE THE TERM EXPIRES AND
EFFECTS OF SUCH TERMINATION

2.1           Termination By PGI.  PGI may terminate Executive’s employment
before the Term expires for the following reasons:

a.             Cause.  For “cause” upon the determination by the
Board that “cause” exists to terminate Executive.  “Cause” means (i) a material breach of
this Agreement by Executive; provided, that if such breach is capable of being
cured, Executive shall be provided 15 days written notice to cure such breach,
(ii) a breach of Executive’s duty of loyalty to PGI or any of its
subsidiaries or any act of dishonesty or fraud with respect to PGI or any of
its subsidiaries, (iii) the commission by Executive of a felony, a crime
involving moral turpitude or other act or omission (excluding business acts or
omissions in the ordinary course) causing material harm to the standing and
reputation of PGI and its subsidiaries, (iv) Executive reporting to work
under the influence of alcohol or illegal drugs, the use of illegal drugs
(whether or not at the workplace) or other repeated conduct (excluding business
conduct in the ordinary course) causing PGI or any of its subsidiaries
substantial public disgrace or disrepute or economic harm, or (v) any
willful act or omission by Executive aiding or abetting a competitor, supplier
or customer of PGI or any of its subsidiaries to the material disadvantage or
detriment of PGI and its subsidiaries. 
The burden for establishing the validity of any termination for Cause
shall rest upon PGI.  No termination
shall be deemed to be for Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Board
called and held for such purpose (after reasonable notice is provided to
Executive and Executive is given an opportunity, together with counsel, to be
heard before the Board), finding that, in the good faith opinion of the Board,
Executive is guilty of the conduct described above, and specifying the
particulars thereof in reasonable detail. 
If PGI terminates Executive’s employment for Cause, Executive shall be
entitled only to the pro rata Base Compensation through the date of such
termination, and all future compensation and benefits shall cease (except for
those benefits vested per plan terms).

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b.             Involuntary Termination Before a
Change in Control.  Involuntary
termination at PGI’s option may occur for any reason whatsoever, including
termination without cause, in the sole discretion of the Board (“Involuntary Termination”).  Upon an Involuntary Termination before the
Term expires, Executive shall be entitled to receive from PGI as severance
payments, in lieu of severance payments under any other plan or program of PGI,
an amount equal to (i) two times the sum of (A) her Base Compensation, plus (B)
her annual target bonus opportunity, each as in effect immediately prior to the
date of her termination (the “Severance Amount”), (ii) any annual bonus for a
completed fiscal year of PGI that has not yet been paid to Executive (the “Prior Year Earned Bonus”), and (iii) her
annual target bonus opportunity for the fiscal year in which the termination
date occurs, multiplied by a fraction equal to the number of days of employment
completed by Executive during the fiscal year in which the termination date
occurs divided by 365 (the “Pro Rata Bonus”), in each case if and only if Executive has executed and
delivered to PGI the General Release substantially in form and substance as set
forth in Exhibit A attached hereto and only so long as Executive
has not breached the provisions of Article 3 or Section 4.1 hereof and does not
apply for unemployment compensation chargeable to PGI during the period equal
to the 24 month anniversary of the date of termination  (the “Severance
Period”).  Executive shall not be
entitled to any other salary, compensation or benefits after termination of the
Agreement, except as specifically provided for in PGI’s employee benefit plans
or as otherwise expressly required by applicable law.  The Severance Amount payable pursuant to this
Section 2.1.b. for the first six months of the Severance Period, the Prior Year
Earned Bonus and the Pro Rata Bonus payable pursuant to this Section 2.1.b.
shall be paid to Executive in a lump sum on the first day of the calendar month
following the six month anniversary of the termination date, and the Severance
Amount payable pursuant to this Section 2.1.b. for the remainder of the
Severance Period shall be payable in regular monthly installments.  The amounts payable pursuant to this Section
2.1.b. shall not be reduced by the amount of any compensation Executive receives
with respect to any other employment during the Severance Period.

For
twenty-four months following the date of Executive’s termination, PGI shall, at
its expense, continue on behalf of the Executive and her dependants and
beneficiaries, the medical, dental and hospitalization benefits provided to the
Executive immediately prior to the date of termination.  The coverage and benefits (including
deductibles and costs) provided in this Section 2.1.b. shall be no less
favorable to the Executive and her dependants and beneficiaries, than the
coverage and benefits provided to other salaried employees under PGI’s benefit
plans, as such plans may be amended from time to time.  PGI’s obligation hereunder with respect to
the foregoing benefits shall be limited to the extent that the Executive
obtains any such benefits pursuant to a subsequent employer’s benefit plans, in
which case PGI may reduce the coverage of any benefits it is required to
provide the Executive hereunder so long as the aggregate coverage and benefits
of the combined benefit plans is no less favorable to the Executive than the
coverages and benefits required to be provided hereunder.  This Section 2.1.b. shall not be interpreted
so as to limit any benefits to which the Executive, her dependants or beneficiaries
may otherwise be entitled under any of PGI’s employee benefit plans, programs
or practices following the termination of employment of the Executive,
including without limitation, any applicable retiree life insurance
benefits.  Except as otherwise expressly
provided herein, all of Executive’s rights to salary, bonuses, employee
benefits and other compensation hereunder which would have accrued or become
payable after the termination or expiration of the Term shall cease upon such
termination or expiration, other than those expressly required under applicable
law (such as COBRA); provided, that for purposes of determining
Executive’s rights under COBRA, the date of the later to occur of (x) the date
of the termination or expiration of the Term or (y) the date of the final
payment of any severance payments made pursuant to Section 2.1.b. above, shall
be deemed to be the qualifying event for such purpose.  PGI may offset any amounts Executive owes it
or its subsidiaries against any amounts it or its subsidiaries owes Executive
hereunder.

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c.             Involuntary Termination At or
After a Change in Control.  In the
event that Executive incurs an Involuntary Termination hereunder after a Change
in Control and before the Term expires, the Executive shall receive the
benefits described in Section 2.1.b above, except that the Severance Amount
shall be equal to three times the sum of (A) her Base Compensation plus (B) her
annual target bonus opportunity, each as in effect immediately prior to the
Change in Control (or, if greater, immediately prior to the date of her
termination), in each case if, and only if, Executive has executed and
delivered to PGI the General Release substantially in the form and substance as
set forth in Exhibit A attached hereto and only so long as Executive has not
breached the provisions of Article 3 or Section 4.1 hereof and does not apply
for unemployment compensation chargeable to PGI during the Severance
Period.  The Severance Amount payable
pursuant to this Section 2.1.c. shall be paid in a single lump sum at the
earliest date that will not result in the imposition of the additional tax on
Executive described in Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”).  In addition, the period of benefit
continuation described in Section 2.1.b shall be for thirty-six months rather
than twenty-four months.

d.             Death/Disability.  Upon Executive’s (i) death, or (ii) becoming
incapacitated or disabled so as to entitle Executive to benefits under PGI’s
long-term disability plan, or (iii) becoming permanently and totally unable to
perform Executive’s duties for PGI as a result of any physical or mental
impairment supported by a written opinion by a physician selected by PGI,
Executive or Executive’s heirs shall be entitled to Executive’s pro rata Base
Compensation through the date of such determination, any annual bonus for a
completed fiscal year of PGI that has not yet been paid to Executive and the
Pro Rata Bonus.

2.2           Termination By Executive.  Executive may terminate the employment
relationship before the Term expires for the following reasons:

a.             Good Reason.  For “good reason.”  A termination for Good Reason shall be deemed
to be an Involuntary Termination and shall mean a termination as a result of:

(i)            A material breach by PGI of any
material provision of this Agreement which remains uncorrected for  30 days following Executive’s written notice
to PGI of such breach;

(ii)           The assignment to Executive, without
her express written consent, of any duties reasonably inconsistent with
Executive’s position, duties, responsibilities and status with PGI as of the
Effective Date, or a change in Executive’s titles or offices (if any) in effect
on the Effective Date, or any removal of Executive from, or any failure to
reelect Executive to, any of such positions, except in connection with
Executive’s termination for Cause, death, disability, or as a result of
Executive’s retirement after attaining age 70; or

(iii)          A reduction by PGI in Executive’s Base
Compensation as in effect on the Effective Date, or as the same may be increased
from time to time thereafter; or

(iv)          The failure of PGI to continue in
effect any material compensation, welfare or benefit plan in which Executive is
participating at the time of a Change in Control of PGI, without substituting
therefor plans providing Executive with substantially similar benefits at
substantially the same cost to Executive; or the taking of any action by PGI
which would adversely affect Executive’s participation in or materially reduce
Executive’s benefits or materially increase the cost to Executive

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under any of such plans or deprive
Executive of any material fringe benefit enjoyed by Executive at the time of
the Change in Control of PGI; or

(v)           Any purported termination for Cause
or disability without grounds therefor; or

(vi)          A requirement that Executive relocate
Executive’s principal residence at least 50 miles from PGI’s headquarters in
effect on the Effective Date to continue to provide services PGI.

b.             Voluntary Termination.  For any other reason whatsoever, in Executive’s
sole discretion.  Upon a Voluntary
Termination before the Term expires, all of Executive’s future compensation and
benefits shall cease as of the date of termination (except benefits vested as
of the termination per plan terms), and Executive shall be entitled only to pro
rata Base Compensation through the termination date.

2.3           Certain Obligations Continue.  Neither termination of employment nor
expiration of the Term terminates the continuing obligations of this Agreement,
including obligations under Articles 3 and 4.1.

2.4           Employment Beyond Term.  Unless the parties hereto mutually agree
otherwise at a later date, should Executive remain employed by PGI after the
Term expires, such employment shall convert to an employment-at-will
relationship, terminable at any time by either PGI or Executive for any reason
whatsoever, with or without cause.

ARTICLE
3:  CONFIDENTIAL INFORMATION; POST-EMPLOYMENT
OBLIGATIONS

3.1           This Agreement.  The terms of this Agreement constitute
confidential information, which Executive shall not disclose to anyone other
than Executive’s spouse, attorneys, tax advisors, or as required by law.  PGI may disclose the terms of this Agreement
as required by law.

3.2           PGI Property.  All written materials, records, data, and
other documents prepared or possessed by Executive during Executive’s
employment by PGI are PGI’s property. 
All memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps, and all other documents, data,
or materials of any type embodying such information, ideas, concepts,
improvements, discoveries, and inventions are PGI’s property.

All
information, ideas, concepts, improvements, discoveries, and inventions that
are conceived, made, developed, or acquired by Executive individually or in
conjunction with others during Executive’s employment (whether during business
hours and whether on PGI’s premises or otherwise) which relate to PGI’s
business, products, or services are PGI’s property.  Executive agrees to make prompt and full
disclosure to PGI 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, logos and all similar or
related information  (whether or not
patentable and whether or not reduced to practice) that relate to PGI’s or its
subsidiaries’ actual or anticipated business, research and development, or
existing or future products or services and that are conceived, developed,
acquired, contributed to, made, or reduced to practice by Executive (either
solely or jointly with others) while employed by PGI or its subsidiaries and
for a period

 7
 

of one (1) year thereafter
(collectively, “Work
Product”).  Any copyrightable work
falling within the definition of Work Product shall be deemed a “work made for
hire” under the copyright laws of the United States, and ownership of all
rights therein shall vest in PGI or its subsidiary.  To the extent that any Work Product is not
deemed to be a “work made for hire,” Executive hereby assigns and agrees to
assign to PGI or such subsidiary all right, title and interest, including
without limitation, the intellectual property rights that Executive may have in
and to such Work Product.  Executive
shall promptly perform all actions reasonably requested by the Board (whether
during or after the employment period) to establish and confirm PGI’s or such
subsidiary’s ownership (including, without limitation, providing testimony and
executing assignments, consents, powers of attorney, and other instruments).

At the termination of Executive’s
employment with PGI for any reason, Executive shall return all of PGI’s
property to PGI.

3.3           Confidential Information:  Non-Disclosure.  Executive acknowledges that the business of
PGI and its subsidiaries is highly competitive and that PGI has provided and
will provide Executive with access to Confidential Information relating to the
business of PGI and its subsidiaries.  “Confidential
Information” means and includes PGI’s confidential and/or proprietary
information and/or trade secrets that have been developed or used and/or will
be developed and that cannot be obtained readily by third parties from outside
sources.  Confidential Information
includes, by way of example and without limitation, the following:  information regarding customers, employees,
contractors, and the industry not generally known to the public; strategies,
methods, books, records, and documents; technical information concerning
products, equipment, services, and processes; procurement procedures and
pricing techniques; the names of and other information concerning customers,
investors, and business affiliates (such as contact name, service provided, pricing
for that customer, amount of services used, credit and financial data, and/or
other information relating to PGI’s relationship with that customer); pricing
strategies and price curves; plans and strategies for expansion or
acquisitions; budgets; customer lists; research; weather data; financial and
sales data; trading terms; evaluations, opinions, and interpretations of
information and data; marketing and merchandising techniques; prospective
customers’ names and marks; grids and maps; electronic databases; models;
specifications; computer programs; internal business records; contracts
benefiting or obligating PGI; bids or proposals submitted to any third party;
technologies and methods; training methods and training processes;
organizational structure; salaries of personnel; payment amounts or rates paid
to consultants or other service providers; and other such confidential or
proprietary information.  Executive
acknowledges that this Confidential Information constitutes a valuable,
special, and unique asset used by PGI or its subsidiaries in their business to
obtain a competitive advantage over their competitors.  Executive further acknowledges that
protection of such Confidential Information against unauthorized disclosure and
use is of critical importance to PGI and its subsidiaries in maintaining their
competitive position.

Executive also will have access to,
or knowledge of, Confidential Information of third parties, such as actual and
potential customers, suppliers, partners, joint venturers, investors, financing
sources and the like, of PGI and its subsidiaries.

Executive agrees that Executive
will not, at any time during or after Executive’s employment with PGI, make any
unauthorized disclosure of any Confidential Information of PGI or its subsidiaries,
or make any use thereof, except in the carrying out of her employment
responsibilities hereunder.  Executive
also agrees to preserve and protect the confidentiality of third party
Confidential Information to the same extent, and on the same basis, as PGI’s
Confidential Information.

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3.4           Non-Competition Obligations.  Executive acknowledges that PGI is providing
Executive with access to Confidential Information. Executive’s non-competition
obligations are ancillary to PGI’s agreements provided in Article 2 and
agreement to disclose Confidential Information to Executive.  In order to protect the Confidential
Information described above, and in consideration for Executive’s receiving
access to this Confidential Information, right to compensation and benefits
upon certain terminations as provided in Article 2, and receiving other
compensation provided in this Agreement, PGI and Executive agree to the
following non-competition provisions:

During the greater of the Severance
Period or the twelve (12) month period following Executive’s date of
termination with PGI, Executive will not, directly or indirectly, for Executive
or for others in any geographic area where PGI or its subsidiaries engage or
plan to engage in business:

a.             engage in any business competing with
any businesses in which PGI or its subsidiaries currently engage in business,
has plans to engage in business, or has engaged in business in the 12-month
period preceding the date of termination (a “Competing Business”);

b.             perform any job, task, function,
skill, or responsibility for a Competing Business that Executive has provided
for PGI in the 12-month period preceding the date of termination; or

c.             render advice or services to, or
otherwise assist, any other person, association or entity in the business of “a”
or “b” above.

Executive understands that the
foregoing restrictions may limit her ability to engage in certain businesses
and during the period provided for above, but acknowledges that these
restrictions are necessary to protect the Confidential Information PGI has
provided to Executive.

Executive agrees that this
provision defining the scope of activities constituting competition with PGI is
narrow and reasonable for the following reasons:  (i) Executive is free to seek employment with
other companies providing services that do not directly or indirectly compete
with any business of PGI or its subsidiaries; (ii) Executive is free to seek
employment with other companies that do not directly or indirectly compete with
any business of PGI or its subsidiaries; and (iii) there are many other
companies that do not directly or indirectly compete with any business of PGI
or its subsidiaries.  Thus, this
restriction on Executive’s ability to compete does not prevent Executive from
using and offering the skills that Executive possessed prior to receiving
Confidential Information, specialized training, and knowledge from PGI.

3.5           Non-Solicitation of Customers.  During the greater of the Severance Period or
the twelve (12) months following the termination of employment for any reason,
Executive will not call on, service, or solicit competing business from
customers of PGI or its subsidiaries whom the Executive, within the twenty-four
(24) months prior to termination of employment, (i) had or made contact with,
or (ii) had access to information and files about.  These restrictions are limited by geography
to the specific places, addresses, or locations where a customer is present and
available for soliciting or servicing.

3.6           Non-Solicitation of Employees.  During Executive’s employment and during the
greater of the Severance Period or the twelve (12) months following the
termination of employment for any reason, Executive will not, either directly
or indirectly, call on, solicit, or induce any other employee or officer of
PGI, or their affiliates whom Executive had contact with, knowledge of, or
association with in

 9
 

the course of employment with PGI
to terminate his or her employment, and will not assist any other person or
entity in such a solicitation.

3.7           Arbitration.  Except with respect to disputes or claims
under Article 3 or Section 4.1 hereof (which may be pursued in any court of
competent jurisdiction as specified herein and with respect to which each party
shall bear the cost of its own attorney’s fees and expenses except as otherwise
required by applicable law), each party hereto agrees that the arbitration
procedure set forth in Exhibit B hereto shall be the sole and exclusive
method for resolving any claim or dispute (“Claim”) arising out of or relating to
the rights and obligations acknowledged and agreed to in this Agreement and the
employment of Executive by PGI and its subsidiaries (including, without
limitation, disputes and claims regarding employment discrimination, sexual
harassment, termination and discharge), whether such Claim arose or the facts
on which such Claim is based occurred prior to or after the execution and
delivery of adoption of this Agreement. 
The parties agree that the result of any arbitration hereunder shall be
final, conclusive and binding on all of the parties.  Nothing in this paragraph shall prohibit a
party hereto from instituting litigation to enforce any Final Determination (as
defined in Exhibit B hereto). 
Each party hereto hereby irrevocably submits to the jurisdiction of any
United States District Court or North Carolina state court of competent
jurisdiction sitting in Mecklenburg County, North Carolina, and agrees that
such court shall be the exclusive forum with respect to disputes and claims
under this Agreement and for the enforcement of any Final Determination, and
irrevocably and unconditionally waives (i) any objection to the laying of venue
of any such action, suit or proceeding in such court or (ii) any argument,
claim, defense or allegation that any such action, suit or proceeding brought
in such court has been brought in an inconvenient forum.  Each party hereto irrevocably consents to
service of process by registered mail or personal service and waives any
objection on the grounds of personal jurisdiction, venue or inconvenience of
the forum.

3.8           Warranty.  Executive warrants that Executive is not a
party to any other restrictive agreement limiting Executive’s activities in her
employment by PGI.  Executive further
warrants that at the time of the signing of this Agreement, Executive knows of
no written or oral contract or of any other impediment that would inhibit or
prohibit employment with PGI and that Executive will not knowingly use any
trade secret, confidential information, or other intellectual property right of
any other party in the performance of Executive’s duties hereunder.

ARTICLE
4:  MISCELLANEOUS

4.1           Mutual Non-Disparagement.

a.             Executive shall refrain, both
during and after her employment, from publishing any oral or written statements
about PGI, any of its respective subsidiaries, or any of such entities’
officers, employees, agents, or representatives that are slanderous, libelous,
or defamatory; or that disclose private or confidential information about their
business affairs; or that constitute an intrusion into their seclusion or
private lives; or that give rise to unreasonable publicity about their private
lives; or that place them in a false light before the public; or that
constitute a misappropriation of their name or likeness.

b.             PGI shall refrain, both during and
after Executive’s employment, from publishing any oral or written statement
about Executive that are slanderous, libelous, or defamatory, or that disclose
private or confidential information about her personal business affairs; or
that constitute an

 10
 

intrusion into her seclusion or
private life; or that give rise to unreasonable publicity about her private
life; or that places her in a false light before the public.

4.2           Notices.  Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, sent by reputable
overnight courier service or mailed by first class mail, return receipt
requested, to the recipient at the address below indicated:

Notices to Executive:

Veronica M. Hagen

1 Avery Street

Boston, MA  02110

Notices to the Company:

Polymer Group, Inc.

9335 Harris Corners Parkway

Suite 300

Charlotte, NC 28269

Attn:  General Counsel

With a copy to:

J. René Toadvine

Littler Mendelson, PC

Bank of America Corporate Center

100 North Tryon Street, Suite 4150

Charlotte, NC 28202

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

4.3           No Waiver.  No failure by either party at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall be deemed a waiver of any
provisions or conditions of this Agreement.

4.4           409A Compliance.  This Agreement and any amendments thereto
shall, to the extent applicable, comply with and be interpreted in such a
manner as to be consistent with the provisions of Section 409A of the Code, and
any Treasury regulations or other Internal Revenue Service guidance promulgated
thereunder.  In addition, notwithstanding
any provision herein to the contrary, because Executive is a “specified
employee” (as such term is defined in Section 409A(a)(2)(B)(i) of the Code),
any payment due and payable hereunder as a result of Employee’s separation from
service shall not be made before the date which is six (6) months after
Executive’s date of separation from service.

4.5           Assignment.  This Agreement shall be binding upon and
inure to the benefit of PGI and any other person, association, or entity that
may acquire or succeed to all or substantially all of the

 11
 

business or assets of PGI.  Executive’s rights and obligations under this
Agreement are personal, and they shall not be assigned or transferred without
PGI’s prior written consent.

4.6           Excise Tax Gross-Up.  In the event that the aggregate of all
payments or benefits made or provided to, or that may be made or provided to,
the Executive under this Agreement and under all other plans, programs and
arrangements of PGI (the “Aggregate Payment”) is determined to constitute a “parachute
payment,” as such term is defined in Section 280G(b)(2) of the Code, PGI shall
pay to the Executive, prior to the time any excise tax imposed by Section 4999
of the Code (“Excise
Tax”)
is payable with respect to such Aggregate Payment, an additional amount which,
after the imposition of all income and excise taxes thereon, is equal to the
Excise Tax on the Aggregate Payment.  The
determination of whether the Aggregate Payment constitutes a parachute payment
and, if so, the amount to be paid to the Executive and the time of payment
pursuant to this Section 4.6 shall be made by an independent auditor (the “Auditor”) jointly selected by PGI and the
Executive and paid by PGI.  The Auditor
shall be a nationally recognized United States public accounting firm which has
not, during the two (2) years preceding the date of its selection, acted in any
way on behalf of PGI or any affiliate thereof. 
If the Executive and PGI cannot agree on the firm to serve as the
Auditor, then the Executive and PGI shall each select one accounting firm and
those two firms shall jointly select the accounting firm to serve as the
Auditor.  Notwithstanding the foregoing,
in the event that the amount of the Executive’s Excise Tax liability is
subsequently determined to be greater than the Excise Tax liability with
respect to which an initial payment to the Executive under this Section 4.6 has
been made, PGI shall pay to the Executive an additional amount with respect to
such additional Excise Tax (and any interest and penalties thereon) at the time
and in the amount determined by the Auditor so as to make the Executive whole,
on an after-tax basis, with respect to such Excise Tax (and any interest and
penalties thereon) and such additional amount paid by PGI.  In the event the amount of the Executive’s
Excise Tax liability is subsequently determined to be less than the Excise Tax
liability with respect to which an initial payment to the Executive has been
made, the Executive shall, as soon as practical after the determination is
made, pay to PGI the amount of the overpayment by PGI, reduced by the amount of
any relevant taxes already paid by the Executive and not refundable, all as
determined by the Auditor.  The Executive
and PGI shall cooperate with each other in connection with any proceeding or
claim relating to the existence or amount of liability for Excise Tax, and all
expenses incurred by the Executive in connection therewith shall be paid by PGI
promptly upon notice of demand from the Executive.

4.7           Indemnification, Liability
Insurance.  PGI agrees to indemnify
the Executive and hold the Executive harmless to the fullest extent permitted
by PGI’s certificate of incorporation and under the bylaws of PGI against and
in respect to any and all actions, suits, proceedings, claims, demands,
judgments, costs, expenses (including reasonable attorneys’ fees), losses, and
damages resulting from the Executive’s good-faith performance of the Executive’s
duties and obligations to PGI.  PGI shall
cover the Executive under directors and officers liability insurance both
during and, while potential liability exists, after the Term of this Agreement
in the same amount and on the same terms as PGI covers its other active
officers and directors, if such coverage is obtainable, but in all events such
coverage shall be at least in substantially the same amount and on
substantially the same terms as PGI covers its other active officers and
directors.

4.8           Other Agreements; Inconsistency.  This Agreement replaces and merges any other
previous agreements and discussions pertaining to the nature of, term, and
termination of Executive’s employment relationship with PGI, and this Agreement
constitutes the entire agreement of the parties with respect to such subject
matters.  No representation, inducement,
promise, or agreement has been made by either party with respect to such
subject matters, and no agreement, statement, or promise

 12
 

relating to the employment of
Executive by PGI that is not contained in this Agreement shall be valid or
binding.  Any modification of this
Agreement will be effective only if it is in writing and signed by each party.  In the event of any inconsistency between
this Agreement and any other agreement (including but not limited to any
profits interest, long-term incentive or other equity award agreement), plan,
program, policy or practice (collectively, “Other Provision”) of PGI, the terms of this
Agreement shall control over such Other Provision to the extent that the terms
of this Agreement are more beneficial to the Executive.

4.9           Survival/Severability/Headings.  It is the express intention and agreement of
the parties that the provisions of Article 3 and Section 4.1 shall survive the
termination of employment of Executive. 
In addition, all obligations of PGI to make payments, and to provide for
equity vesting, under this Agreement shall survive any termination of this
Agreement on the terms and conditions set forth in this Agreement.  The invalidity or unenforceability of any one
or more provisions of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which shall remain in
full force and effect.  Article and section
headings contained in this Agreement are provided for convenience and reference
only, and do not define or affect the meaning, construction, or scope of any of
the provisions of this Agreement.

IN WITNESS WHEREOF, PGI and
Executive have executed this Agreement in multiple originals to be effective on
the first date of the Term.

	
  PGI

  	
   

  	
  VERONICA M. HAGEN

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated this the
  ___ day of _______________, ____

  	
   

  	
  Dated this the ___ day of ___________, ____

  

 

 13

Exhibit A

GENERAL RELEASE

I, Veronica M. Hagen, in  consideration of and subject to the
performance by Polymer Group, Inc., a Delaware corporation (together with its
subsidiaries, the “Company”), of its obligations under the Employment
Agreement, entered into on April 23, 2007, (the “Agreement”), do hereby release and forever
discharge as of the date hereof the Company and its affiliates and all present
and former directors, officers, agents, representatives, employees, successors
and assigns of the Company and its affiliates and the Company’s direct or
indirect owners (collectively, the “Released Parties”) to the extent provided below.

1.                                       I understand that any
payments or benefits paid or granted to me under paragraph 2(b) of the
Agreement represent, in part, consideration for signing this General Release
and are not salary, wages or benefits to which I was already entitled. I
understand and agree that I will not receive the payments and benefits
specified in paragraph 2(b) of the Agreement unless I execute this General
Release and do not revoke this General Release within the time period permitted
hereafter or breach this General Release. 
Such payments and benefits will not be considered compensation for
purposes of any employee benefit plan, program, policy or arrangement
maintained or hereafter established by the Company or its affiliates.  I also acknowledge and represent that I have
received all payments and benefits that I am entitled to receive (as of the
date hereof) by virtue of any employment by the Company.

2.                                       Except as provided in
paragraph 4 below and except for the provisions of my Employment Agreement
which expressly survive the termination of my employment with the Company, I
knowingly and voluntarily (for myself, my heirs, executors, administrators and
assigns) release and forever discharge the Company and the other Released
Parties from any and all claims, suits, controversies, actions, causes of
action, cross-claims, counter-claims, demands, debts, compensatory damages,
liquidated damages, punitive or exemplary damages, other damages, claims for
costs and attorneys’ fees, or liabilities of any nature whatsoever in law and
in equity, existing or hereafter arising, based in whole or in part upon any
act or omission, transaction, agreement, event or other occurrence taking place
from the beginning of time through the date this General Release becomes
effective and enforceable and whether known or unknown, suspected, or claimed
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 arise out of
or are connected with my employment with, or my separation or termination 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 Employment Act of 1967, as
amended (including the Older Workers Benefit Protection Act); the Equal Pay Act
of 1963, as amended; the Americans with Disabilities Act of 1990; the Family
and Medical Leave Act of 1993; the Worker Adjustment Retraining and
Notification Act; the Employee Retirement Income Security Act of 1974; any
applicable Executive Order Programs; the Fair Labor Standards Act; or their
state or local counterparts; the North Carolina Equal Employment Practice Act,
N.C. Gen. Stat. § 143-422.1, et  seq.; the North Carolina
Persons With Disabilities Protection Act, N.C. Gen. Stat. § 168A-1 et
seq.; and the North Carolina Retaliatory Employment Discrimination Act,
N.C. Gen. Stat. § 95-240 et  seq. or under any other federal,

 ExA-1
 

state
or local civil or human rights law, or under any other local, state, or federal
law, regulation or ordinance; or under any public policy, contract or tort, or
under common law; or arising under any policies, practices or procedures of the
Company; or any claim for wrongful discharge, breach of contract, infliction of
emotional distress, defamation; or any claim for costs, fees, or other
expenses, including attorneys’ fees incurred in these matters) (all of the
foregoing collectively referred to herein as the “Claims”).

3.                                       I represent 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.                                       I agree that this
General Release does not waive or release any rights or claims that I may have
under the Age Discrimination in Employment Act of 1967 which arise after the
date I execute this General Release.  I
acknowledge and agree that my separation from employment with the Company in
compliance with the terms of the Agreement shall not serve as the basis for any
claim or action (including, without limitation, any claim under the Age
Discrimination in Employment Act of 1967).

5.                                       In signing this
General Release, I acknowledge and intend that it shall be effective as 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 and
effect according to each and all of its express terms and provisions, including
those relating to unknown and unsuspected Claims (notwithstanding any state
statute that expressly limits the effectiveness of a general release of
unknown, unsuspected and unanticipated Claims), if any, as well as those
relating to any other Claims hereinabove mentioned or implied. I acknowledge
and agree that this waiver is an essential and material term of this General
Release and that without such waiver the Company would not have agreed to the
terms of the Agreement.  I further agree
that 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 Claim
brought by a governmental agency on my behalf, this General Release shall serve
as a complete defense to such Claims. I further agree that I am not aware of
any pending charge or complaint of the type described in paragraph 2 as of the
execution of this General Release.

6.                                       I agree that neither
this General Release, nor the furnishing of the consideration for this General
Release, shall be deemed or construed at any time to be an admission by the
Company, any Released Party or myself of any improper or unlawful conduct.

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

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

 ExA-2
 

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

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

11.                                 I agree that as of the
date hereof, I have returned to the Company any and all property, tangible or
intangible, relating to its business, which I possessed or had control over at
any time (including, but not limited to, company-provided credit cards,
building or office access cards, keys, computer equipment, manuals, files,
documents, records, software, customer data base and other data) 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.                                 Notwithstanding
anything in this General Release to the contrary, this General Release shall
not relinquish, diminish, or in any way affect any rights or claims arising out
of any breach by the Company or by any Released Party of the Agreement after
the date hereof.

13.                                 Whenever possible,
each provision of this General Release shall be interpreted in, such manner as
to be effective and valid under applicable law, but if any provision of this
General Release is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or any other
jurisdiction, but this General Release shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE
THAT:

(a)                                  I HAVE READ IT
CAREFULLY;

(b)                                 I UNDERSTAND ALL OF
ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT
LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT 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 THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

 ExA-3
 

(c)                                  I VOLUNTARILY CONSENT
TO EVERYTHING IN IT;

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

(e)                                  I HAVE HAD AT LEAST 21
DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY 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-DAY PERIOD;

(f)                                    THE CHANGES TO THE
AGREEMENT SINCE _______________ ___, _____ EITHER ARE NOT MATERIAL OR WERE MADE
AT MY REQUEST.

(g)                                 I UNDERSTAND THAT I
HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS
RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD
HAS EXPIRED;

(h)                                 I HAVE SIGNED THIS GENERAL
RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED
TO ADVISE ME WITH RESPECT TO IT; AND

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

DATE:  _____________                                                                   ____________________________________

 

 ExA-4

Exhibit B

ARBITRATION PROCEDURE

1              Notice of Claim.  A party asserting a Claim (the “Claimant”) shall deliver written notice to
each party against whom the Claim is asserted (collectively, the “Opposing Party”), with a copy to the persons
required to receive copies of notices under the Agreement (the “Additional Notice Parties”), specifying the
nature of the Claim and requesting a meeting to resolve same.  The Additional Notice Parties shall be given
reasonable notice of and invited and permitted to attend any such meeting.  If no resolution is reached within 10
business days after delivery of such notice, the Claimant or the Opposing Party
may, within 45 days after giving such notice, invoke the arbitration procedure
provided herein by delivering to each Opposing Party and the Additional Notice
Parties a notice of arbitration which shall specify the Claim as to which
arbitration is sought, the nature of the Claim, the basis for the Claim and the
nature and amount of any damages or other compensation or relief sought (a “Notice of Arbitration”).  Each party agrees that no punitive damages
may be sought or recovered in any arbitration, judicial proceeding or
otherwise.  Failure to file a Notice of
Arbitration within 45 days shall constitute a waiver of any right to relief for
the 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 year
of the date such Claim accrues.

2              Selection of Arbitrator.  Within 20 business days after receipt of the
Notice of Arbitration, the Executive and a duly authorized representative of
PGI shall confer, whether in person, by telephone or in writing, and attempt to
agree on an arbitrator to hear and decide the Claim.  If the Executive and the Board cannot agree
on an arbitrator within ten business days, then they shall request the American
Arbitration Association (the “AAA”) in Charlotte, North Carolina to appoint an
arbitrator experienced in the area of dispute who does not have an ongoing
business relationship with any of the parties to the dispute.  If the arbitrator selected informs the
parties he cannot hear and resolve the Claim within the time-frame specified
below, the Executive and the Board shall request the appointment of another
arbitrator by the AAA subject to the same requirements.

3              Arbitration Procedure.  The following procedures shall govern the
conduct of any arbitration under this section. 
All procedural matters relating to the conduct of the arbitration other
than those specified below shall be discussed among counsel for the parties and
the arbitrator.  Subject to any agreement
of the parties, the arbitrator shall determine all procedural matters not
specified herein.

(a)           Within 30 days after the delivery of
a Notice of Arbitration, each party shall afford the other, or its counsel,
with reasonable access to documents relating directly to the issues raised in
the Notice of Arbitration.  All documents
produced and all copies thereof shall be maintained as strictly confidential,
shall be used for no purpose other than the arbitration hereunder, and shall be
returned to the producing party upon completion of the arbitration.  There shall be no other discovery except
that, if a reasonable need is shown, limited depositions may be allowed in the
discretion of the arbitrator, it being the expressed intention and agreement of
each party to have the arbitration proceedings conducted and resolved as
expeditiously, economically and fairly as reasonably practicable, and with the
maximum degree of confidentiality.

(b)           All written communications regarding
the proceeding sent to the arbitrator shall be sent simultaneously to each
party or its counsel, with a copy to the Additional Notice Parties.  Oral

 ExB-1
 

communications between any of the
parties or their counsel and the arbitrator shall be conducted only when all
parties or their counsel are present and participating in the conversation.

(c)           Within 20 days after selection of the
arbitrator, the Claimant shall submit to the arbitrator a copy of the Notice of
Arbitration, along with a supporting memorandum and any exhibits or other
documents supporting the Claim.

(d)           Within 20 days after receipt of the
Claimant’s submission, the Opposing Party shall submit to the arbitrator a
memorandum supporting its position and any exhibits or other supporting
documents.  If the Opposing Party fails
to respond to any of the issues raised by the Claimant within 20 days of
receipt of the Claimant’s submission, then the arbitrator may find for the
Claimant on any such issue and bar any subsequent consideration of the matter.

(e)           Within 20 days after receipt of the
Opposing Party’s response, the Claimant may submit to the arbitrator a reply to
the Opposing Party’s response, or notification that no reply is forthcoming.

(f)            Within 10 days after the last
submission as provided above, the arbitrator shall confer with the parties to
select the date of the hearing on the issues raised by the Claim.  Scheduling of the hearing shall be within the
sole discretion of the arbitrator, but in no event more than 30 days after the
last submission by the parties, and shall take place within 50 miles of the
corporate headquarters of PGI at a place selected by the arbitrator or such
other place as is mutually agreed.  Both
parties shall be granted substantially equal time to present evidence at the
hearing.  The hearing shall not exceed
one business day, except for good cause shown.

(g)           Within 30 days after the conclusion
of the hearing, the arbitrator shall issue a written decision to be delivered
to both parties and the Additional Notice Parties (the “Final Determination”).  The Final Determination shall address each
issue disputed by the parties, state the arbitrator’s findings and reasons
therefor, and state the nature and amount of any damages, compensation or other
relief awarded.

(h)           The award rendered by the arbitrator
shall be final and non-appealable, except as otherwise provided under the
Federal Arbitration Act, and judgment may be entered upon it in accordance with
applicable law in such court as has jurisdiction thereof.

4              Costs of Arbitration.  Each party shall bear its own costs of
conducting the arbitration, and administrative fees shall be shared equally
among the parties.

5              Satisfaction of Award.  If any party fails to pay the amount of the
award, if any, assessed against it within 30 days after the delivery to such
party of the Final Determination, the unpaid amount shall bear interest from
the date of such delivery at the lesser of (i) prime lending rate announced by
Citibank N.A. plus three hundred basis points and (ii) the maximum rate
permitted by applicable usury laws.  In
addition, such party shall promptly reimburse the other party for any and all
costs or expenses of any nature or kind whatsoever (including attorneys’ fees)
reasonably incurred in seeking to collect such award or to enforce any Final
Determination.

6              Confidentiality of Proceedings.  The parties hereto agree that all of the
arbitration proceedings provided for herein, including any notice of claim, the
Notice of Arbitration, the submissions of the parties, and the Final
Determination issued by the arbitrator, shall be confidential and

 ExB-2
 

shall not be disclosed at any time
to any person other than the parties, their representatives, the arbitrator and
the Additional Notice Parties; provided, however, that this provision shall not
prevent the party prevailing in the arbitration from submitting the Final
Determination to a court for the purpose of enforcing the award, subject to
comparable confidentiality protections if the court agrees; and further
provided that the foregoing shall not prohibit disclosure to the minimum extent
reasonably necessary to comply with (i) applicable law (or requirement having
the force of law), court order, judgment or decree, including, without
limitation, disclosures which may be required pursuant to applicable securities
laws, and (ii) the terms of contractual arrangements (such as financing
arrangements) to which PGI or any Additional Notice Party may be subject so
long as such contractual arrangements were not entered into for the primary
purpose of permitting disclosure which would otherwise be prohibited hereunder.

 

 ExB-3

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