Document:

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                                                                   Exhibit 10.38

                             SEALY MATTRESS COMPANY
                                SEALY CORPORATION

            FOURTH AMENDMENT TO REVOLVER/TERM A LOAN CREDIT AGREEMENT
                  AND THIRD AMENDMENT TO AXEL CREDIT AGREEMENT

               This FOURTH AMENDMENT TO REVOLVER/TERM A LOAN CREDIT AGREEMENT
AND THIRD AMENDMENT TO AXEL CREDIT AGREEMENT (this "Amendment") is dated as of
March 30, 2001 and entered into by and among Sealy Mattress Company, an Ohio
corporation ("Company"), Sealy Corporation, a Delaware corporation ("Holdings"),
the financial institutions listed on the signature pages hereof ("Lenders"),
Goldman Sachs Credit Partners L.P., as arranger and syndication agent
("Syndication Agent"), Morgan Guaranty Trust Company of New York, as
administrative agent for Lenders ("Administrative Agent"; collectively,
Syndication Agent and Administrative Agent are referred to herein as "Agents"),
and Bankers Trust Company, as documentation agent for Lenders, and the Credit
Support Parties (as defined in Section 4 hereof) listed on the signature pages
hereof, and is made with reference to (i) that certain Credit Agreement dated as
of December 18, 1997 (as amended, supplemented or otherwise modified to the date
hereof, the "Revolver/Term A Loan Credit Agreement") and (ii) that certain AXEL
Credit Agreement dated as of December 18, 1997 (as amended, supplemented or
otherwise modified to the date hereof, the "AXEL Credit Agreement"; the AXEL
Credit Agreement and the Revolver/Term A Loan Credit Agreement are,
collectively, the "Credit Agreements"), in each case by and among Company,
Holdings, certain Lenders, Syndication Agent and Administrative Agent.
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Revolver/Term A Loan Credit Agreement or the AXEL
Credit Agreement, as applicable, or in Section 1.1 hereof.

                                    RECITALS

               WHEREAS, Company, Holdings and Lenders desire to amend certain of
the terms and provisions of each of the Credit Agreements as set forth below;

               NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:

Section 1.     AMENDMENTS TO THE CREDIT AGREEMENTS

1.1     Amendments to Section 1:  Definitions
        -------------------------------------

        A. Subsection 1.1 of each of the Credit Agreements is hereby amended
by adding thereto the following definitions, which shall be inserted in proper
alphabetical order:

              "March 2001 Amendment" means that certain Fourth Amendment to
        Revolver/Term A Loan Credit Agreement and Third Amendment to AXEL Credit
        Agreement dated as of March 30, 2001 by and among Company, Holdings,
        Subsidiary Guarantors and the Lenders party thereto.

                                        1

<PAGE>

              "March 2001 Amendment Effective Date" means the "Amendment
        Effective Date" as defined in the March 2001 Amendment.

              "New Headquarters Mortgage" means the Mortgage in favor of
        Collateral Agent for the benefit of Lenders executed and delivered by
        Company in connection with its acquisition of the real property in
        Archdale, North Carolina, where its corporate headquarters are located
        on and as of the March 2001 Amendment Effective Date.

        B.    Subsection 1.1 of each of the Credit Agreements is hereby further
amended by deleting the definition of "Senior Subordinated Notes" therefrom and
substituting therefor the following:

              "Senior Subordinated Notes" means the $125,000,000 in aggregate
        principal amount of 9-7/8% Senior Subordinated Notes due December 15,
        2007 of Company issued pursuant to the Senior Subordinated Note
        Indenture; provided that such principal amount shall be increased by the
        principal amount (not to exceed $125,000,000) of any additional Senior
        Subordinated Notes issued on or after the March 2001 Amendment Effective
        Date in transactions not prohibited under this Agreement.

1.2     Amendment to Section 5:  Affirmative Covenants
        ----------------------------------------------

        Section 5 of the AXEL Credit Agreement is hereby amended by adding at
the end thereof the following new subsection 5.13:

        "5.13 Additional Senior Subordinated Note Proceeds.

              Company shall, no later than the date of receipt of the proceeds
        of any issuance of Senior Subordinated Notes on or after the March 2001
        Amendment Effective Date, apply such proceeds (net of underwriting
        discounts and commissions and other reasonable costs and expenses
        associated with such issuance, including reasonable legal fees and
        expenses) to (i) repay in full all outstanding Indebtedness, if any,
        secured by any mortgage (other than the New Headquarters Mortgage)
        encumbering the New Headquarters (such term used herein as defined in
        the Revolving Credit Agreement), (ii) to the extent any such proceeds
        remain after application in accordance with clause (i), repay any
        outstanding Revolving Loans (without reducing the Revolving Loan
        Commitments), and (iii) to the extent any such proceeds remain after
        application in accordance with clauses (i) and (ii), repay any
        outstanding Tranche A Term Loans. No later than 60 days after the
        repayment of the Indebtedness described in clause (i), Company shall
        terminate all mortgage Liens on the New Headquarters (other than the New
        Headquarters Mortgage) and shall execute and deliver such documents and
        instruments, and take all further action that Collateral Agent may
        reasonably request, in order to cause the Lien granted under the New
        Headquarters Mortgage to be a First Priority Lien (except for Permitted
        Encumbrances of the type described in clause (vi) or (x) of the
        definition thereof which are in existence, and

                                        2

<PAGE>

        have priority over the New Headquarters Mortgage, on the March 2001
        Amendment Effective Date), subject to no other mortgage Lien."

1.3     Amendment to Section 6:  Affirmative Covenants

        Section 6 of the Revolver/Term A Loan Credit Agreement is hereby amended
by adding at the end thereof the following new subsection 6.13:

        "6.13 Additional Senior Subordinated Note Proceeds.

              Company shall, no later than the date of receipt of the proceeds
        of any issuance of Senior Subordinated Notes on or after the March 2001
        Amendment Effective Date, apply such proceeds (net of underwriting
        discounts and commissions and other reasonable costs and expenses
        associated with such issuance, including reasonable legal fees and
        expenses) to (i) repay in full all outstanding Indebtedness, if any,
        incurred pursuant to subsection 7.1(xviii), (ii) to the extent any such
        proceeds remain after application in accordance with clause (i), repay
        pursuant to subsection 2.4B(i) any outstanding Revolving Loans (without
        reducing the Revolving Loan Commitments), and (iii) to the extent any
        such proceeds remain after application in accordance with clauses (i)
        and (ii), repay pursuant to subsection 2.4B(i) any outstanding Tranche A
        Term Loans. No later than 60 days after the repayment of the
        Indebtedness described in clause (i), Company shall terminate all
        mortgage Liens on the New Headquarters (other than the New Headquarters
        Mortgage) and shall execute and deliver such documents and instruments,
        and take all further action that Collateral Agent may reasonably
        request, in order to cause the Lien granted under the New Headquarters
        Mortgage to be a First Priority Lien (except for Permitted Encumbrances
        of the type described in clause (vi) or (x) of the definition thereof
        which are in existence, and have priority over the New Headquarters
        Mortgage, on the March 2001 Amendment Effective Date), subject to no
        other mortgage Lien."

1.4     Amendment to Negative Covenants
        -------------------------------

        Each of subsection 6.10B of the AXEL Credit Agreement and subsection
7.14B of the Revolver/Term A Loan Credit Agreement is hereby amended by adding
immediately prior to the "." at the end thereof the following proviso:

        "; provided, that on or after the March 2001 Amendment Effective Date
           --------
        Company may issue (and amend the Senior Subordinated Note Indenture to
        the extent necessary to issue) up to $125,000,000 in aggregate principal
        amount of additional notes (such notes being considered Senior
        Subordinated Notes for all purposes under the Loan Documents) on
        identical terms as the $125,000,000 of Senior Subordinated Notes
        originally issued under the Senior Subordinated Note Indenture, so long
        as the proceeds from the issuance of such additional Senior Subordinated
        Notes are applied in accordance with the provisions of this Agreement.

1.5     Consents to Amendments
        ----------------------

                                        3

<PAGE>

        Each undersigned Lender hereby consents to the amendments to each of the
Credit Agreements set forth in this Amendment.

Section 2.     CONDITIONS TO EFFECTIVENESS

        Anything herein to the contrary notwithstanding, Section 1 of this
Amendment shall become effective only upon the prior or concurrent satisfaction
or waiver of all of the following conditions precedent (the date of satisfaction
of such conditions being referred to herein as the "Amendment Effective Date"):

              (i) On or before the Amendment Effective Date, each of Company and
        Holdings shall have delivered to Lenders (or to Administrative Agent for
        Lenders with sufficient originally executed copies, where appropriate,
        for each Lender and its counsel) the following, each, unless otherwise
        noted, dated the Amendment Effective Date:

                  (a) A certificate of its corporate secretary or an assistant
              secretary to the effect that (i) there have been no amendments to
              its Certificate of Incorporation or Bylaws after the Closing Date
              (or, in lieu thereof, certified copies of any such amendments),
              (ii) the Resolutions of its Board of Directors delivered on the
              Closing Date are in full force and effect without modification or
              amendment, and (iii) there have been no changes after the Closing
              Date in the incumbency of its officers (or, in lieu thereof, a
              certificate of signatures and incumbency for the officers
              executing this Amendment and any related documents), together with
              a good standing certificate with respect to Company from the
              Secretary of State of the State of Ohio, dated a recent date prior
              to the Amendment Effective Date; and

                  (b) This Amendment, executed by Holdings, Company, Credit
              Support Parties, Requisite Lenders under the Revolver/Term A Loan
              Credit Agreement and Requisite Lenders under the AXEL Credit
              Agreement.

              (ii)  So long as Requisite Lenders under the Revolver/Term A Loan
        Credit Agreement and Requisite Lenders under the AXEL Credit Agreement
        shall have executed this Amendment, Administrative Agent shall have
        received from Company, for distribution to each Lender that has executed
        and delivered this Amendment on or prior to 5:00 p.m. (New York City
        time) on March 30, 2001, an amendment fee in an amount equal to .05% of
        the aggregate Revolving Loan Exposure, Tranche A Term Loan Exposure,
        AXEL Series B Exposure, AXEL Series C Exposure and AXEL Series D
        Exposure of such Lender.

              (iii) Company shall have paid the reasonable fees, expenses and
        disbursements of O'Melveny & Myers LLP, counsel to Agents, to the extent
        invoiced prior to the Amendment Effective Date.

Section 3.     COMPANY'S REPRESENTATIONS AND WARRANTIES

               In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreements in the manner provided herein, Company represents
and warrants to each Lender under each Credit Agreement that the following
statements are true, correct and complete:

                                        4

<PAGE>

       A.   Incorporation of Representations and Warranties From Credit
Agreements. On and as of the date hereof and the Amendment Effective Date, the
representations and warranties contained in subsections 5.1A, 5.2A, 5.2B, 5.2C
and 5.2D of the Revolver/Term A Loan Credit Agreement and subsections 4.1A,
4.2A, 4.2B, 4.2C and 4.2D of the AXEL Credit Agreement are and will be true,
correct and complete with respect to this Amendment and the Credit Agreements as
amended by this Amendment (each, as so amended, an "Amended Agreement," and
collectively, the "Amended Agreements") as if this Amendment and the Amended
Agreements were "Loan Documents" referred to in such representations and
warranties, and with the foregoing modifications such representations and
warranties are incorporated herein by this reference; and the representations
and warranties contained in Section 5 of the Revolver/Term A Loan Credit
Agreement and Section 4 of the AXEL Credit Agreement are and will be true,
correct and complete in all material respects on and as of the Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.

       B.   Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default under
any of the Credit Agreements.

Section 4.  ACKNOWLEDGMENT AND CONSENT

       Each of Company, Holdings and the Persons indicated as Subsidiary
Guarantors on the signature pages hereof (each individually a "Credit Support
Party" and collectively, the "Credit Support Parties") hereby acknowledges and
agrees that each Loan Document to which it is a party is in full force and
effect and shall not be limited or impaired in any manner by the effectiveness
of this Amendment and the transactions contemplated hereby.

Section 5.  MISCELLANEOUS

       A.   Reference to and Effect on the Credit Agreements and the Other Loan
Documents.

            (i)   On and after the Amendment Effective Date, each reference in
       each of the Revolver/Term A Loan Credit Agreement and the AXEL Credit
       Agreement to "this Agreement", "hereunder", "hereof'", "herein" or words
       of like import referring to such Credit Agreement, and each reference in
       the other applicable Loan Documents to the "Credit Agreement",
       "thereunder", "thereof" or words of like import referring to such Credit
       Agreement shall mean and be a reference to the applicable Amended
       Agreement.

            (ii)  Except as specifically amended by this Amendment, each Credit
       Agreement and the other Loan Documents relating thereto shall remain in
       full force and effect and are hereby ratified and confirmed.

            (iii) The execution, delivery and performance of this Amendment
       shall not, except as expressly provided herein or therein, constitute a
       waiver of any provision of, or operate as a waiver of any right, power or
       remedy of any Agent or any Lender under, any Credit Agreement or any of
       the other Loan Documents relating thereto.

                                        5

<PAGE>

       B. Fees and Expenses. Company acknowledges that all reasonable costs,
fees and expenses incurred by Agents and their counsel with respect to this
Amendment and the documents and transactions contemplated hereby shall be for
the account of Company.

       C. Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.

       D. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

       E. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment (other than Section 1 hereof) shall become
effective with respect to the Revolver/Term A Loan Credit Agreement and the AXEL
Credit Agreement upon (A) the execution of counterparts hereof by (1) Requisite
Lenders (as defined in the Revolver/Term A Loan Credit Agreement), (2) Requisite
Lenders (as defined in the AXEL Credit Agreement), (3) Company and (4) Holdings
and the other Credit Support Parties, and (B) receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.

                  [Remainder of page intentionally left blank]

                                        6

<PAGE>

       IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

                                  SEALY MATTRESS COMPANY

                                  By:   ____________________________________
                                        Name:
                                        Title:

                                  SEALY CORPORATION

                                  By:   _____________________________________
                                        Name:
                                        Title:

                                       S-1

<PAGE>

SUBSIDIARY GUARANTORS:

                  THE SEALY MATTRESS COMPANY OF PUERTO RICO
                  OHIO-SEALY MATTRESS MANUFACTURING CO., INC.
                  OHIO-SEALY MATTRESS MANUFACTURING CO.-- FORT WORTH
                  OHIO-SEALY MATTRESS MANUFACTURING CO.
                  OHIO-SEALY MATTRESS MANUFACTURING CO.-- HOUSTON
                  SEALY MATTRESS COMPANY OF MICHIGAN, INC.
                  SEALY MATTRESS MANUFACTURING COMPANY OF KANSAS CITY, INC.
                  SEALY OF MARYLAND AND VIRGINIA, INC.
                  SEALY MATTRESS COMPANY OF ILLINOIS
                  A. BRANDWEIN & COMPANY
                  SEALY MATTRESS COMPANY OF ALBANY, INC.
                  SEALY OF MINNESOTA, INC.
                  SEALY MATTRESS COMPANY OF MEMPHIS
                  THE OHIO MATTRESS COMPANY LICENSING AND COMPONENTS GROUP
                  SEALY MATTRESS MANUFACTURING COMPANY, INC.
                  SEALY, INC.
                  THE STEARNS & FOSTER BEDDING COMPANY
                  THE STEARNS & FOSTER UPHOLSTERY FURNITURE COMPANY

                  By:
                     --------------------------------------
                     Name:
                     Title:

                                       S-2

<PAGE>

AGENTS AND LENDERS:

                                GOLDMAN SACHS CREDIT PARTNERS L.P.,
                                individually and as Syndication Agent

                                By:   _____________________________________
                                      Name:
                                      Title:

                                MORGAN GUARANTY TRUST COMPANY
                                OF NEW YORK,
                                individually and as Administrative Agent

                                By:   _____________________________________
                                      Name:
                                      Title:

                                BANKERS TRUST COMPANY,
                                individually and as Documentation Agent

                                By:   _____________________________________
                                      Name:
                                      Title:

                                       S-3

<PAGE>

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

                                      [NAME OF LENDER]

                                      By:   __________________________________
                                            Name:
                                            Title:

                                       S-4<PAGE>

                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT
                              --------------------

     EMPLOYMENT AGREEMENT (this "Agreement"), by and between PartnerRe Ltd., a
Bermuda company (the "Company"), and Mark L. Pabst (the "Employee").

                                   WITNESSETH:
                                   -----------

     WHEREAS, the Company desires to memorialize the terms of employment of the
Employee as Executive Vice President, Corporate Affairs of the Company and at
the same time, member of the Executive Committee of PartnerRe Group Management;
and

     WHEREAS, the Employee is willing to serve the Company on the terms and
conditions herein provided.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

1.   EMPLOYMENT

     The Company agrees to employ the Employee and the Employee agrees to serve
the Company on the terms and conditions set forth herein.

2.   TERM

     This Agreement shall be effective, and the Employee's employment as
contemplated hereunder shall commence (subject to any immigration
considerations), as of 16 July 2001 (the "Effective Date") and shall continue,
unless earlier terminated pursuant to Section 6 hereof. Unless either party
shall provide Notice of Termination prior to an anniversary date of this
Agreement pursuant to Section 6 hereof, this Agreement and the Employee's
employment term shall extend automatically for consecutive periods of one year.

3.   POSITION AND DUTIES

     (a) The employee shall serve as the Executive Vice President, Corporate
Affairs of the Company and shall report directly to the Chief Executive Officer
of the Company. The Employee shall perform such duties and exercise such
supervision and powers over and with regard to the business of the Company such
as are consistent with the position of Exective Vice President, as well as such
other reasonable duties and services consistent with the position of a
multi-national reinsurance company as may be prescribed from time to time by the
Chief Executive Officer. The Employee's performance of any duties and
responsibilities shall be conducted in a manner consistent with any reasonable
guidelines provided to the Employee by the Chief Executive Officer.
<PAGE>

     (b) Subject to the next succeeding sentence, except during customary
vacation periods and periods of illness, the Employee shall, during his
employment hereunder, devote substantially his full business time and attention
to the performance of services for the Company. The Company hereby acknowledges
that the Employee shall be permitted to devote a reasonable amount of his
business time, consistent with his duties to the Company and the consent of the
Chief Executive Officer, to (a) the management of personal and family
investments and (b) serving on the board of directors and/or acting as an
officer of any private, public or not-for-profit entities that are not engaged
in businesses similar to the Company and do not materially affect the duties of
the Employee.

4.   PLACE OF PERFORMANCE

     In connection with the Employee's employment by the Company, the Employee
shall generally perform his duties in Bermuda except for reasonably necessary
travel on the Company's business and in connection with the performance of his
duties hereunder, or may perform his duties hereunder at such places as are
mutually agreed upon with the Chief Executive Officer,

5.   COMPENSATION AND RELATED MATTERS

     (a) Base Salary. During the term of this Agreement, the Company shall pay
to the Employee a base salary at an aggregate initial rate of USD $320,000 per
annum, which shall be reviewed by the Human Resources Committee of the Board of
Directors (the "Human Resource Committee") in February, 2002 and annually
thereafter (which salary, as adjusted from time to time, is referred to herein
as "Base Salary"). Base Salary shall be paid in equal installments in accordance
with normal payroll practices of the Company but not less frequently than
monthly. Base Salary may be increased (but not decreased) annually at the
discretion of the Human Resources Committee. Base Salary payments (including any
increased Base Salary payments) hereunder shall not in any way limit or reduce
any other obligation of the Company hereunder, and no other compensation,
benefit or payment hereunder shall in any way limit or reduce the obligation of
the Company to pay the Employee's Base Salary hereunder.

     (b) Annual Incentive Bonus Compensation. During the term of the Employee's
employment hereunder, the Employee will be entitled to receive annual incentive
compensation in an amount for the Company's fiscal year determined in the sole
discretion of the Human Resources Committee in accordance with the Company's
Compensation Guidelines; provided that the first such bonus shall be determined
at between 0% and 140% of Base Salary with 70% for target performance. The first
such annual incentive compensation will be paid in March, 2002 and calculated
prorata at the rate of 60% of the annual award for the period ending 31 December
2001.
<PAGE>

Long-Term Incentive Compensation.

     (a) Sign-on Incentive Stock Option Award. The Employee will receive an
award of 25,000 PartnerRe Ltd. stock options. Twenty-five percent of the options
will vest immediately, and twenty-five percent will vest on the first, second
and third anniversary of the Grant Date. In the event the Optionee ceases to be
an employee of the PartnerRe Group for any reason, any Option awards, to the
extent vested and exercisable shall be exercisable for three years after
termination of employment, but in no event later than the expiration of the
Option.

In the case of termination by reason other than for cause, all unvested options
on the date of termination will continue to vest according to the stated vesting
schedule.

     (b) Annual Incentive Stock Option Award. The Employee will be eligible to
participate in the Stock Option Plans of the Company (the "Plans"); the next
such award is expected to be granted in February 2002. The Employee shall
receive stock options at the sole discretion of the Human Resources Committee of
the Board and in accordance with, and subject to, the terms of the Plans, and
any agreement executed by the Employee in connection therewith.

     (c) Expenses. During the term of this Agreement, the Employee shall be
entitled to receive prompt reimbursement from the Company of all reasonable
expenses incurred by the Employee in promoting the business of the Company and
in performing services hereunder, including all expenses of travel and
entertainment and living expenses while away from home on business or at the
request of or in the service of the Company, provided that such expenses are
incurred and accounted for in accordance with the policies and procedures
established by the Company from time to time.

     (d) Other Benefits. During the term of this Agreement, the Employee shall
participate, at the Company's expense, in the retirement, death, disability,
health and other benefit plans and arrangements set forth on Schedule 1 hereto
(the "Benefit Plans") and shall participate in any revision or improvement in
such benefits as provided to members of the Company's Executive Committee, which
could be made at any time in the future. Except as set forth on Schedule 1
hereto or as otherwise provided in this Agreement, the Company shall have no
obligation to provide the Employee with any employee pension, disability, health
or other benefits of any kind provided to its employees generally.

6.   TERMINATION

     The Employee's employment hereunder may be terminated under the following
circumstances, subject to the effective "Date of Termination" described in
Section 6(e) hereof:
<PAGE>

     (a) Death or Disability

     (i) The Employee's employment hereunder shall terminate upon his death.

     (ii) If the Employee shall have qualified for long-term disability benefits
under any long-term disability insurance arrangement in which he is
participating and the Employee qualifies for the Company's long-term disability
benefit, then, notwithstanding the provisions of Section 2, the Company may at
any time after the date of such qualification, give to the Employee a Notice of
Termination (as defined in Section 6(d) hereof) of the Employee's employment
hereunder and the Employee's employment hereunder shall terminate on the date
provided in Section 6(e) hereof.

     (b) Termination by the Company. The Company may terminate the Employee's
employment hereunder at any time for or without Cause. For purposes of this
Agreement, the Company shall have "Cause" to terminate the Employee's employment
hereunder upon (A) the engaging by the Employee in gross negligence or willful
misconduct which is materially monetarily injurious to the Company and its
subsidiaries on a consolidated basis, or (B) the conviction of the Employee of a
felony involving moral turpitude. For purposes of this paragraph, no act, or
failure to act, on the Employee's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company. The
Employee shall not be deemed to have been terminated for Cause unless the
Company shall have given or delivered to the Employee (i) reasonable notice (the
"Preliminary Notice of Cause") setting forth, in reasonable detail the facts and
circumstances claimed to provide a basis for termination for Cause, (ii) a
reasonable opportunity for the Employee to cure any action alleged as the basis
for termination under clause (A) above, (iii) a reasonable opportunity for the
Employee, together with his counsel, to be heard before the Board, and (iv) a
Notice of Termination stating that, in the good faith opinion of not less than a
majority of the entire membership of the Board, the Employee was guilty of
conduct set forth in clauses (A) or (B) above. Upon receipt of the Preliminary
Notice of Cause, the Employee shall have thirty (30) days in which to appear
before the Board with counsel, or take such other action as he may deem
appropriate, and such thirty (30) day period is hereby agreed to as a reasonable
opportunity for the Employee to be heard.

     (c) Termination by the Employee. The Employee may terminate his employment
hereunder at any time for or without Good Reason. For purposes of this
Agreement, "Good Reason" shall mean (A) a failure by the Company to comply with
any material provision of this Agreement (B) the assignment to the Employee by
the Company of duties inconsistent with the Employee's position, authority,
duties, responsibilities or status with the Company as in effect immediately
after the date of execution of this Agreement including, but not limited to, any
reduction whatsoever in such position, authority, duties, responsibilities or
status, or a change in the Employee's titles or offices, as then in effect, or
any removal of the Employee from, or any failure to re-elect the Employee to,
any of such positions, except in connection with the termination
<PAGE>

of his employment on account of his death, disability, or for Cause, (C) any
reduction in compensation or benefits without the Employee's prior written
consent, (D) any other material change in the conditions of employment, (E) the
occurrence of any Change of Control (as defined below), or (F) any purported
termination of the Employee's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of subsection 6(d) hereof or,
in the case of a termination allegedly for "Cause", which fails to satisfy the
requirements of clauses (i) through (iv) of Section 6(b) hereof (and for
purposes of this Agreement no such purported termination shall be effective). If
the Company has not cured such event within 30 days of receipt of the
preliminary notice of Good Reason, the Employee may terminate his employment for
Good Reason by delivery of a Notice of Termination.

     (d) Notice of Termination. Any termination of the Employee's employment by
the Company or by the Employee shall be communicated by written Notice of
Termination to the other party hereto. 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, if any, claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated.

     (e) Date of Termination. "Date of Termination" shall mean (i) if the
Employee's employment is terminated by his death, the date of his death, (ii) if
the Employee's employment is terminated disability pursuant to Section 6(a) (ii)
hereof, the date specified in the Notice of Termination, (iii) if the Employee's
employment is terminated by the Company without Cause or by the Employee for
Good Reason, either party hereto gives written Notice of Termination to the
other of no less than twelve months, (iv) if the Employee's employment is
terminated by the Company for Cause or if the Employee voluntarily terminates
his employment for other than Good Reason, the date specified in the Notice of
Termination.

7.   COMPENSATION UPON TERMINATION

     The compensation and benefit arrangements set forth in this Section 7 shall
be paid or provided for by the Company upon any termination of the Employee's
employment by the Company:

     (a) Upon his death, the Company shall pay the spouse or his dependent
children or other dependents, in aggregate, (i) 6 months Base Salary and (ii) a
bonus equal to 1/2 the annual target rate of bonus in the year when the Date of
Termination occurs and (iii) continuation of the Housing Allowance and provision
of the Motor Vehicle in Bermuda for the period ending the earlier of the date
the dependents of the Employee leave Bermuda or 3 months after the Date of
Termination and (iv) all Options granted to the Employee under the Plans which
remain unvested shall immediately vest.

     (b) If the Company terminates the employment of the Employee under Section
6 (a) (ii) by reason of disability, the Company shall pay to the Employee, not
less
<PAGE>

frequently than monthly, the amount of any difference between the level of
long-term disability benefits required to be maintained under the benefit Plans,
and the amount actually paid in satisfaction of such benefits by insurance, for
so long as the Employee is disabled and remains entitled to benefits. Prior to
termination for disability, full compensation and benefits shall continue to be
provided to the Employee. In addition, there will be (i) a continuation of the
Housing Allowance and provision of the Motor Vehicle in Bermuda for the period
ending the earlier of the date the Employee leaves Bermuda or 3 months after the
Date of Termination and (ii) all Options granted to the Employee under the Plans
which remain unvested shall immediately vest and (iii) payment of a pro rata
bonus for the fiscal year in which the Date of Termination occurs, based on the
bonus paid to the employee for the previous fiscal year and the number of days
elapsed in the current fiscal year as of the Date of Termination. After the Date
of Termination because of disability, the Employee's medical coverage under the
Benefit Plans shall continue to be provided at Company expense in accordance
with provisions of Schedule 1.

     (c) If (i) the Company terminates the employment of the Employee under
Section 6(b) for Cause, or (ii) the Employee terminates employment without Good
Reason, the Employee shall be paid all accrued salary and benefits through the
Date of Termination and, except as provided in Section 7(e) hereof, the Company
shall have no further obligations to the Employee after the Date of Termination.

     (d) If the Employee's employment terminates for any reason other than those
reasons described in subsection (a), (b) or (c) of the Section 7: (i) the
Employee shall continue to receive his Base Salary from the Company at the rate
in effect hereunder on the Date of Termination periodically, in accordance with
the Company's prevailing payroll practices for one year, and (ii) 1/12th of the
annualised incentive bonus due by the Company to the Employee for the calendar
year prior to the Date of Termination under Section 5(b) shall be paid to the
Employee by the Company for each full calendar month for one year and (iii) all
Options granted to the Employee under the Plans which remain unvested shall
immediately vest and (iv) continuation of the Housing Allowance and provision of
the Motor Vehicle in Bermuda for the period ending the earlier of the date the
Employee leaves Bermuda or 3 months after the Date of Termination. In addition,
the Employee shall be paid (I) all accrued salary and benefits through the Date
of Termination, (ii) a pro rata bonus for the fiscal year in which the Date of
Termination occurs, based on the bonus paid to the Employee for the previous
fiscal year and the number of days elapsed in the current fiscal year as of the
Date of Termination, and, (iii) except as provided in Sections 7 (e), (f) and
(g) hereof, the Company shall have no further obligations to the Employee after
the Date of Termination.

     (e) If the Employee's employment terminates for any reason other than those
reasons described in sub section (a), (b) or (c) of this section 7 in connection
with a Change of Control (as herein defined), the Company shall pay the Employee
the greater of (A) the amounts described clause (i) and (ii) of Section 7(d)
hereof, in a single lump sum of (B) (i) 2 years of the last Base Salary and,
(ii) a bonus equal to two times the
<PAGE>

target rate of bonus for the Employee in the year when the Date of Termination
occurs, in a single lump sum.

     (f) Upon any termination of the Employee's employment hereunder, the
Company will allow the Employee to receive all accrued benefits to which the
Employee was entitled under the provisions of the Benefit Plans, and the Company
shall have no further obligations to the Employee, except as may be provided
under the express terms of this Agreement or of any such Benefit Plans or under
the express terms of any option agreements entered into during the term of this
Agreement, or in accordance with the survivorship provisions of Section 14 of
this Agreement.

     (g) In the event that any payment to the Employee under this Agreement or
otherwise is subject to the excise tax imposed under Section 4999 of the U.S.
Internal Revenue Code of 1986, the Company shall make an additional payment to
the Employee such that his net after tax position shall be the same as if such
excise tax had not been so imposed.

8.   INDEMNIFICATION

     The Company shall indemnify the Employee (and his legal representatives or
other successors and heirs) to the fullest extent permitted (including payment
of expenses in advance of final disposition of the proceeding) by the laws of
Bermuda, as in effect at the time of the subject act or omission, or the
Certificate of Incorporation and Bye-Laws of the Company as in effect at such
time or on the date of this Agreement, whichever affords or afforded greater
protection to the Employee; and the Employee 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 or his legal representatives in
connection with any action, suit or proceeding to which he (or his legal
representatives or other successors and heirs) 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 Employee in respect of which indemnity may be sought against the
Company pursuant to the foregoing, the Employee shall notify the Company
promptly in writing of the institution of such action, suit or proceeding and
the Company shall assume the defense thereof and the employment of counsel and
payment of all fees and expenses, provided however, that if a conflict of
interest exists between the Company and the Employee such that it is not legally
practicable for the Company to assume the Employee's defense, the Employee shall
be entitled to retain separate counsel reasonably acceptable to the Company at
the Company's expense.

9.   TAXES

     The Company shall deduct all taxes required by law from all amounts payable
under this Agreement.
<PAGE>

10.  CONFIDENTIALITY

     Unless otherwise required by law or judicial process, for the duration of
this agreement and after its conclusion, the Employee shall retain all
confidential information known to the Employee concerning the Company and its
business for the shorter of (I) one year following such termination or (ii)
until such information is publicly disclosed by the Company or otherwise becomes
publicly disclosed other than through the Employee's actions.

11.  COVENANTS NOT TO COMPETE OR INTERFERE

     In the event of a termination by the Company for Cause, without Cause or a
termination by the employee without Good Reason, during the period ending six
months from and after the Date of Termination with respect to such event, the
Employee will not, other than on behalf of the Company, directly or indirectly,
as a sole proprietor, agent, broker or intermediary, member of a partnership, or
stockholder, investor, officer or director of a corporation, or as an employee,
agent, associate or consultant of any person, firm or corporation:

(a) Solicit or accept business (i) from any clients of the Company or its
affiliates, (ii) from any prospective clients whose business the Company or any
of its affiliates is in the process of soliciting at the time of the Employee's
termination, or (iii) from any former clients which had been doing business with
the Company within one year prior to the Employee's termination;

     (b) Solicit any employee of the Company or its affiliates to terminate such
employee's employment with the Company; or

     (c) Nothing contained in this Section shall prohibit the Employee from
making investments in or from serving as an officer or employee of a firm or
corporation which is not directly or indirectly engaged in the same type of
business as the Company.

     It is the desire and intent of the parties that the provisions of this
Section 11 shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular portion of this Section 11 shall be adjudicated
to be invalid or unenforceable, this Section 11 shall be deemed amended to
delete therefrom the portion thus adjudicated to be invalid or unenforceable,
such deletion to apply only with respect to the operation of this Section 11 in
the particular jurisdiction in which such adjudication is made. The Employee
acknowledges that he has received good and valuable consideration for the
non-competition obligation contained in this Section 11.

12.  SUCCESSORS; BINDING AGREEMENT

     (a) This Agreement is personal to the Employee and without the prior
written consent of the Company shall not be assignable by the Employee otherwise
than by will
<PAGE>

or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Employee legal representatives or heirs.

     (b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.

     (c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company (a "Successor Company") to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place; provided, however, that no such succession shall relieve the
Company o its obligations hereunder unless the assumption of this Agreement by a
Successor Company is approved in writing by the Employee.

13.  NOTICE

     For the purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered or (unless otherwise
specified) when mailed by registered mail return receipt requested, postage
prepaid, addressed as follows:

     If to the Employee:
     -------------------

     Mark L. Pabst
     C/- PartnerRe Ltd.
     106 Pitts Bay Rd
     Pembroke HM-08

     If to the Company:
     ------------------

     PartnerRe Ltd:
     Attn:  Chief Executive Officer
     106 Pitts Bay Road
     Pembroke HM 08
     Bermuda

Or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

14.  SURVIVORSHIP

     The respective rights and obligations of the parties hereunder, including,
without limitation, the rights and obligations set forth in Sections 5 through 8
and 10 through 12
<PAGE>

of this Agreement, shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.

15.  MISCELLANEOUS

     The parties hereto agree that this Agreement contains the entire
understanding and agreement between them, and supersedes all prior
understandings and agreements between the parties respecting the employment by
the Company of the Employee or respecting the employment by the Company of the
Employee. The parties further agree that the provisions of this Agreement may
not be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the parties hereto. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Except as set forth
in the benefit Plans, no agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party, which are not set Exhibit 10.1 forth expressly in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of Bermuda without giving effect to the conflict
of law principles thereof.

16.  VALIDITY

     The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
or provisions of this Agreement, which shall remain in full force and effect.

17.  COUNTERPARTS

     This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.

18.  CHANGE OF CONTROL

     "Change of Control" means the happening of any of the following: (i) when
any "person" (as that term issued in Sections 13 and 14 (d) (2) of the U.S.
Securities and Exchange Act of 1034 ("Exchange Act")), is or becomes the
beneficial owner (As that term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of 40% or more of the voting Stock, (ii) when, with any
24-month period, the persons who were directors of the Company immediately
before the beginning of such period (the "Incumbent Director") shall cease (for
any reason other than death) to constitute at least a majority of the Board,
provided that any director who was not a director as of the beginning of such
period shall be deemed to be an Incumbent Director if such Director was elected
to the Board by or on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as Incumbent Directors either
actually or by prior operation
<PAGE>

of this clause (ii), or (iii) the occurrence of a transaction requiring
shareholder approval for the acquisition of any of the entities in the Company's
Group including the Company (together the "Group") by an entity other than any
member of the Group or any subsidiary of any such member, through purchase of
assets, by merger or otherwise.

19.  GOVERNING LAW

     This Agreement shall be deemed to be made, and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of
Bermuda.

     IN WITNESS WHEREOF, the Company has caused its name to be ascribed to this
Agreement by its duly authorized representative and the Employee has executed
this Agreement effective as of the date set forth in Section 2 hereof.

     PARTNERRE LTD.

/s/ Patrick Thiele                          Date:  July 16, 2001
-------------------------                         ------------------------
Name:  Patrick Thiele
Title: Chief Executive Officer

/s/ Mark L. Pabst                           Date:  July 16, 2001
-------------------------                         ------------------------
Name:  Mark L. Pabst
<PAGE>

                                   Schedule I

     To EMPLOYMENT AGREEMENT, by and between PartnerRe Ltd. (the "Company"), and
     Mark L. Pabst (the "Employee") effective 16 July 2001.

1.   Non-contributory Company Benefit Plans -

You will be eligible for all the Benefit Plans as set-up and administered for
all Company employees:
Health Coverage - Major Medical, Dental and Hospitalization
Group Term Life Insurance
Short and Long Term Disability
Accidental Death and Dismemberment
Reimbursement of medical premiums in the US for as long as you are considered an
employee of the Company.

2.   Retirement

The Company pension plan is a defined contribution plan in which the Company
pays a contribution equal to 15% of your base salary, calculated on a monthly
basis. There will be an option to have the Company make your pension
contributions to a US tax qualified plan for American employees.

The initial company-paid pension contribution will include $7,416, which
represents pension contributions on consulting fees prior to employment

3.   Housing Assistance

The Company will pay up to $7,500 per month in housing allowance, up to actual
rental costs.

4.   Vacation

You are eligible to receive 25 vacation days per year, plus all local Bermuda
public holidays.

5.   Travel

Business Class travel expenses will be reimbursed for all travel on Company
business.

6.   Scooter

The Company shall provide for or reimburse the lease cost of two motor scooters
for the duration of his employment with the Company.
<PAGE>

7.   Household Goods Move
The Company agrees to ship all household goods from Bermuda at the end of the
employee's assignment in Bermuda. This includes replacement cost insurance for
all items.

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