Document:

Exhibit 10.1

Execution
Copy

POLYMER GROUP, INC.

SEVERANCE AGREEMENT

THIS SEVERANCE AGREEMENT is entered into on October
31, 2006, between Polymer Group, Inc., a Delaware corporation (the “Company”),
and James L. Schaeffer (“Executive”).

WHEREAS, the Company and Executive are parties to a
certain employment agreement dated as of March 24, 2006 (the “Employment
Agreement”);

WHEREAS, the Company and Executive are parties to a
certain change in control severance compensation agreement dated as of March
24, 2006 (the “Change in Control Agreement”);

WHEREAS, the Company and Executive wish to end the
employment relationship.

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

1.             End of Employment.

(a)           The Company and
Executive hereby agree that the employment of Executive with the Company and
its Subsidiaries shall end on October 31, 2006 (the “Termination Date”).  Executive also agrees that his service as a
member of the Board of Directors and as an officer of the Company and its
Subsidiaries shall end on October 31, 2006. 
Executive shall take such actions reasonably requested by the Company in
furtherance of the foregoing to evidence the end of such employment and such
service as a director and/or officer.

(b)           For purposes of this
Agreement, “Subsidiaries” shall mean any corporation or other entity of
which the securities or other ownership interests having the voting power to
elect a majority of the board of directors or other governing body are, at the
time of determination, owned by the Company, directly or through one of more
Subsidiaries, including without limitation those entities set forth on Annex I
attached hereto.

2.             Compensation and Benefits.

(a)           Salary.  Executive shall be entitled to receive his
base salary through the Termination Date. 
As payment of severance under this Agreement, Executive shall be
entitled to receive an amount equal to his base salary until December 20, 2006
(the “Payment End Date”).  Executive
shall not be entitled to receive any amounts of base salary for any period
after the Payment End Date.  Such
severance payments shall be made bi-weekly in accordance with the Company’s
current payroll practices.  Executive
shall not be entitled to any additional payment for unused vacation days or
paid time off days.

 

(b)           Expenses.  The Company shall reimburse Executive for all
reasonable business expenses incurred by him prior to the Termination Date
which were incurred in the course of performing his duties and responsibilities
which are consistent with the Company’s policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company’s requirements with respect to reporting and documentation of such
expenses.

(c)           Bonus.  Executive shall not be entitled to receive
any amounts that may have been due to him under the Employment Agreement or
pursuant to any Company bonus plan in respect of a bonus for the current fiscal
year.

(d)           Vested Restricted
Stock and Vested Stock Options.  As
additional payment of severance payments under this Agreement, Executive shall
be entitled to the vested portion of his restricted stock grants, totaling
46,618 shares (prior to the reduction for the shares withheld by the Company in
payment of taxes on behalf of Executive totaling 15,836 shares, for a current
total holding of 30,782 shares), subject to the terms and conditions of the
2005 Restricted Stock Plan, and to the vested portion of the stock options
grants totaling 48,750 stock options, subject to the terms and conditions of
the 2003 Stock Option Plan; provided that the provisions of Section 2(c)(ii) of
the Restricted Stock Grant concerning service and performance vested shares and
Section 2(b) of the Restricted Stock Grant concerning immediately vested
shares, and the provisions of Section 6(d)(iii) of the 2003 Stock Option Plan,
in each case covering forfeitures on certain terminations, shall not apply to the
shares and options referred to in this sentence; provided further, that
Executive shall be free to sell his shares of restricted stock commencing on
December 21, 2006.  All other grants of
restricted stock and stock options are hereby forfeited and cancelled.  All shares of restricted stock previously
withheld by the Company in satisfaction of amounts due for taxes resulting from
the grant of shares of restricted stock shall remain with the Company.

(e)           Withholding.  All amounts payable to Executive as compensation
hereunder shall be subject to all required and customary withholding by the
Company.

(f)            Insurance.  Until September 21, 2007, the Company shall,
at its expense, pay both the employer and employee portion of the premiums for
group medical, dental and vision insurance at the level and with the coverage
in effect for Executive and his dependants and beneficiaries immediately prior
to the Termination Date.  Executive shall
only be responsible for the deductible or co-pay obligations under such insurance
programs.  The Company shall pay the
conversion premium under the group life insurance plan to convert the existing
group life insurance coverage of Executive into an individual policy with the
same level of coverage as in effect immediately prior to the Termination Date,
with an initial term through September 21, 2007.  The Company shall also pay to Executive for
each month during the period beginning on the Termination Date and ending on
September 21, 2007, an amount equal to the amount the Company was paying on
behalf of Executive to provide coverage under the Company’s long-term
disability plan.  Executive shall also be
entitled to receive the continuation of his group medical, dental and vision
insurance coverage as provided under the provisions of the Consolidated Omnibus
Budget Reconciliation Act (“COBRA”) beginning on March 21, 2007, and continuing
until September 21, 2008.  For the period
between March 21, 2007 and 

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September 21,
2007, the Company shall pay the employer and employee portions of the coverage
under COBRA, other than any co-pay or deductible payments required under such
insurance.  The Company’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 the Company 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 subsection (f) shall not
be interpreted so as to limit any benefits to which the Executive, his
dependants or beneficiaries may otherwise be entitled under any of the Company’s
employee benefit plans, programs or practices following the termination of
employment of the Executive, including without limitation, any applicable
retiree medical and life insurance benefits. 
The Company may offset any amounts Executive owes it or its Subsidiaries
against any amounts it or its Subsidiaries owes Executive hereunder.

(g)           Return of Car.  Executive has returned his company car to the
Company, together with all keys, owner’s manuals and other documents relating
to ownership or maintenance.

3.             Confidential Information.

(a)           Obligation to
Maintain Confidentiality.  Executive
acknowledges that the continued success of the Company and its Subsidiaries,
depends upon the use and protection of a large body of confidential and
proprietary information.  All of such
confidential and proprietary information existing prior hereto, now existing or
to be developed in the future will be referred to in this Agreement as “Confidential
Information.”  Confidential
Information will be interpreted as broadly as possible to include all
information of any sort (whether merely remembered or embodied in a tangible or
intangible form) that is (i) related to the Company’s or its Subsidiaries’
current or potential business and (ii) is not generally or publicly
known.  Confidential Information
includes, without specific limitation, the information, observations and data
obtained by him during the course of his employment by the Company and its
Subsidiaries concerning the business and affairs of the Company and its
Subsidiaries, information concerning acquisition opportunities in or reasonably
related to the Company’s or its Subsidiaries’ business or industry of which
Executive becomes aware during such employment, the persons or entities that
are current, former or prospective suppliers or customers of any one or more of
them during Executive’s employment, as well as development, transition and
transformation plans, methodologies and methods of doing business, strategic,
marketing and expansion plans, including plans regarding planned and potential
sales, financial and business plans, employee lists and telephone numbers,
locations of sales representatives, new and existing programs and services,
prices and terms, customer service, integration processes, requirements and
costs of providing service, support and equipment.  Therefore, Executive agrees that he shall not
disclose to any unauthorized person or use for his own account any of such
Confidential Information, unless and to the extent that any Confidential Information
(i) becomes generally known to and available for use by the public other
than as a result of Executive’s acts or omissions to act or (ii) is
required to be disclosed pursuant to any applicable law or court order.  Executive agrees to deliver to the Company
all memoranda, notes, plans, records, reports and other documents (and copies
thereof) relating to 

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the business
of the Company or its Subsidiaries (including, without limitation, all
Confidential Information) that he may then possess or have under his control.

(b)           Ownership of
Intellectual Property.  Executive
agrees to make prompt and full disclosure to the Company or its Subsidiaries,
as the case may be, of all ideas, discoveries, trade secrets, inventions,
innovations, improvements, developments, methods of doing business, processes,
programs, designs, analyses, drawings, reports, data, software, firmware, logos
and all similar or related information 
(whether or not patentable and whether or not reduced to practice) that
relate to the Company’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
the Company or its Subsidiaries and for a period thereafter ending on September
21, 2007 (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 the Company 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 the Company 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 to establish and confirm the Company’s or such Subsidiary’s ownership
(including, without limitation, providing testimony and executing assignments,
consents, powers of attorney, and other instruments).

(c)           Third Party
Information. Executive understands that the Company and its Subsidiaries
have received from third parties confidential or proprietary information (“Third
Party Information”) subject to a duty on the Company’s and its Subsidiaries’
part to maintain the confidentiality of such information and to use it only for
certain limited purposes.  Without in any
way limiting the provisions of Section 3(a) above, Executive will hold
Third Party Information in the strictest confidence and will not disclose to
anyone (other than personnel of the Company or its Subsidiaries who need to
know such information in connection with their work for the Company or such
Subsidiaries) or use, such Third Party Information unless expressly authorized
by a member of the Board in writing.

4.             Non-Compete, Non-Solicitation.

(a)           In further
consideration of the compensation to be paid to Executive hereunder, Executive
acknowledges that during the course of his employment with the Company and its
Subsidiaries he became familiar with the Company’s trade secrets and with other
Confidential Information concerning the Company and its predecessors and its
Subsidiaries and that his services shall be of special, unique and
extraordinary value to the Company and its Subsidiaries, and therefore,
Executive agrees that, from the date of this Agreement until September 21, 2007
(the “Noncompete Period”), he shall not directly or indirectly own any
interest in, manage, control, participate in, consult with, render services
for, or in any manner engage in any business competing with the businesses of
the Company or its Subsidiaries, as such businesses exist or were in process
during his employment by the Company and its Subsidiaries, within any
geographical area in which the Company or its Subsidiaries engage or 

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plan to engage
in such businesses.  Nothing herein shall
prohibit Executive from being a passive owner of not more than 2% of the
outstanding stock of any class of a corporation which is publicly traded, so
long as Executive has no active participation in the business of such corporation.  In the event Executive is approached by a
third party that is not a competitor of the Company and asked to advise such
third party with respect to a potential acquisition of the Company, Executive
may request the consent of the Company to act in such capacity and the Company
will consider such request in good faith.

(b)           During the
Noncompete Period, Executive shall not directly or indirectly through another
person or entity (i) induce or attempt to induce any employee of the Company or
any Subsidiary to leave the employ of the Company or such Subsidiary, or in any
way interfere with the relationship between the Company or any Subsidiary and
any employee thereof, (ii) hire any person who was an employee of the Company
or any Subsidiary at any time during his employment by the Company and its
Subsidiaries or (iii) induce or attempt to induce any customer, supplier,
licensee, licensor, franchisee or other business relation of the Company or any
Subsidiary to cease doing business with the Company or such Subsidiary, or in
any way interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or any Subsidiary (including,
without limitation, making any negative or disparaging statements or
communications regarding the Company or its Subsidiaries).

(c)           If, at the time of
enforcement of this paragraph 4, a court shall hold that the duration, scope or
area restrictions stated herein are unreasonable under circumstances then
existing, the parties agree that the maximum duration, scope or area reasonable
under such circumstances shall be substituted for the stated duration, scope or
area and that the court shall be allowed to revise the restrictions contained
herein to cover the maximum period, scope and area permitted by law.  Executive acknowledges that the restrictions
contained in this paragraph 4 are reasonable and that he has reviewed the
provisions of this Agreement with his legal counsel.

(d)           In the event of the
breach or a threatened breach by Executive of any of the provisions of this
paragraph 4, the Company would suffer irreparable harm, and in addition and
supplementary to other rights and remedies existing in its favor, the Company
shall be entitled to specific performance and/or injunctive or other equitable
relief from a court of competent jurisdiction in order to enforce or prevent
any violations of the provisions hereof (without posting a bond or other
security).  In addition, in the event of
an alleged breach or violation by Executive of this paragraph 4, the Noncompete
Period shall be tolled until such breach or violation has been duly cured.  Executive acknowledges that the restrictions
contained in paragraph 4 are reasonable and that he has reviewed the provisions
of this Agreement with his legal counsel.

5.             Release. 
Executive shall execute the general release dated as of the date hereof
(the “Release”) attached as Exhibit A hereto. 
Without otherwise limiting the Company’s rights and subject to and in
further consideration of Executive’s obligations under the terms of this
Agreement, the Company agrees that it will not, except to the extent required
by law, require Executive to repay or otherwise seek recovery from Executive of
any salary or bonus amounts paid to, or vested restricted stock or vested stock
options granted to, Executive by the Company during Executive’s employment with
the Company.

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6.             Executive’s Representations.  Executive hereby represents and warrants to
the Company that (i) the execution, delivery and performance of this Agreement
by Executive do not and shall not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound, (ii) Executive is not a
party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall
be the valid and binding obligation of Executive, enforceable in accordance
with its terms.  Executive hereby
acknowledges and represents that he has consulted with independent legal
counsel regarding his rights and obligations under this Agreement and that he fully
understands the terms and conditions contained herein.

7.             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:

James L. Schaeffer

2331 Mount Isle Harbor Drive

Charlotte, N.C.  28214

With a copy to:

William H. Sturges

Partner

Shumaker, Loop & Kendrick, LLP

128 South Tryon Street

Suite 1800

Charlotte, NC  28202

Notices to the Company:

Polymer Group, Inc.

9335 Harris Corners Parkway, Suite 300

Charlotte, NC  28269

Attn:  General Counsel

With a copy to:

H. Kurt von Moltke, P.C.

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, IL  60601

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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.

8.             Severability. 
Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement 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
of this Agreement or any action in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.

9.             Complete Agreement.  This Agreement, those documents expressly
referred to herein and other documents of even date herewith, including the
Release referred to in Section 5, embody the complete agreement and
understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.

10.           Termination of Employment
Agreement; Termination of Change in Control Agreement.  The Company and Executive hereby agree to
terminate, in their entirety, the Employment Agreement and the Change in
Control Agreement, without any obligation on the part of the Company or
Executive under either such agreement for any event or transaction occurring
prior to or following the termination of such agreement.

11.           No Strict Construction.  The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.

12.           Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

13.           Successors and Assigns.  This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his duties or obligations hereunder without the prior
written consent of the Company.

14.           Choice of Law.  All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of North Carolina, without giving effect
to any choice of law or conflict of law rules or provisions (whether of the
State of North Carolina or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of North
Carolina.

15.           Amendment and Waiver.  The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company (as
approved by the 

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Board) and
Executive, and no course of conduct or course of dealing or failure or delay by
any party hereto in enforcing or exercising any of the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement or be deemed to be an implied waiver of any provision of this
Agreement.

16.           Indemnification and Reimbursement
of Payments on Behalf of Executive. 
The Company and its respective Subsidiaries shall be entitled to deduct
or withhold from any amounts owing from the Company or any of its Subsidiaries
to Executive any federal, state, local or foreign withholding taxes, excise
tax, or employment taxes (“Taxes”) imposed with respect to Executive’s
compensation or other payments from the Company or any of its Subsidiaries or
Executive’s ownership interest in the Company (including, without limitation,
wages, bonuses, dividends, the receipt or exercise of equity options and/or the
receipt or vesting of restricted equity). 
In the event the Company or any of its Subsidiaries does not make such
deductions or withholdings, Executive shall indemnify the Company and its
Subsidiaries for any amounts paid with respect to any such Taxes.

17.           Waiver of Jury Trial.  AS A SPECIFICALLY BARGAINED FOR INDUCEMENT
FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE
OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE
RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN
ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

18.           Executive’s Cooperation.  Executive shall cooperate with the Company
and its Subsidiaries in any internal investigation or administrative,
regulatory or judicial proceeding as reasonably requested by the Company
(including, without limitation, Executive being 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 all pertinent information and
turning over to the Company all relevant documents which are or may come into
Executive’s possession, all at times and on schedules that are reasonably
consistent with Executive’s other permitted activities and commitments). In the
event the Company requires Executive’s cooperation in accordance with this
paragraph, the Company shall reimburse Executive solely for reasonable travel
expenses (including lodging and meals, upon submission of receipts); provided,
that in the event Executive is required to spend more than 20 hours in any
one-year period assisting the Company under this paragraph on any investigation
or administrative, regulatory or judicial proceeding that involves or arises
out of matters or actions that are substantially unrelated to any conduct of
Executive during his employment with the Company, as opposed to the mere fact
that he was the Chief Executive Officer of the Company during such time period,
the Company shall reimburse Executive for his time in excess of 20 hours at the
rate of $350.00 per hour.

19.           Arbitration.  Except with respect to disputes or claims
under paragraphs 3 and 4 hereof (which may be pursued in any court of competent
jurisdiction as specified below 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 

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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
the Company 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 paragraphs 3 and 4 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.

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

21.           Number.  In this Agreement, words importing the
singular number only shall include the plural and vice versa, and words
importing the masculine gender shall include the feminine and neuter genders
and vice versa, and words importing persons shall include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations.

22.           Independent Advice.  The Company and the Executive acknowledge and
agree that they have each obtained independent legal advice in connection with
this Agreement and they further acknowledge and agree that they have read, understand
and agree with all of the terms hereof and that they are executing this
Agreement voluntarily and in good faith.

23.           Copy of Agreement.  The Executive hereby acknowledges receipt of
a copy of this Agreement duly signed by the Company.

24.           Currency.  All dollar amounts set forth or referred to
in this Agreement refer to U.S. currency.

25.           Effectiveness.  Once this Agreement has been duly executed
and delivered by each party hereto, all of the provisions shall become
effective.

    *   
*    *    *

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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first written above.

	
   

  	
  Polymer Group, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  James L.
  Schaeffer

  

 

 10

 

Exhibit A

GENERAL RELEASE

I, James L. Schaeffer, 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 Severance Agreement,
entered into on October 31, 2006, (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 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 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, 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, are connected with, or occurred during
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 South Carolina Human Affairs Law, S.C. Code sections 1-13-10
et seq.; S.C. Code sections 41-10-10 et seq., the retaliatory employment
discrimination provision of North Carolina law 

 ExA-1
 

 

or under any other
federal, 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, as
amended, 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, as amended).

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.

 ExA-2
 

 

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.

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; provided,
that in the event I am required to spend more than 20 hours in any one-year
period assisting the Company under this paragraph on any investigation or
administrative, regulatory or judicial proceeding that involves or arises out
of matters or actions that are substantially unrelated to any conduct of mine
during my employment with the Company, as opposed to the mere fact that I was
the Chief Executive Officer of the Company during such time period, the Company
shall reimburse me for my time in excess of 20 hours at the rate of $350.00 per
hour.

11.                                 I
agree not to disparage the Company, its past and present investors, officers,
directors or employees or its affiliates and to keep all confidential and
proprietary information about the past or present business affairs of the
Company and its affiliates confidential unless a prior written release from the
Company is obtained.  I further 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.

 ExA-3
 

 

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;

(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 BEEN GIVEN THE OPPORTUNITY FOR AT LEAST 45 DAYS FROM THE DATE OF MY
RECEIPT OF THIS RELEASE SUBSTANTIALLY IN ITS FINAL FORM ON SEPTEMBER 22, 2006
TO CONSIDER IT AND THE CHANGES MADE SINCE THE SEPTEMBER 22, 2006 VERSION OF
THIS RELEASE ARE NOT MATERIAL AND WILL NOT RESTART THE REQUIRED 45-DAY PERIOD;

(f)                                    THE
CHANGES TO THE AGREEMENT SINCE SEPTEMBER 22, 2006 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 

 ExA-4
 

 

IN WRITING SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATE:  OCTOBER 31, 2006                                                                ____________________________________

 

 ExA-5

 

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
the Company 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 

 ExB-1
 

 

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 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 the Company 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, 

 ExB-2
 

 

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 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 the Company 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

 

ANNEX
I

SUBSIDIARIES

PGI Polymer, Inc.

DT Acquisition Inc.

Fabrene Group, L.L.C.

Bonlam (S.C.), Inc.

FabPro Oriented Polymers, Inc.

Chicopee, Inc.

PGI Nonwovens (Mauritius)

Dominion Textile Mauritius Inc.

Bonlam S.A. de C.V.

Fabrene, Inc.

Dominion Textile (USA) Inc.

Fabrene Corp.

Nanhai Nanxin Non-Wovens Co. Ltd.

Dominion Nonwovens Sudamerica, S.A.

Bonlam Andina Ltd.

Bonlam Holdings BV

DIFCO Performance Fabrics, Inc.

FiberTech Group, Inc.

PNA Corp.

PGI Europe, Inc.

Poly-Bond Inc.

Pristine Brands Corporation

Polyionix Separation Technologies, Inc.

Technetics Group, Inc.

FNA Polymer Corp.

Chicopee Holdings B.V.

FiberGol Corporation

FNA Acquisition, Inc.

PGI Holdings BV

Chicopee Holdings CV

PGI Nonwovens BV

PGI Neunkirchen GmbH

PGI Nonwoven Ltd.

PGI Nonwovens A.B.

Geca Tapes B.V.

Albuma S.A.S.

Geca-Tapes PTE LTD

Nordlys SAS

PGI Nonwovens (China) Co. Ltd.

PGI Nonwoven (Foshan) Co. Ltd.

 

 	  
 	 Annex IExhibit 10.2

Execution
Copy

SEPARATION
AGREEMENT AND GENERAL RELEASE 

This
Separation Agreement and General Release (“Agreement”), effective as of
November 7, 2006, is made and entered into by you, James Snyder, on
behalf of yourself, your heirs, executors, administrators, successors and
assigns (collectively referred to as “you”) and Polymer Group, Inc., on behalf
of itself, its current and former divisions, subsidiaries, affiliates, related
companies, predecessors, successors, assigns, and their officers, directors,
employees, insurers, stockholders, and agents (collectively referred to as
“PGI”).

1.             Separation Date and Pay.  Your employment with PGI will end on November
7, 2006 (your “Separation Date”).  In
exchange for your promises as set forth in this Agreement, PGI agrees to pay
you your current monthly pay, in accordance with standard PGI payroll process,
in the amount of $11,526.67 per month until September 21, 2007, less applicable
payroll withholdings and other deductions, taking into account North Carolina
tax rules relating to severance payments.

2              Recovery.  Without otherwise limiting PGI’s rights and
subject to and in further consideration of your obligations under the terms of
this Agreement, PGI agrees that it, except to the extent required by law, will
not require you to repay or otherwise seek recovery from you of any salary or
bonus amounts paid to you by PGI during your employment with PGI prior to the
Separation Date.

3.             Additional Payment Opportunity.  You will be eligible for an additional
payment opportunity equal to $34,580.01 in lieu of any other bonus payments or
bonus opportunities available to you under any PGI plan, agreement or
arrangement, less applicable payroll withholdings and other deductions, taking
into account North Carolina tax rules relating to severance payments.  This additional payment will only be paid on
September 21, 2007 and only if you comply with all of the terms and conditions
of this Agreement for the entire period. 
Your satisfaction of the terms of this Agreement shall entitle you to
the additional payment.

4.             Stock Options; Restricted Stock.  You will forfeit all of your shares of
restricted stock and stock options that have been granted to you, including all
vested and unvested shares, and all such vested and unvested shares shall be
immediately cancelled.

5.             Vacation; Paid Time Off.  You will be entitled to receive $ 3,645.00
for your 3 weeks of unused earned vacation and/or paid time off days, less
applicable payroll withholdings and other deductions, taking into account North
Carolina tax rules relating to severance payments.

6.             Release.  In exchange for the benefits set forth in
this Agreement, you agree to waive and release PGI with respect to any and all
claims, whether currently known or unknown, that you now have or have ever had,
against PGI arising from or related to any agreement, act, omission, or thing
occurring or existing at any time prior to or on the date on which you sign
this Agreement.  Without limiting the
foregoing, the claims released by you hereunder include, but are not limited
to:

 

 

 

(a)           all
claims for or related in any way to your employment, compensation, other terms
and conditions of employment, actions occurring during your employment, or
termination from employment with PGI, including without limitation all claims
for salary, bonus, severance pay, or any other compensation or benefit;

(b)           all
claims that were or could have been asserted by you or on your behalf:  (i) in any federal, state, or local court,
commission, arbitration proceeding, or agency; (ii) under any common law
theory; or (iii) under any employment, contract, tort, federal, state, or local
law, regulation, ordinance, constitutional provision, or executive order; and

(c)           all claims that were or could have
been asserted by you or on your behalf arising under any of the following laws,
as amended from time to time:  Title VII
of the Civil Rights Act of 1964, 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, the
Employee Retirement Income Security Act, the Family and Medical Leave Act, and
the Worker Adjustment and Retraining Notification Act any applicable Executive
Order Programs, the Fair Labor Standards Act, or their state or local
counterparts, the South Carolina Human Affairs Law, S.C. Code sections 1-13-10
et seq.; S.C. Code sections 41-10-10 et seq. and the retaliatory employment
discrimination provision of North Carolina law; provided that this release does
not cover any claims you may have under the North Carolina Worker’s Comp Act,
N.C.G.S. 97-1 et seq.  Annex 1 sets forth
the name of the other terminated employee.

7.             Covenant
Not to Sue.  You agree, represent and
warrant that: (a) you will not commence, aid or maintain any action or other
legal proceeding based upon any claim arising out of or related to the matters
released in this Agreement, except for the purpose of enforcing this Agreement
as required by law; (b) you have not filed or initiated any legal or other
proceedings against PGI; (c) no such proceedings have been initiated against
PGI on your behalf; (d) you are the sole owner of the claims that are released
in Paragraph 6 above; (e) none of these claims has been transferred or assigned
or caused to be transferred or assigned to any other person, firm or other
legal entity; and (f) you have the full right and power to grant, execute, and
deliver the releases, undertakings, and agreements contained in this Agreement.

8.             Acknowledgements.  You further agree that:

·                                          You
have read this Agreement and understand all of its terms, having been advised
by counsel;

·                                          You
are entering into this Agreement knowingly, voluntarily and with full knowledge
of its significance;

·                                          The
promises contained in Paragraphs 1 and 3, are consideration for your signing
this Agreement and represent payments and benefits that, in absence of signing
this Agreement, you would not be entitled to receive from PGI;

 

 2
 

 

 

·                                          You
acknowledge that you understand that you have seven days after the execution of
this Agreement to revoke it and that the release contained in this Agreement
shall not become effective or enforceable until this seven-day revocation
period has expired; and

·                                          You
acknowledge that you have had at least 45 days from the date of your receipt of
the release contained in this Agreement substantially in its final form on
September 25, 2006, to consider it and the changes made since the September 25,
2006 version of this Agreement are not material and will not restart the
required 45-day period..

9.             Termination
of Change in Control Severance Compensation Agreement.  You and PGI agree that the Change in Contro0l
Severance Compensation Agreement dated as of March 24, 2006, is hereby
terminated in its entirety without any obligation on the part of you or PGI for
any events, occurrences or transactions that may have occurred, or may occur,
prior to or after the date hereof.

10.           Confidential
Information.

                                (a)  Obligation
to Maintain Confidentiality.  You
acknowledge that the continued success of the Company and its Subsidiaries,
depends upon the use and protection of a large body of confidential and
proprietary information.  All of such
confidential and proprietary information existing prior hereto or now existing
is referred to in this Agreement as “Confidential Information.”  Confidential Information will be interpreted
as broadly as possible to include all information of any sort (whether merely
remembered or embodied in a tangible or intangible form) that is (i) related to
the Company’s or its Subsidiaries’ current or potential business and (ii) is
not generally or publicly known. 
Confidential Information includes, without specific limitation, the
information, observations and data obtained by you during the course of your
employment with the Company and its Subsidiaries concerning the business and
affairs of the Company and its Subsidiaries, information concerning acquisition
opportunities in or reasonably related to the Company’s or it Subsidiaries’
business or industry of which you become aware during your employment, the persons or entities that are current, former
or prospective suppliers or customers of any one or more of them during your
course of your employment, as well as development, transition and
transformation plans, methodologies and methods of doing business, strategic,
marketing and expansion plans, including plans regarding planned and potential
sales, financial and business plans, employee lists and telephone numbers,
locations of sales representatives, new and existing programs and services,
prices and terms of purchases, purchasing practices, contact terms, prices paid
for raw materials and supplies, negotiating strategy, customer service policies
and programs, integration processes, requirements and costs of providing
service, support and equipment. 
Therefore, you agree that you shall not disclose to any unauthorized
person or use for your own account any of such Confidential Information without
both Board’s prior written consent, unless and to the extent that any
Confidential Information (i) becomes generally known to and available for
use by the public other than as a result of your acts or omissions to act or
(ii) is required to be disclosed pursuant to any applicable law or court
order.  You agree to deliver to the
Company all

 

 3
 

 

 

memoranda, notes, plans, records, reports and other
documents (and copies thereof) relating to the business of the Company or its
Subsidiaries (including, without limitation, all Confidential Information) that
you possess or have under your control.

(b)  Ownership of Intellectual Property.  You agree to make prompt and full disclosure
to the Company or its Subsidiaries, as the case may be, of all ideas,
discoveries, trade secrets, inventions, innovations, improvements,
developments, methods of doing business, processes, programs, designs,
analyses, drawings, reports, data, software, firmware, logos and all similar or
related information (whether or not patentable and whether or not reduced to
practice) that relate to the Company’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 you (either solely or jointly with others) while
employed by the Company or it Subsidiaries and for a period 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 right therein shall
vest in the Company or its Subsidiary. 
To the extent that any Work Product is not deemed to be a “work made for
hire,” you hereby assign and agree to assign to the Company or such Subsidiary
all right, title and interest, including without limitation, the intellectual
property rights that you may have in and to such Work Product.  You shall promptly perform all actions reasonably
requested by the Board to establish and confirm the Company’s or such
Subsidiary’s ownership (including, without limitation, providing testimony and
executing assignments, consents, powers of attorney, and other instruments).

(c)  Third Party Information.  You understand that the Company and its
Subsidiaries have received from third parties confidential or proprietary
information (“Third Party Information”) subject to a duty on the
Company’s and its Subsidiaries’ part to maintain the confidentiality of such
information and to use it only for certain limited purposes.  Without in any way limiting the provisions of
subsection (a) above, you will hold Third Party Information in the strictest
confidence and will not disclose to anyone (other than personnel of the Company
or its Subsidiaries who need to know such information in connection with their
work for the Company or such Subsidiaries) or use Third Party Information
unless expressly authorized by a member of the Board in writing.

11.           Return of PGI Property.  You agree to return to PGI all PGI property,
equipment and materials, including, but not limited to, the following materials
provided to you in the course of your employment with PGI, if applicable:  laptop computer and peripherals; cell phone;
telephone calling cards; keys; PGI identification card; credit cards; PDA; and
all written or graphic materials (and all copies) relating in any way to PGI’s
business, including documents, manuals, computer files, diskettes, customer
lists and reports.

12.           Transition.  You agree that you will assist PGI, as
reasonably requested, in the professional transition of work in progress,
duties, files and pertinent information for matters occurring prior to the
Separation Date.

 

 4
 

 

 

13.           Assistance.  You agree:

(a)           to cooperate fully with PGI and its
legal counsel in investigating, defending, prosecuting, litigating, filing,
initiating or asserting any claims or potential claims (including without
limitation in connection with legal, equitable, administrative or other
proceedings) that may be made by or against PGI to the extent that such claims
may relate to or arise out of your employment with PGI;

(b)           to
cooperate fully with PGI and its legal counsel with respect to any government or private investigations or legal claims
related to PGI. Such cooperation shall include, but not be limited to, making
yourself available upon reasonable notice for interviews and deposition and
trial testimony as needed, in the sole discretion of PGI and its legal
counsel.  You further agree to provide
PGI with any documents related to PGI, whether foreign or domestic, that are in
your  possession, custody or
control.  You shall provide
immediate notice to PGI of any subpoena or other legal document that you
receive that relates in any way to PGI, along with a copy of such subpoena or
other legal document.  You may be accompanied at any time you so desire
by counsel of your choice and must provide truthful and accurate
information  and testimony and not assert
any privilege on behalf of PGI, other than the attorney-client or work product
privileges which may arise from your retention of your separate counsel; and

(c)           that
on reasonable notice, and without service of a subpoena, you will cooperate
with the United States Securities and Exchange Commission (“SEC”) and its staff
(“staff”) and any other securities regulatory or law enforcement agency with
respect to any investigation involving PGI. 
As part of such cooperation you will truthfully disclose all information
with respect to your activities and the activities of others about which the
SEC or its staff may inquire; accept service, and appear and testify in all
investigations, administrative and judicial proceedings, at which the SEC or
its staff makes requests for such testimony. 
You shall further make yourself available for interviews if requested by
the staff and must produce any documents related to the above matters that are
within your possession, custody or control, domestic or foreign.  You may be accompanied at any time you so desire
by counsel of your choice and must provide truthful and accurate information
and testimony and not assert any evidentiary or other privilege on behalf of
PGI, other than the attorney-client or work product privileges which may arise from your retention of your
separate counsel.

14.           Non-Compete, Non-Solicitation.

(a)           In further
consideration of the compensation to be paid to you hereunder, you acknowledge
that during the course of your employment with the Company and its Subsidiaries
you became familiar with the Company’s trade secrets and with other
Confidential Information concerning the Company and its predecessors and its
Subsidiaries and that your services were of special, unique and extraordinary
value to the Company and its Subsidiaries, and therefore, you agree that, for a
period of twelve months following the Separation Date (the “Noncompete
Period”), you shall not directly or indirectly own any interest in, manage,
control, participate in, consult with, 

 

 5
 

 

 

render services for, be employed by or in any manner
engage in any business competing with the businesses of the Company or its
Subsidiaries, as such businesses exist or are in process, as made known to
Executive during his employment with the Company, on the date hereof, within
any geographical area in which the Company or its Subsidiaries engage or plan
to engage in such businesses, as such plans were made known to Executive during
his employment with the Company.  Nothing
herein shall prohibit you from being a passive owner of not more than 2% of the
outstanding stock of any class of a corporation which is publicly traded, so
long as you have no active participation in the business of such corporation.

(b)           During the
Noncompete Period, you shall not directly or indirectly through another person
or entity (i) induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any way
interfere with the relationship between the Company or any Subsidiary and any
employee thereof, (ii) hire any person who was an employee of the Company or
any Subsidiary at any time during the period of your employment with the
Company or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee or other business relation of the Company or any
Subsidiary to cease doing business with the Company or such Subsidiary, or in
any way interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or any Subsidiary (including,
without limitation, making any negative or disparaging statements or
communications regarding the Company or its Subsidiaries).

(c)           If, at the time of
enforcement of this paragraph 14, a court shall hold that the duration, scope
or area restrictions stated herein are unreasonable under circumstances then
existing, the parties agree that the maximum duration, scope or area reasonable
under such circumstances shall be substituted for the stated duration, scope or
area and that the court shall be allowed to revise the restrictions contained
herein to cover the maximum period, scope and area permitted by law.  You acknowledge that the restrictions
contained in this paragraph 14 are reasonable and that have reviewed the
provisions of this Agreement with your legal counsel.

(d)           In the event of the
breach or a threatened breach by you of any of the provisions of this paragraph
14, the Company would suffer irreparable harm, and in addition and
supplementary to other rights and remedies existing in its favor, the Company
shall be entitled to specific performance and/or injunctive or other equitable
relief from a court of competent jurisdiction in order to enforce or prevent
any violations of the provisions hereof (without posting a bond or other
security).  In addition, in the event of
an alleged breach or violation by you of this paragraph 14, the Noncompete
Period shall be tolled until such breach or violation has been duly cured and
the Company may suspend or terminate its payments to you under paragraph
1.  You acknowledge that the restrictions
contained in this paragraph 14 are reasonable and that you have reviewed the
provisions of this Agreement with your legal counsel.

15.           Assignment.  You agree that the rights and benefits
provided to you under this Agreement are personal to you and no such right or benefit
will be subject to alienation, assignment or transfer except as required by
law; provided, however, that nothing in this paragraph will 

 

 6
 

 

 

preclude you from
designating a beneficiary or beneficiaries to receive any benefit payable on
your death.

16.           No Admission.  You and PGI acknowledge that this Agreement
does not constitute an admission by you and PGI of any liability or wrongdoing
whatsoever.

17.           Entire Agreement.  You and PGI agree that this Agreement
constitutes the complete understanding between you and PGI regarding the
matters herein and that no other promises or agreements, express or implied,
will be binding between you and PGI unless signed in writing by you and
PGI.  This Agreement fully supersedes and
replaces any and all prior agreements or understandings, if any, between you
and PGI on any matter that is addressed in this Agreement.  This Agreement may not be amended except in
writing signed by you and a duly authorized senior officer of PGI.

18.           Severability.  You and PGI agree that to the extent that any
portion of this Agreement may be held to be invalid or legally unenforceable,
the remaining portions will not be affected and will be given full force and
effect.

19.           Enforcement.         You and PGI reserve the right to
initiate and pursue any legal action necessary to enforce the terms of this
Agreement.  You acknowledge and agree
that a breach of Paragraph 14 of this Agreement will result in immediate and
irreparable harm to PGI and its affiliates and other related entities for which
full damages cannot readily be calculated and for which damages are an
inadequate remedy.  Accordingly, you
agree that PGI shall be entitled to injunctive relief to prevent any such
actual or threatened breach or any continuing breach by you (without posting a bond
or other security) of paragraph 14, without limiting any other remedies that
may be available to PGI.   In the event
of any legal action or proceeding to enforce the terms of this Agreement, the
prevailing party will be entitled to recover from the losing party, in addition
to any and all other relief awarded or recovered, its reasonable expenses,
attorneys’ fees and costs.  This
Agreement will be construed and governed by the laws of the State of North
Carolina, without reference to the principles of conflict of laws or choice of
law rules.

20.           No Waiver.  The failure to enforce at any time any of the
provisions of this Agreement, or to require at any time performance by the
other party of any of the provisions hereof, will in no way be construed to be
a waiver of such provisions or to affect either the validity of this Agreement
or any part hereof or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.

21.           Notices.  All notices required hereunder will be in
writing and will be deemed given upon receipt if delivered personally (receipt
of which is confirmed) or by courier service promising overnight delivery (with
delivery confirmed the next day) or three (3) business days after deposit in
the U.S. Mails, certified with return receipt requested.  All notices will be addressed as follows:

If to you:

 7
 

 

 

James Snyder

18218 Town Harbor Road

Cornelius, NC  28031

With a copy to:

C. Margaret Errington

Ferguson, Stein, Chambers, Gresham &Sumter, P.A.

741 Kenilworth Avenue, Suite 300

Charlotte, NC  28204-2828

If to PGI:

Polymer Group, Inc.

9335 Harris Corners Parkway, Suite 300

Charlotte, NC  28269

Attn:  General Counsel

With a copy to:

H. Kurt von Moltke, P.C.

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, IL  60601

Or to such other address
as either party will have furnished to the other in writing.

SIGNED:

	
  /s/ James B. Snyder

  	
   

  	
  /s/ William B. Hewitt

  
	
   

  	
   

  	
  Title: Interim CEO

  
	
   

  	
   

  	
  Polymer Group, Inc.

  
	
   

  	
   

  	
   

  
	
  Dated: November
  7, 2006

  	
   

  	
  Dated: November 7, 2006

  

 

 8

 

ANNEX
I

 

OTHER
TERMINATED EMPLOYEES

James L.
Schaeffer, Age:  56

 

 

 

 Annex I

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