SEVERANCE PAY PLAN

                           Effective January 17, 1997

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN


                      The American Filtrona Corporation Severance Pay Plan (the
Plan) was established, effective January 17, 1997, by American Filtrona
Corporation in order to assist eligible employees upon termination of employment
from the Company (as defined in the Plan), following a Change in Control. The
Plan provides severance benefits to certain employees in the event that their
employment with the company is terminated without Cause or they resign with Good
Reason within three years of a Change in Control of the Company.

                      The Plan is intended to be a "welfare plan," but not a
"pension plan," as defined in ERISA Sections 3(1) and 3(2), respectively. The
Plan must be interpreted and administered in a manner that is consistent with
that intent.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

                                   ARTICLE I


1.01.        Administrator means AFC or such other person or entity as may be
appointed by AFC.

1.02.        AFC means American Filtrona Corporation.

1.03.        Board means AFC's Board of Directors.

1.04.        Cause means (i) the Employee's willful and continuing neglect of
his duties to the Company or (ii) the conviction of the Employee of a felony
(including the theft, larceny or embezzlement of the Company's tangible or
intangible property).

1.05.        Change in Control means (i) a successful tender or exchange offer
for shares of AFC's Common Stock; (ii) the sale or transfer of all or
substantially all of the assets of AFC to another corporation or to any other
person or entity; (iii) the merger, consolidation or reorganization (other than
a merger or consolidation or reorganization in which AFC is the surviving
corporation and no shares of Common Stock are converted into securities, cash or
other thing of value); or (iv) any event or series of events that results in the
Directors who were Directors prior to the event or series of events to cease to
constitute a majority of the Board or of any parent of or successor to AFC.

1.06.        Code means the Internal Revenue Code of 1986, as amended.

1.07.        Company means American Filtrona Corporation and its affiliates and
any successor to all or part of the business of the Company and its affiliates.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

1.08.        Compensation means the greater of (i) a Participant's base annual
salary as in effect on his Separation Date, or (ii) a Participant's base annual
salary on a Control Change Date.

1.09.        Control Change Date means the date that a Change in Control occurs.
If a Change in Control occurs as a result of a series of transactions, the
Control Change Date is the date of the last of such transactions.

1.10.        Director means a member of the Board.

1.11.        Employee  means an individual listed in Appendix A.

1.12.        ERISA means the Employee Retirement Income Security Act of 1974, as

1.13.        Fiduciary means a fiduciary, as defined in ERISA section 3(21)(A).

1.14.        Good Reason means (i) the Employee does not receive salary
increases or bonuses comparable to the salary increases or bonuses that the
Employee received in prior years, (ii) the Employee's salary or bonus is
reduced, (iii) the Employee's status, title, office, working conditions or
management responsibilities are significantly diminished (other than changes in
reporting or management responsibilities required by applicable federal or state
law), (iv) the Employee's place of employment is changed by more than 35 miles
without the Employee's consent, (v) the direction, by the Company's President or
Board that the Employee perform an act or refrain from acting if such act or
omission would be illegal, unethical or a violation of Company policy or
standards or (vi) the failure of a successor employer to enter into an

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

satisfactory to the Employee, to assume and agree to provide the benefits
described in this Plan.

1.15.        Participant means an Employee who has satisfied the eligibility
requirements provided in Plan article II.

1.16.        Plan means the American Filtrona Corporation Severance Pay Plan.

1.17.        Plan Year means the twelve-month period that is AFC's tax year.

1.18.        Separation Date means the date that an Employee's employment with
the Company terminates; provided, however, that if an Employee commences
employment with a successor to the Company or one of its affiliates on a Control
Change Date, Separation Date means the date that such Employee's employment with
such successor and its affiliates terminates.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

                                   ARTICLE II


2.01.        Eligibility Requirements.

             Only an Employee is eligible to become a Participant in this Plan.
An Employee becomes a Participant in this Plan only if, prior to the third
anniversary of a Control Change Date, the Employee's employment with the Company
is either (i) involuntarily terminated by the Company for reasons other than
Cause, or (ii) voluntarily terminated by the Employee for Good Reason.

2.02.        Determination of Eligibility.

             (a) In accordance with Section 2.01 and such rules and regulations
as may be established by the Administrator, the Administrator, in its
discretion, shall determine each Employee's eligibility for participation in
this Plan. All good-faith determinations by the Administrator are conclusive and
binding on all persons for the Plan Year in question, and there is no right of

             (b) At AFC's request, the Administrator must provide the Company a
list of Employees who are Participants or who have become Participants since the
last list of Participants was provided.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

                                  ARTICLE III


3.01.        Severance Pay.

             (a) A Participant is entitled to receive severance pay equal
to one-hundred percent (100%) of his Compensation.

             (b) The severance pay provided under Section 3.01(a) shall be paid
in a single lump sum cash payment as soon as practicable following the
Participant's Separation Date. Federal and state taxes, FICA taxes, any
garnishment or wage assignment, and amounts required to be withheld pursuant to
any orders for child support will be deducted from the Participant's severance

3.02.        Other Benefits.

             The benefits, if any, that a Participant is entitled to receive
under the Plan are in addition to any other benefit that he is entitled to
receive from the Company or under any other employee benefit plan.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

                                   ARTICLE IV

                           AMENDMENT AND TERMINATION

4.01.        Amendment.

             By action of the Administrator, AFC may modify, alter, or amend the
Plan, in whole or in part. An amendment may be made retroactively if it is
necessary to make this Plan conform to applicable law. Notwithstanding the
preceding sentences, the Plan may not be modified, altered or amended on or
after a Control Change Date if such amendment would adversely affect the rights
of an Employee under the Plan.

4.02.        Termination.

             By action of the Administrator, AFC may terminate the Plan;
provided, however, that the Plan may not be terminated within three years
following a Control Change Date. The termination of the Plan will not affect the
rights of Participants whose Separation Date occurred on or before the date of
the termination.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

                                   ARTICLE V


5.01.        Named Fiduciaries, Allocation of Responsibility.

             (a) There are two Named Fiduciaries--AFC and the
Administrator. Each is severally liable for its responsibilities.

             (b) The Administrator has only the responsibilities described
in this Plan and those delegated by AFC.

             (c) All responsibilities not specifically delegated to another
Named Fiduciary remain with AFC, including designating all Named Fiduciaries not
named in this Plan. AFC's responsibilities include drafting and designing the
Plan and amendments to it and designating all additional Fiduciaries not named
in this Plan. AFC has the power to delegate fiduciary responsibilities that the
Plan does not specifically delegate. A delegation may be made to any legal
person. Each person to whom fiduciary responsibility is delegated serves at
AFC's pleasure and for the compensation that AFC and that person determine in
advance, except as prohibited by law. A person to whom responsibility is
delegated may resign after thirty days' notice to AFC. AFC may make additional
delegations, including delegations occasioned by resignation, death, or other
cause, and including delegations to successor Administrators.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

             (d) This Plan allocates to each Named Fiduciary the individual
responsibilities assigned.  Named Fiduciaries do not share responsibilities
unless the Plan so provides.

             (e) Whenever the Plan requires one Named Fiduciary to follow the
directions of another Named Fiduciary, the two have not been assigned to share
the responsibility. The Named Fiduciary giving directions bears the sole
responsibility for those directions, and the responsibility of the Named
Fiduciary receiving those directions is to follow directions as long as on their
face the directions are not improper under applicable law.

5.02.        Assignment of Administrative Authority.

             The Administrator shall administer the Plan. If the Administrator
is not AFC, the Administrator serves at AFC's pleasure. If the Administrator is
not AFC, the Administrator may resign by giving oral or written notice to that
effect to AFC and AFC may remove such Administrator by delivering written notice
to the Administrator. AFC may fill a vacancy in the position of Administrator
arising from resignation, death, removal, or other causes.

5.03.        Administrator Powers and Duties.

             The Administrator must administer the Plan by its terms and has all
powers necessary to do so. The Administrator is agent for service of legal
process unless it designates another person to be agent for service of legal
process. The Administrator must interpret the Plan. The Administrator's duties
include, but are not limited to,

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

determining the answers to all questions relating to Employees' eligibility to
become Participants.

             A determination that the Administrator makes in good faith is
conclusive and binding on all persons. The Administrator's decisions, however,
may not take away any rights that the Plan specifically gives to a Participant.
If the Administrator is also a Participant, he must abstain from any action that
directly affects him as a Participant in a manner different from other similarly
situated Participants. The Plan, however, does not prevent the Administrator who
is also a Participant or a Beneficiary from receiving any benefit to which he
may be entitled, if the benefit is computed and paid on a basis that is
consistently applied to all other Participants and Beneficiaries.

             The Administrator may employ and compensate from AFC's assets
according to Plan section 5.06 such accountants, counsel, specialists, and other
advisory and clerical persons as it deems necessary or desirable in connection
with the Plan's administration. The Administrator is entitled to rely
conclusively on any opinions from its accountant or counsel. Except to the
extent prohibited by law, the Administrator is fully protected by AFC and the
Employees and the Participants whenever it takes action based in good faith on
advice from its advisors.

5.04.        Discretion of Fiduciary.

             Each Fiduciary's discretion to perform or consent to any act is
exclusive if all similarly situated Employees and Participants are treated in a
consistent manner.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

5.05.        Records and Reports.

             AFC must supply information to the Administrator sufficient to
enable the Administrator to fulfill its duties. The Administrator must keep all
books of account, records, and other data necessary for proper administration of
the Plan. The Administrator may appoint any person as agent to keep records.

5.06.        Payment of Expenses.

             Until AFC determines otherwise, the Administrator serves without
compensation. AFC must pay the Administrator's expenses, including any expenses
incident to the functioning of the Administrator, fees of accountants, legal
counsel, and other similar specialists, and other costs of administering the

5.07.        Limitation of Liability.

             If permissible by law, the Administrator and other Fiduciaries
serve without bond. If the law requires bond, the Administrator must secure the
minimum bond required and obtain necessary payments according to Plan section
5.06. Unless the Plan provides otherwise, the Administrator or any other
Fiduciary are not liable for another Fiduciary's act or omission. To the extent
allowed by law and except as otherwise provided in the Plan, the Administrator
and any other Fiduciary are not liable for any action or omission that is not
the result of the Administrator's or the Fiduciary's own negligence or bad

             As permitted by law and as limited by any agreement in writing
between AFC and the Administrator, AFC must indemnify and save the Administrator

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

any other Fiduciary harmless against expenses, claims, and liabilities arising
out of being the Administrator or a Fiduciary, except expenses, claims, and
liabilities arising out of the Administrator's or the Fiduciary's own negligence
or bad faith. AFC may obtain insurance against acts or omissions of the
Administrator and any other Fiduciary. If AFC fails to obtain that insurance,
the Administrator and any other Fiduciary may obtain insurance and must be
reimbursed according to section 5.06 and as permitted by law. At its own
expense, AFC may employ its own counsel to defend or maintain, either in its own
name or in the name of the Administrator or any other Fiduciary, any suit or
litigation arising under the Plan concerning the Administrator or any other

5.08.        Claims.

             (a) It is not necessary to file a claim in order to receive
Plan benefits.

             (b) On receipt of an Employee's claim for Plan benefits, the
Administrator must respond in writing within ninety days. If necessary, the
Administrator's first notice must indicate any special circumstances requiring
an extension of time for the Administrator's decision. The extension notice must
indicate the date by which the Administrator expects to render a decision; an
extension of time for processing may not exceed ninety days after the end of the
initial period.

             (c) If a claim is wholly or partially denied, the Administrator
must give written notice within the time provided in subsection (b).  An adverse
notice must specify each reason for denial.  There must be a specific reference
to the provisions

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

of the Plan or related documents on which the denial is based. If additional
material or information is necessary for the claimant to perfect the claim, it
must be described and there must be an explanation of why that material or
information is necessary. Adverse notice must disclose appropriate information
about the steps that the claimant must take if he wishes to submit the claim for
review. If notice that a claim has been denied is not furnished within the time
required in subsection (b), the claim is deemed denied.

             (d) The full value of a payment made according to the provisions of
the Plan satisfies that much of the claim and all related claims under the Plan
against the Administrator, which, as a condition to a payment from it or
directed by it, may require the Participant or the Participant's legal
representative to execute a receipt and release of the claim in a form
determined by the person requesting the receipt and release.

5.09.        Review of Claims.

             (a) On proper written request for review from a claimant to the
Administrator, there must be a review by the Administrator of any claim denied
according to Plan section 5.08. The Administrator must receive the written
request before sixty-one days after the claimant's receipt of notice that a
claim has been denied according to Plan section 5.08. The claimant and an
authorized representative are entitled to be present and heard if any hearing is
used as part of the review.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

             (b) The Administrator must determine whether there will be a
hearing. Before any hearing, the claimant or a duly authorized representative
may review all Plan documents and other papers that affect the claim and may
submit issues and comments in writing. The Administrator must schedule any
hearing to give sufficient time for this review and submission, giving notice of
the schedule and deadlines for submissions.

             (c) The Administrator must advise the claimant in writing of the
final determination after review. The decision on review must be written in a
manner calculated to be understood by the claimant, and it must include specific
reasons for the decision and specific references to the pertinent provisions of
the Plan or related documents on which the decision is based. The written advice
must be rendered within sixty days after the request for review is received,
unless special circumstances require an extension of time for processing. If an
extension is necessary, the decision must be rendered as soon as possible but no
later than 120 days after receipt of the request for review.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

                                   ARTICLE VI

                               GENERAL PROVISIONS

6.01.        Construction.

             One gender includes the other, and the singular and plural include
each other when the meaning would be appropriate. The Plan's headings and
subheadings have been inserted for convenience of reference only and must be
ignored in any construction of the provisions. If a provision of this Plan is
illegal or invalid, that illegality or invalidity does not affect other
provisions. Any term with an initial capital not expected by capitalization
rules is a defined term according to Plan Article I. This Plan must be construed
according to the applicable provisions of the Code and Treasury Regulations in a
manner that assures that the Plan provides the benefits and tax consequences
intended for Participants. Any terms defined in the Code or Treasury Regulations
that are not defined terms according to Plan Article I are incorporated in this
Plan by reference.

6.02.        Governing Law.

             This Plan is construed, enforced, and administered in accordance
with the laws of the Commonwealth of Virginia (other than its choice of law
rules), except to the extent that those laws are superseded by the laws of the
United States of America.

                         AMERICAN FILTRONA CORPORATION
                               SEVERANCE PAY PLAN

6.03.        Plan Creates No Separate Rights.

             The creation, continuance, or change of the Plan or any payment
does not give any person any additional or separate non-statutory legal or
equitable right (other than those based on the terms of the Plan), against AFC,
or any of AFC's officers, agents, Directors or other persons employed by AFC.
The Plan does not modify the terms of a Participant's employment.

6.04.        Non-Alienation of Benefits.

             Except as permitted by law and this section, no assignment of any
rights or benefits arising under the Plan is permitted or recognized. No rights
or benefits are subject to attachment or other legal or equitable process or
subject to the jurisdiction of any bankruptcy court. If any Participant is
adjudicated bankrupt or attempts to assign any benefits, then in AFC's
discretion, those benefits cease. If that happens, the Administrator may apply
those benefits for that Participant or his dependents as the Administrator sees
fit. AFC is not liable for or subject to the debts, contracts, liabilities, or
torts of any person entitled to benefits under this Plan.

6.05.        Successors.

             The Plan shall be binding on AFC, its affiliates and any successors
and assigns and, with respect to Employees employed by an affiliate or in a
division, operating unit or business of AFC, any person or entity that acquires
that affiliate or the assets of that division, operating unit or business. 

Basic Info X:

Type: Severance Pay Plan
Date: March 31, 1997
State: Virginia

Other info:


  • January 17 , 1997


  • AFC 's Board of Directors
  • American Filtrona Corporation Severance
  • Participant 's Separation Date
  • Control Change Date
  • Allocation of Responsibility
  • Commonwealth of Virginia


  • United States of America


  • one-hundred percent 100 %