Exhibit 10.35

LYDALL, INC.

ANNUAL INCENTIVE PERFORMANCE PROGRAM

(Effective January 1, 2015)

This Annual Incentive Performance Program (this “AIP Program”) sets forth the
terms and conditions under which designated employees of Lydall, Inc. and its
subsidiaries (collectively, “Lydall” or the “Company”) may receive cash
incentive payments based on the annual financial performance of the Company.

1.    Purpose. The purpose of this AIP Program is to retain and incentivize
Participating Employees (as defined below) by providing annual cash bonus
opportunities to reward them when specified performance metrics are achieved.

2.    Effective Date. This AIP Program is effective as of January 1, 2015 and
shall continue indefinitely until terminated by the Compensation Committee (the
“Compensation Committee”) of the Board of Directors (the “Board”) of Lydall.

3.    Eligibility. Only Participating Employees are eligible to participate in
this AIP Program. “Participating Employees” are officers of Lydall and Vice
Presidents / Senior Vice Presidents of Lydall subsidiaries as approved by the
Compensation Committee (“Group A Participating Employees”) and other employees
of Lydall who are designated by the Chief Executive Officer and approved by the
Compensation Committee (“Group B Participating Employees”).

4.    Program Elements. The following elements and defined terms apply to this
AIP Program:

a.    Program Year. A “Program Year” is the calendar year.

b.
Base Salary. “Base Salary” is the Participating Employee’s regular earnings as
indicated on his or her final paycheck of the Program Year, plus any separately
recorded holiday and vacation pay. Base Salary is reduced by earnings attributed
to any leave of absence.

c.
Target Bonus Percentage. “Target Bonus Percentage” is a specified percentage of
a Participating Employee’s Base Salary that is assigned as part of his or her
compensation package. Target Bonus Percentages may change from year-to-year
based upon approval of the Chief Executive Officer or, in the case of the Chief
Executive Officer and his/her direct reports, based upon approval by the
Compensation Committee.

d.
Target Bonus Amount. “Target Bonus Amount” for each Participating Employee is
the product obtained by multiplying his or her Base Salary by his or her Target
Bonus Percentage.

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e.
Performance Metrics. “Performance Metrics” are the following designated measures
of financial performance for any given Program Year for Lydall on a consolidated
basis or for a Business Unit (as defined below):

(i)
Operating Income (or “OI”) — defined as operating income from continuing
operations.

(ii)
Free Cash Flow (or “FCF”) — defined as Cash Flow from Operations minus Capital
Expenditures.

(iii)
Gross Margin (or “GM”) — defined as the percentage resulting from: (A) the
excess, if any, of net sales from continuing operations over cost of sales from
continuing operations; (B) divided by net sales from continuing operations.

(iv)
Revenue — defined as total net sales, adjusted for this Performance Metric only
to exclude foreign exchange fluctuations from the budgeted exchange rate.

f.
Performance Targets. “Performance Targets” are the specific measures of
financial performance (expressed with reference to consolidated and Business
Unit Performance Metrics) that are established and approved by the Compensation
Committee for each Program Year.

g.
Business Units. Performance Targets may be established for such business units
of the Company as may be determined by the Compensation Committee from
time-to-time (each, a “Business Unit” or “BU” and, collectively, the “Business
Units”).

h.
Applicability and Relative Weight of Performance Metrics. The applicable
Performance Metrics and the relative weight of each such Performance Metric (the
“Performance Metric Weight”) for the respective Participating Employees shall be
established by the Compensation Committee at the same time it establishes the
consolidated and Business Unit Performance Targets for each Program Year. For
Group A Participating Employees within each Business Unit, the Performance
Metrics and Performance Metric Weight will be set based on 80% of their
respective Business Unit performance and 20% on Corporate Headquarters (i.e.,
consolidated) performance.

5.    AIP Program Operation. This AIP Program shall operate as set forth below:

a.
Establishment of Performance Targets. No later than March 31 of each Program
Year, the Compensation Committee shall establish the consolidated and Business
Unit Performance Targets, Performance Metrics and Performance Metric Weight for
such Program Year. All Performance Targets and actual performance with respect
to those targets are subject to adjustment by the Compensation Committee, in its
discretion, if determined necessary or appropriate to adjust for the effects of
extraordinary items, unusual or non-recurring events, changes in accounting
principles, realized investment gains or losses, discontinued operations,
acquisitions, divestitures, material restructuring or impairment charges and
other similar items.

b.
Determination of Cash Bonus Factors for OI and FCF Achieved. Cash bonus awards
with respect to the OI and FCF Performance Metrics are determined based upon the
achievement of the Performance Targets with reference to the applicable cash
bonus factor set forth in the table below (hereinafter, the “OI and FCF Cash
Bonus Factor”).

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Straight line interpolation will be used to calculate the Cash Bonus Factor for
actual performance between the achieved performance levels for each performance
metric.

% of Performance Target Achieved for IO and FCF
OI and FCF Cash Bonus Factor
90
.50
100
1.00
110
2.00

c.
Determination of Cash Bonus Factor for Revenue Achieved. Cash bonus awards with
respect to the Revenue Performance Metric for performance achieved are
determined based upon the achievement of the Performance Targets with reference
to the applicable cash bonus factor set forth in the table below (hereinafter,
the “Revenue Cash Bonus Factor”). Straight line interpolation will be used to
calculate the Cash Bonus Factor for actual performance between the achieved
performance levels.

% of Performance Target Achieved for Revenue
Revenue Cash Bonus Factor
95
.50
100
1.00
110
2.00

d.
Determination of Cash Bonus Factor for GM Achieved. Cash bonus awards with
respect to the GM Performance Metric for performance achieved are determined
based upon the achievement of the Performance Targets with reference to the
applicable cash bonus factor set forth in the table below (hereinafter, the “GM
Cash Bonus Factor”) Straight line interpolation will be used to calculate the GM
Cash Bonus Factor for actual performance between the achieved performance
levels.

Basis Points Relative to GM Target
GM Cash Bonus Factor
100
.5
Target
1.0
100
2.0

e.
Determination of Actual Financial Performance. As soon as practicable following
the completion of each Program Year and the availability of Lydall’s audited
consolidated financial statements for such Program Year, the Compensation
Committee shall: (i) determine the consolidated and Business Unit Operating
Income, Free Cash Flow, Gross Margin and Revenue achieved for the Program Year
(each “Performance Metric Achieved”); and (ii) certify in writing the extent to
which the Performance Target for each has been achieved, if at all (such
certification is referred to as the “Committee Certification”). If, in
determining and certifying the achievement of any Performance Targets for the
Program Year, the Compensation Committee determines that it is necessary or
appropriate to make adjustments by virtue of the authority set forth in
paragraph (a) above, the Committee Certification shall include a brief statement
setting forth the amount of the adjustment and the reasons therefor.

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f.
Determination of Cash Bonus Amount. Each Participating Employee, other than
Group A Participating Employees within each Business Unit, shall be entitled to
receive a cash bonus equal to the product of his or her: (i) Target Bonus
Amount, (ii) Performance Metric Weight for the applicable Performance Metric,
and (iii) Cash Bonus Factor for the applicable Performance Metric Achieved (as
set forth in Committee Certification) for the applicable Program Year.

Each Group A Participating Employees within each Business Unit shall be entitled
to receive a cash bonus equal to (A) eighty (80%) percent of the product of his
or her: (i) Target Bonus Amount, (ii) Performance Metric Weight for the
applicable Business Unit Performance Metric, and (iii) Cash Bonus Factor for the
applicable Business Unit Performance Metric Achieved (as set forth in Committee
Certification) for the applicable Program Year; and (B) twenty (20%) percent of
the product of his or her: (i) Target Bonus Amount, (ii) Performance Metric
Weight for the applicable Corporate Headquarters Performance Metric, and (iii)
Cash Bonus Factor for the applicable the Corporate Headquarters Performance
Metric Achieved (as set forth in Committee Certification) for the applicable
Program Year.

g.
Limitation on Payments. Notwithstanding any other provision of the AIP Program,
the following limitations shall apply with respect to the total bonus amount
paid to any Participating Employee: (i) the total amount paid to any Group A
Participating Employee shall not exceed 200% of their Target Bonus Amount; and
(ii) the total amount paid to any group B Participating employee shall not
exceed 150% of their Target Bonus Amount.

6.    General Terms and Conditions

a.
Plan Administration. The Compensation Committee shall be responsible for
overseeing the administration and interpretation of this AIP Program and for
overseeing the implementation of its provisions. The Compensation Committee
reserves the right, in its sole discretion, to modify, amend or terminate this
AIP Program at any time. All decisions of the Compensation Committee regarding
the interpretation, construction, implementation and administration of this AIP
Program shall be final and binding.

b.
Repayment of Bonus. The following shall apply with respect to the repayment of
bonuses paid under this AIP Program:

(i)
To the extent not required to be repaid by the other provisions to this Section
6 (b), if, at any time, the Compensation Committee, in its sole discretion,
determines that any action or omission by a Participating Employee constituted
(i) wrongdoing that contributed to any material misstatement in or omission from
any report or statement filed by the Company with the U.S. Securities and
Exchange Commission; (ii) intentional misconduct or gross misconduct; (iii) a
breach of a fiduciary duty to the Company or its shareholders; or (iv) fraud,
then in each such case, commencing with the first Program Year during which such
action or omission occurred, the Participating Employee committing such act or
omission shall be terminated from participation in this AIP Program and such
Participating Employee shall immediately repay to the Company, upon notice to
the Participating Employee by the Company, up to 100% (as determined by the
Company) of the gross amount paid to the Participating Employee pursuant to this
AIP Program during and after such Program Year.

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(ii)
To the extent not required to be repaid by the other provisions to this Section
6(b), any bonus paid pursuant to this AIP Program also shall be subject to
recoupment in accordance with the applicable provisions of any law, government
regulation or stock exchange listing requirement (and any policy adopted by the
Company pursuant to any such law, government regulation or stock exchange
listing requirement).

Additionally, at the discretion of the Compensation Committee, if the Company is
required to restate any of its financial statements filed with the U.S.
Securities and Exchange Commission, other than restatements due solely to facts
external to the Company and its affiliates such as a change in accounting
principles or a change in securities laws or regulations with retroactive
effect, Participating Employees may be required to disgorge and repay to the
Company any bonus paid pursuant to this AIP Program to the extent such bonus
exceeded the amount that would have been paid for such Program Year if it had
been based upon the restated financial statements.

c.
Payment. All cash bonuses shall be paid after issuance of the Committee
Certification.

d.
Active Employment Condition. To be eligible to receive a bonus payout under this
AIP Program, a Participating Employee must be an employee in good standing as of
the date the cash bonus is actually paid by Lydall, except as otherwise
specifically agreed to by the Board or the Compensation Committee.

e.
No Guarantee That Cash Bonuses Will Be Paid. Lydall and the Compensation
Committee reserve the right to withhold, reduce or deny payment of a cash bonus
otherwise payable under the AIP Program, subject to any limitations that may be
imposed by applicable law.

f.
Not an ERISA Regulated Program. This is not an ERISA regulated program.

g.
No Assignability. No rights of any Participating Employee may be sold,
exchanged, transferred, assigned, pledged or otherwise disposed of (including
through the use of any cash-settled instrument), either voluntarily or
involuntarily by operation of law, other than by will or by the laws of descent
and distribution.

h.
Program Creates No Employment Rights. Nothing in this AIP Program shall confer
upon any Participating Employee a right to continue in the employ of Lydall or
affect any right which Lydall may have to terminate such employment.

i.
Program Unfunded. This AIP Program is unfunded and nothing in the program shall
be construed to create a trust or to establish or evidence any Participating
Employee’s claim of any right to payment of a cash bonus other than as a general
unsecured creditor.

j.
Governing Law. All rights and obligations under this AIP Program shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to principles of conflict of laws.

k.
Tax Withholding. All payments hereunder shall be subject to applicable income,
employment and other tax withholding as may be required by law.

l.
Section 409A of the Code. Lydall intends that cash payments under this AIP
Program shall be exempt from Section 409A of the U.S. Internal Revenue Code, as
amended

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(the “Code”), as short-term deferrals and shall not constitute “deferred
compensation” within the meaning of Section 409A of the Code (absent a valid
deferral election under the terms of another plan or arrangement maintained by
Lydall). This AIP Program shall be interpreted, construed and administered in
accordance with the foregoing intent. Notwithstanding the foregoing, Lydall
shall have no liability to any Participating Employee or otherwise if this AIP
Program or any cash bonus award paid or payable hereunder is subject to the
additional tax and penalties under Section 409A of the Code.

m.
No Effect on Benefits. Awards and payments under this AIP Program shall
constitute special incentive payments to the Participating Employee and shall
not be required to be taken into account in computing the amount of salary or
compensation of the Participating Employee for the purpose of determining any
contributions to or any benefits under any pension, retirement, profit-sharing,
bonus, life insurance, severance or other benefit plan of Lydall or under any
agreement with a Participating Employee, unless Lydall has elected to implement
a different arrangement or practice.

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