**Exhibit 10.1**

**Executive EmploymentAgreement**

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

**ARTICLE1:****  EMPLOYMENT, COMPENSATION AND BENEFITS**

**1.1           Term and Position.  PGI agrees to employ Executive and Executiveagrees to be employed by PGI as Chief Executive Officer of PGI.  As Chief Executive Officer, Executive shallbe a member of PGI’s Board of Directors (the “**Board”). Executive shall have the normal duties, responsibilities, functions andauthority of the Chief Executive Officer and shall devote full working time tothe successful conduct of the business of PGI; however, Executive shall bepermitted to serve on the board of directors of one for-profit corporation(provided such corporation is not in competition with PGI) and onenot-for-profit corporation.  Executivewill report directly to the Board and Executive’s specific duties shall bedetermined by the Board.  The term of theAgreement shall be for a period of 3 years, commencing on April 23, 2007 andending on April 22, 2010 (the “Term”); provided, however, that the Term shall beautomatically extended for additional one (1) year periods commencing on thethird anniversary of the Effective Date unless written notice of termination ofthe automatic extension is provided by either the Executive or PGI at leastthree months prior to the third anniversary of the Effective Date, or eachsuccessive anniversary, as applicable; provided further, that if a “Change inControl” of PGI (as defined below) occurs during the Term (including anyextension thereof), the Term shall automatically extend to the thirdanniversary of the Change in Control.

**1.2           Compensation.**

**a.             Base Compensation.  For all services rendered by Executive duringthe Term, Executive shall receive base compensation at a rate of $650,000 perannum (“**BaseCompensation”), payable in accordance with PGI’s then existing payrollpractices, less such deductions as are authorized or required by law.  Executive’s Base Compensation shall besubject to review and potential increase (but no decrease) annually by theBoard.

**b.             Bonus. Executive shall beentitled to participate in the Polymer Group, Inc. Short-Term IncentiveCompensation Plan (the “**Bonus Plan”).  Executive’sannual target cash bonus potential under the Bonus Plan will be, and shall notexceed, 100% of Base Compensation, and shall be based on annual performancegoals to be mutually agreed upon by the Board and Executive.  Notwithstanding the preceding to thecontrary, Executive’s full annual target cash bonus (without pro-ration) forthe fiscal year ending December 29, 2007 shall be guaranteed (the “2007 Bonus”) provided Executive is anemployee in good standing on the Payment Date (as defined in the Bonus Plan).

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

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

**On the first, second, and thirdanniversaries of the Effective Date, and upon the satisfaction of certainperformance goals established by the Board for fiscal years 2007, 2008, and2009 respectively, Executive shall be eligible for an annual target award of50,000 (with a minimum of zero and a maximum of 100,000) restricted shares ofPGI common stock under the Equity Plan, provided, that for the equity awardopportunity on the first anniversary of the Effective Date (i.e., fiscal year2007 performance), Executive shall receive no less than 50% of the target award(i.e., 25,000 restricted shares) (the “Guaranteed Shares”).  The equity awards, if any, for the first,second, and third anniversaries of the Effective Date shall vest over a periodof 4 years, at a rate of 25% per year, provided certain performance goals aremet as established by the Board over the 4 year vesting period; providedfurther, the Guaranteed Shares shall vest based on service at a rate of 25% peryear on the first four anniversaries of the award date.**

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

**Forpurposes of any equity awards, “change in control” shall mean that term as itis defined in the Equity Plan.  For allother purposes of this Agreement, Change in Control means any of the followingevents:**

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

**(ii)           during any period of two consecutiveyears, individuals who at the beginning of such period constitute the Board andany new directors whose election by the Board or nomination for election by PGI’sstockholders was approved by at least two-thirds of the directors then still inoffice who either were directors at the beginning of the period or whoseelection was previously so approved, cease for any reason to constitute a majoritythereof; or**

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

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

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

**(v)           For purposes of this Agreement, theterm “Exempt Person” means (1) MatlinPatterson Global Opportunities Fund L.P.,MatlinPatterson Global Opportunities Partners, L.P., MatlinPatterson GlobalOpportunities Partners B, L.P., MatlinPatterson LLC, MatlinPatterson AssetManagement LLC, MatlinPatterson Global Advisers LLC, MatlinPatterson GlobalOpportunities Partners (Bermuda), L.P., MatlinPatterson Global Partners LLC andany of their respective affiliated entities, (2) any person, entity or groupunder the control of any party included in clause (1), or (3) any employeebenefit plan of PGI or a trustee or other administrator or fiduciary holdingsecurities under an employee benefit plan of PGI.**

**d.             Reimbursement of Expenses.  During the Term, PGI shall reimburseExecutive for all reasonable business expenses incurred by her in the course ofperforming her duties and responsibilities under this Agreement which areconsistent with PGI’s policies in effect from time to time with respect totravel, entertainment and other business expenses, subject to PGI’srequirements with respect to reporting and documentation of such expenses.**

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

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

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

**(iii)          Relocation payments and benefits willbe fully grossed-up for any applicable taxes with respect to any reportableincome, except for any payments and benefits pursuant to Section 1.2.e.(ii)).**

**1.3           Paid Leave.**

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

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

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

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

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

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

**ARTICLE2:****  TERMINATION BEFORE THE TERM EXPIRES ANDEFFECTS OF SUCH TERMINATION**

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

**a.             Cause.  For “cause” upon the determination by theBoard that “cause” exists to terminate Executive.  “Cause” means (i) a material breach ofthis Agreement by Executive; provided, that if such breach is capable of beingcured, Executive shall be provided 15 days written notice to cure such breach,(ii) a breach of Executive’s duty of loyalty to PGI or any of itssubsidiaries or any act of dishonesty or fraud with respect to PGI or any ofits subsidiaries, (iii) the commission by Executive of a felony, a crimeinvolving moral turpitude or other act or omission (excluding business acts oromissions in the ordinary course) causing material harm to the standing andreputation of PGI and its subsidiaries, (iv) Executive reporting to workunder the influence of alcohol or illegal drugs, the use of illegal drugs(whether or not at the workplace) or other repeated conduct (excluding businessconduct in the ordinary course) causing PGI or any of its subsidiariessubstantial public disgrace or disrepute or economic harm, or (v) anywillful act or omission by Executive aiding or abetting a competitor, supplieror customer of PGI or any of its subsidiaries to the material disadvantage ordetriment of PGI and its subsidiaries. The burden for establishing the validity of any termination for Causeshall rest upon PGI.  No terminationshall be deemed to be for Cause unless and until there shall have beendelivered to Executive a copy of a resolution duly adopted by the affirmativevote of not less than three-quarters of the entire membership of the Boardcalled and held for such purpose (after reasonable notice is provided toExecutive and Executive is given an opportunity, together with counsel, to beheard before the Board), finding that, in the good faith opinion of the Board,Executive is guilty of the conduct described above, and specifying theparticulars thereof in reasonable detail. If PGI terminates Executive’s employment for Cause, Executive shall beentitled only to the pro rata Base Compensation through the date of suchtermination, and all future compensation and benefits shall cease (except forthose benefits vested per plan terms).**

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**b.             Involuntary Termination Before aChange in Control.  Involuntarytermination at PGI’s option may occur for any reason whatsoever, includingtermination without cause, in the sole discretion of the Board (“**Involuntary Termination”).  Upon an Involuntary Termination before theTerm expires, Executive shall be entitled to receive from PGI as severancepayments, in lieu of severance payments under any other plan or program of PGI,an amount equal to (i) two times the sum of (A) her Base Compensation, plus (B)her annual target bonus opportunity, each as in effect immediately prior to thedate of her termination (the “Severance Amount”), (ii) any annual bonus for acompleted fiscal year of PGI that has not yet been paid to Executive (the “Prior Year Earned Bonus”), and (iii) herannual target bonus opportunity for the fiscal year in which the terminationdate occurs, multiplied by a fraction equal to the number of days of employmentcompleted by Executive during the fiscal year in which the termination dateoccurs divided by 365 (the “Pro Rata Bonus”), in each case if and only if Executive has executed anddelivered to PGI the General Release substantially in form and substance as setforth in Exhibit A attached hereto and only so long as Executivehas not breached the provisions of Article 3 or Section 4.1 hereof and does notapply for unemployment compensation chargeable to PGI during the period equalto the 24 month anniversary of the date of termination(the “SeverancePeriod”).  Executive shall not beentitled to any other salary, compensation or benefits after termination of theAgreement, except as specifically provided for in PGI’s employee benefit plansor as otherwise expressly required by applicable law.  The Severance Amount payable pursuant to thisSection 2.1.b. for the first six months of the Severance Period, the Prior YearEarned Bonus and the Pro Rata Bonus payable pursuant to this Section 2.1.b.shall be paid to Executive in a lump sum on the first day of the calendar monthfollowing the six month anniversary of the termination date, and the SeveranceAmount payable pursuant to this Section 2.1.b. for the remainder of theSeverance Period shall be payable in regular monthly installments.  The amounts payable pursuant to this Section2.1.b. shall not be reduced by the amount of any compensation Executive receiveswith respect to any other employment during the Severance Period.

**Fortwenty-four months following the date of Executive’s termination, PGI shall, atits expense, continue on behalf of the Executive and her dependants andbeneficiaries, the medical, dental and hospitalization benefits provided to theExecutive immediately prior to the date of termination.  The coverage and benefits (includingdeductibles and costs) provided in this Section 2.1.b. shall be no lessfavorable to the Executive and her dependants and beneficiaries, than thecoverage and benefits provided to other salaried employees under PGI’s benefitplans, as such plans may be amended from time to time.  PGI’s obligation hereunder with respect tothe foregoing benefits shall be limited to the extent that the Executiveobtains any such benefits pursuant to a subsequent employer’s benefit plans, inwhich case PGI may reduce the coverage of any benefits it is required toprovide the Executive hereunder so long as the aggregate coverage and benefitsof the combined benefit plans is no less favorable to the Executive than thecoverages and benefits required to be provided hereunder.  This Section 2.1.b. shall not be interpretedso as to limit any benefits to which the Executive, her dependants or beneficiariesmay otherwise be entitled under any of PGI’s employee benefit plans, programsor practices following the termination of employment of the Executive,including without limitation, any applicable retiree life insurancebenefits.  Except as otherwise expresslyprovided herein, all of Executive’s rights to salary, bonuses, employeebenefits and other compensation hereunder which would have accrued or becomepayable after the termination or expiration of the Term shall cease upon suchtermination or expiration, other than those expressly required under applicablelaw (such as COBRA); provided, that for purposes of determiningExecutive’s rights under COBRA, the date of the later to occur of (x) the dateof the termination or expiration of the Term or (y) the date of the finalpayment of any severance payments made pursuant to Section 2.1.b. above, shallbe deemed to be the qualifying event for such purpose.  PGI may offset any amounts Executive owes itor its subsidiaries against any amounts it or its subsidiaries owes Executivehereunder.**

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**c.             Involuntary Termination At orAfter a Change in Control.  In theevent that Executive incurs an Involuntary Termination hereunder after a Changein Control and before the Term expires, the Executive shall receive thebenefits described in Section 2.1.b above, except that the Severance Amountshall be equal to three times the sum of (A) her Base Compensation plus (B) herannual target bonus opportunity, each as in effect immediately prior to theChange in Control (or, if greater, immediately prior to the date of hertermination), in each case if, and only if, Executive has executed anddelivered to PGI the General Release substantially in the form and substance asset forth in Exhibit A attached hereto and only so long as Executive has notbreached the provisions of Article 3 or Section 4.1 hereof and does not applyfor unemployment compensation chargeable to PGI during the SeverancePeriod.  The Severance Amount payablepursuant to this Section 2.1.c. shall be paid in a single lump sum at theearliest date that will not result in the imposition of the additional tax onExecutive described in Section 409A of the Internal Revenue Code of 1986, asamended (the “**Code”).  In addition, the period of benefitcontinuation described in Section 2.1.b shall be for thirty-six months ratherthan twenty-four months.

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

**2.2           Termination By Executive.  Executive may terminate the employmentrelationship before the Term expires for the following reasons:**

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

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

**(ii)           The assignment to Executive, withouther express written consent, of any duties reasonably inconsistent withExecutive’s position, duties, responsibilities and status with PGI as of theEffective Date, or a change in Executive’s titles or offices (if any) in effecton the Effective Date, or any removal of Executive from, or any failure toreelect Executive to, any of such positions, except in connection withExecutive’s termination for Cause, death, disability, or as a result ofExecutive’s retirement after attaining age 70; or**

**(iii)          A reduction by PGI in Executive’s BaseCompensation as in effect on the Effective Date, or as the same may be increasedfrom time to time thereafter; or**

**(iv)          The failure of PGI to continue ineffect any material compensation, welfare or benefit plan in which Executive isparticipating at the time of a Change in Control of PGI, without substitutingtherefor plans providing Executive with substantially similar benefits atsubstantially the same cost to Executive; or the taking of any action by PGIwhich would adversely affect Executive’s participation in or materially reduceExecutive’s benefits or materially increase the cost to Executive**

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

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

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

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

**2.3           Certain Obligations Continue.  Neither termination of employment norexpiration of the Term terminates the continuing obligations of this Agreement,including obligations under Articles 3 and 4.1.**

**2.4           Employment Beyond Term.  Unless the parties hereto mutually agreeotherwise at a later date, should Executive remain employed by PGI after theTerm expires, such employment shall convert to an employment-at-willrelationship, terminable at any time by either PGI or Executive for any reasonwhatsoever, with or without cause.**

**ARTICLE3:****  CONFIDENTIAL INFORMATION; POST-EMPLOYMENTOBLIGATIONS**

**3.1           This Agreement.  The terms of this Agreement constituteconfidential information, which Executive shall not disclose to anyone otherthan Executive’s spouse, attorneys, tax advisors, or as required by law.  PGI may disclose the terms of this Agreementas required by law.**

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

**Allinformation, ideas, concepts, improvements, discoveries, and inventions thatare conceived, made, developed, or acquired by Executive individually or inconjunction with others during Executive’s employment (whether during businesshours and whether on PGI’s premises or otherwise) which relate to PGI’sbusiness, products, or services are PGI’s property.  Executive agrees to make prompt and fulldisclosure to PGI or its subsidiaries, as the case may be, of all ideas,discoveries, trade secrets, inventions, innovations, improvements,developments, methods of doing business, processes, programs, designs,analyses, drawings, reports, data, software, firmware, logos and all similar orrelated information  (whether or notpatentable and whether or not reduced to practice) that relate to PGI’s or itssubsidiaries’ actual or anticipated business, research and development, orexisting or future products or services and that are conceived, developed,acquired, contributed to, made, or reduced to practice by Executive (eithersolely or jointly with others) while employed by PGI or its subsidiaries andfor a period**

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**of one (1) year thereafter(collectively, “**WorkProduct”).  Any copyrightable workfalling within the definition of Work Product shall be deemed a “work made forhire” under the copyright laws of the United States, and ownership of allrights therein shall vest in PGI or its subsidiary.  To the extent that any Work Product is notdeemed to be a “work made for hire,” Executive hereby assigns and agrees toassign to PGI or such subsidiary all right, title and interest, includingwithout limitation, the intellectual property rights that Executive may have inand to such Work Product.  Executiveshall promptly perform all actions reasonably requested by the Board (whetherduring or after the employment period) to establish and confirm PGI’s or suchsubsidiary’s ownership (including, without limitation, providing testimony andexecuting assignments, consents, powers of attorney, and other instruments).

**At the termination of Executive’semployment with PGI for any reason, Executive shall return all of PGI’sproperty to PGI.**

**3.3           Confidential Information:  Non-Disclosure.  Executive acknowledges that the business ofPGI and its subsidiaries is highly competitive and that PGI has provided andwill provide Executive with access to Confidential Information relating to thebusiness of PGI and its subsidiaries.  “ConfidentialInformation” means and includes PGI’s confidential and/or proprietaryinformation and/or trade secrets that have been developed or used and/or willbe developed and that cannot be obtained readily by third parties from outsidesources.  Confidential Informationincludes, by way of example and without limitation, the following:  information regarding customers, employees,contractors, and the industry not generally known to the public; strategies,methods, books, records, and documents; technical information concerningproducts, equipment, services, and processes; procurement procedures andpricing techniques; the names of and other information concerning customers,investors, and business affiliates (such as contact name, service provided, pricingfor that customer, amount of services used, credit and financial data, and/orother information relating to PGI’s relationship with that customer); pricingstrategies and price curves; plans and strategies for expansion oracquisitions; budgets; customer lists; research; weather data; financial andsales data; trading terms; evaluations, opinions, and interpretations ofinformation and data; marketing and merchandising techniques; prospectivecustomers’ names and marks; grids and maps; electronic databases; models;specifications; computer programs; internal business records; contractsbenefiting or obligating PGI; bids or proposals submitted to any third party;technologies and methods; training methods and training processes;organizational structure; salaries of personnel; payment amounts or rates paidto consultants or other service providers; and other such confidential orproprietary information.  Executiveacknowledges that this Confidential Information constitutes a valuable,special, and unique asset used by PGI or its subsidiaries in their business toobtain a competitive advantage over their competitors.  Executive further acknowledges thatprotection of such Confidential Information against unauthorized disclosure anduse is of critical importance to PGI and its subsidiaries in maintaining theircompetitive position.**

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

**Executive agrees that Executivewill not, at any time during or after Executive’s employment with PGI, make anyunauthorized disclosure of any Confidential Information of PGI or its subsidiaries,or make any use thereof, except in the carrying out of her employmentresponsibilities hereunder.  Executivealso agrees to preserve and protect the confidentiality of third partyConfidential Information to the same extent, and on the same basis, as PGI’sConfidential Information.**

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**3.4           Non-Competition Obligations.  Executive acknowledges that PGI is providingExecutive with access to Confidential Information. Executive’s non-competitionobligations are ancillary to PGI’s agreements provided in Article 2 andagreement to disclose Confidential Information to Executive.  In order to protect the ConfidentialInformation described above, and in consideration for Executive’s receivingaccess to this Confidential Information, right to compensation and benefitsupon certain terminations as provided in Article 2, and receiving othercompensation provided in this Agreement, PGI and Executive agree to thefollowing non-competition provisions:**

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

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

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

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

**Executive understands that theforegoing restrictions may limit her ability to engage in certain businessesand during the period provided for above, but acknowledges that theserestrictions are necessary to protect the Confidential Information PGI hasprovided to Executive.**

**Executive agrees that thisprovision defining the scope of activities constituting competition with PGI isnarrow and reasonable for the following reasons:  (i) Executive is free to seek employment withother companies providing services that do not directly or indirectly competewith any business of PGI or its subsidiaries; (ii) Executive is free to seekemployment with other companies that do not directly or indirectly compete withany business of PGI or its subsidiaries; and (iii) there are many othercompanies that do not directly or indirectly compete with any business of PGIor its subsidiaries.  Thus, thisrestriction on Executive’s ability to compete does not prevent Executive fromusing and offering the skills that Executive possessed prior to receivingConfidential Information, specialized training, and knowledge from PGI.**

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

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

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**the course of employment with PGIto terminate his or her employment, and will not assist any other person orentity in such a solicitation.**

**3.7           Arbitration.  Except with respect to disputes or claimsunder Article 3 or Section 4.1 hereof (which may be pursued in any court ofcompetent jurisdiction as specified herein and with respect to which each partyshall bear the cost of its own attorney’s fees and expenses except as otherwiserequired by applicable law), each party hereto agrees that the arbitrationprocedure set forth in Exhibit B hereto shall be the sole and exclusivemethod for resolving any claim or dispute (“**Claim”) arising out of or relating tothe rights and obligations acknowledged and agreed to in this Agreement and theemployment of Executive by PGI and its subsidiaries (including, withoutlimitation, disputes and claims regarding employment discrimination, sexualharassment, termination and discharge), whether such Claim arose or the factson which such Claim is based occurred prior to or after the execution anddelivery of adoption of this Agreement. The parties agree that the result of any arbitration hereunder shall befinal, conclusive and binding on all of the parties.  Nothing in this paragraph shall prohibit aparty hereto from instituting litigation to enforce any Final Determination (asdefined in Exhibit B hereto). Each party hereto hereby irrevocably submits to the jurisdiction of anyUnited States District Court or North Carolina state court of competentjurisdiction sitting in Mecklenburg County, North Carolina, and agrees thatsuch court shall be the exclusive forum with respect to disputes and claimsunder this Agreement and for the enforcement of any Final Determination, andirrevocably and unconditionally waives (i) any objection to the laying of venueof any such action, suit or proceeding in such court or (ii) any argument,claim, defense or allegation that any such action, suit or proceeding broughtin such court has been brought in an inconvenient forum.  Each party hereto irrevocably consents toservice of process by registered mail or personal service and waives anyobjection on the grounds of personal jurisdiction, venue or inconvenience ofthe forum.

**3.8           Warranty.  Executive warrants that Executive is not aparty to any other restrictive agreement limiting Executive’s activities in heremployment by PGI.  Executive furtherwarrants that at the time of the signing of this Agreement, Executive knows ofno written or oral contract or of any other impediment that would inhibit orprohibit employment with PGI and that Executive will not knowingly use anytrade secret, confidential information, or other intellectual property right ofany other party in the performance of Executive’s duties hereunder.**

**ARTICLE4:****  MISCELLANEOUS**

**4.1           Mutual Non-Disparagement.**

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

**b.             PGI shall refrain, both during andafter Executive’s employment, from publishing any oral or written statementabout Executive that are slanderous, libelous, or defamatory, or that discloseprivate or confidential information about her personal business affairs; orthat constitute an**

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

**4.2           Notices.  Any notice provided for in this Agreementshall be in writing and shall be either personally delivered, sent by reputableovernight courier service or mailed by first class mail, return receiptrequested, to the recipient at the address below indicated:**

**Notices to Executive:**

**Veronica M. Hagen1 Avery StreetBoston, MA  02110**

**Notices to the Company:**

**Polymer Group, Inc.9335 Harris Corners ParkwaySuite 300Charlotte, NC 28269Attn:  General Counsel**

**With a copy to:**

**J. René ToadvineLittler Mendelson, PCBank of America Corporate Center100 North Tryon Street, Suite 4150Charlotte, NC 28202**

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

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

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

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

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**business or assets of PGI.  Executive’s rights and obligations under thisAgreement are personal, and they shall not be assigned or transferred withoutPGI’s prior written consent.**

**4.6           Excise Tax Gross-Up.  In the event that the aggregate of allpayments or benefits made or provided to, or that may be made or provided to,the Executive under this Agreement and under all other plans, programs andarrangements of PGI (the “**Aggregate Payment”) is determined to constitute a “parachutepayment,” as such term is defined in Section 280G(b)(2) of the Code, PGI shallpay to the Executive, prior to the time any excise tax imposed by Section 4999of the Code (“ExciseTax”)is payable with respect to such Aggregate Payment, an additional amount which,after the imposition of all income and excise taxes thereon, is equal to theExcise Tax on the Aggregate Payment.  Thedetermination of whether the Aggregate Payment constitutes a parachute paymentand, if so, the amount to be paid to the Executive and the time of paymentpursuant to this Section 4.6 shall be made by an independent auditor (the “Auditor”) jointly selected by PGI and theExecutive and paid by PGI.  The Auditorshall be a nationally recognized United States public accounting firm which hasnot, during the two (2) years preceding the date of its selection, acted in anyway on behalf of PGI or any affiliate thereof. If the Executive and PGI cannot agree on the firm to serve as theAuditor, then the Executive and PGI shall each select one accounting firm andthose two firms shall jointly select the accounting firm to serve as theAuditor.  Notwithstanding the foregoing,in the event that the amount of the Executive’s Excise Tax liability issubsequently determined to be greater than the Excise Tax liability withrespect to which an initial payment to the Executive under this Section 4.6 hasbeen made, PGI shall pay to the Executive an additional amount with respect tosuch additional Excise Tax (and any interest and penalties thereon) at the timeand in the amount determined by the Auditor so as to make the Executive whole,on an after-tax basis, with respect to such Excise Tax (and any interest andpenalties thereon) and such additional amount paid by PGI.  In the event the amount of the Executive’sExcise Tax liability is subsequently determined to be less than the Excise Taxliability with respect to which an initial payment to the Executive has beenmade, the Executive shall, as soon as practical after the determination ismade, pay to PGI the amount of the overpayment by PGI, reduced by the amount ofany relevant taxes already paid by the Executive and not refundable, all asdetermined by the Auditor.  The Executiveand PGI shall cooperate with each other in connection with any proceeding orclaim relating to the existence or amount of liability for Excise Tax, and allexpenses incurred by the Executive in connection therewith shall be paid by PGIpromptly upon notice of demand from the Executive.

**4.7           Indemnification, LiabilityInsurance.  PGI agrees to indemnifythe Executive and hold the Executive harmless to the fullest extent permittedby PGI’s certificate of incorporation and under the bylaws of PGI against andin respect to any and all actions, suits, proceedings, claims, demands,judgments, costs, expenses (including reasonable attorneys’ fees), losses, anddamages resulting from the Executive’s good-faith performance of the Executive’sduties and obligations to PGI.  PGI shallcover the Executive under directors and officers liability insurance bothduring and, while potential liability exists, after the Term of this Agreementin the same amount and on the same terms as PGI covers its other activeofficers and directors, if such coverage is obtainable, but in all events suchcoverage shall be at least in substantially the same amount and onsubstantially the same terms as PGI covers its other active officers anddirectors.**

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

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

**4.9           Survival/Severability/Headings.  It is the express intention and agreement ofthe parties that the provisions of Article 3 and Section 4.1 shall survive thetermination of employment of Executive. In addition, all obligations of PGI to make payments, and to provide forequity vesting, under this Agreement shall survive any termination of thisAgreement on the terms and conditions set forth in this Agreement.  The invalidity or unenforceability of any oneor more provisions of this Agreement shall not affect the validity orenforceability of the other provisions of this Agreement, which shall remain infull force and effect.  Article and sectionheadings contained in this Agreement are provided for convenience and referenceonly, and do not define or affect the meaning, construction, or scope of any ofthe provisions of this Agreement.**

**IN WITNESS WHEREOF, PGI andExecutive have executed this Agreement in multiple originals to be effective onthe first date of the Term.**
| **PGI**                                          | ** ** | **VERONICA M. HAGEN**                       |
|--------------------------------------------------|------------|---------------------------------------------|
|                                             |       |                                        |
|                                             |       |                                        |
|                                             |       |                                        |
| By:                                              |       |                                        |   |
|                                             | Name       |                                        |   |
|                                             | Title      |                                        |   |
|                                             |       |                                        |   |
| Dated this the  ___ day of _______________, ____ |       | Dated this the ___ day of ___________, ____ |

 

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**Exhibit A**

**GENERAL RELEASE**

**I, Veronica M. Hagen, in  consideration of and subject to theperformance by Polymer Group, Inc., a Delaware corporation (together with itssubsidiaries, the “Company”), of its obligations under the EmploymentAgreement, entered into on April 23, 2007, (the “**Agreement”), do hereby release and foreverdischarge as of the date hereof the Company and its affiliates and all presentand former directors, officers, agents, representatives, employees, successorsand assigns of the Company and its affiliates and the Company’s direct orindirect owners (collectively, the “Released Parties”) to the extent provided below.

**1.**                                       I understand that anypayments or benefits paid or granted to me under paragraph 2(b) of theAgreement represent, in part, consideration for signing this General Releaseand are not salary, wages or benefits to which I was already entitled. Iunderstand and agree that I will not receive the payments and benefitsspecified in paragraph 2(b) of the Agreement unless I execute this GeneralRelease and do not revoke this General Release within the time period permittedhereafter or breach this General Release. Such payments and benefits will not be considered compensation forpurposes of any employee benefit plan, program, policy or arrangementmaintained or hereafter established by the Company or its affiliates.  I also acknowledge and represent that I havereceived all payments and benefits that I am entitled to receive (as of thedate hereof) by virtue of any employment by the Company.

**2.**                                       Except as provided inparagraph 4 below and except for the provisions of my Employment Agreementwhich expressly survive the termination of my employment with the Company, Iknowingly and voluntarily (for myself, my heirs, executors, administrators andassigns) release and forever discharge the Company and the other ReleasedParties from any and all claims, suits, controversies, actions, causes ofaction, cross-claims, counter-claims, demands, debts, compensatory damages,liquidated damages, punitive or exemplary damages, other damages, claims forcosts and attorneys’ fees, or liabilities of any nature whatsoever in law andin equity, existing or hereafter arising, based in whole or in part upon anyact or omission, transaction, agreement, event or other occurrence taking placefrom the beginning of time through the date this General Release becomeseffective and enforceable and whether known or unknown, suspected, or claimedagainst the Company or any of the Released Parties which I, my spouse, or anyof my heirs, executors, administrators or assigns, may have, which arise out ofor are connected with my employment with, or my separation or termination from,the Company (including, but not limited to, any allegation, claim or violation,arising under: Title VII of the Civil Rights Act of 1964, as amended; the CivilRights Act of 1991; the Age Discrimination in Employment Act of 1967, asamended (including the Older Workers Benefit Protection Act); the Equal Pay Actof 1963, as amended; the Americans with Disabilities Act of 1990; the Familyand Medical Leave Act of 1993; the Worker Adjustment Retraining andNotification Act; the Employee Retirement Income Security Act of 1974; anyapplicable Executive Order Programs; the Fair Labor Standards Act; or theirstate or local counterparts; the North Carolina Equal Employment Practice Act,N.C. Gen. Stat. § 143-422.1, etseq.; the North CarolinaPersons With Disabilities Protection Act, N.C. Gen. Stat. § 168A-1 etseq.; and the North Carolina Retaliatory Employment Discrimination Act,N.C. Gen. Stat. § 95-240 etseq. or under any other federal,

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

**3.**                                       I represent that Ihave made no assignment or transfer of any right, claim, demand, cause ofaction, or other matter covered by paragraph 2 above.

**4.**                                       I agree that thisGeneral Release does not waive or release any rights or claims that I may haveunder the Age Discrimination in Employment Act of 1967 which arise after thedate I execute this General Release.  Iacknowledge and agree that my separation from employment with the Company incompliance with the terms of the Agreement shall not serve as the basis for anyclaim or action (including, without limitation, any claim under the AgeDiscrimination in Employment Act of 1967).

**5.**                                       In signing thisGeneral Release, I acknowledge and intend that it shall be effective as a barto each and every one of the Claims hereinabove mentioned or implied. Iexpressly consent that this General Release shall be given full force andeffect according to each and all of its express terms and provisions, includingthose relating to unknown and unsuspected Claims (notwithstanding any statestatute that expressly limits the effectiveness of a general release ofunknown, unsuspected and unanticipated Claims), if any, as well as thoserelating to any other Claims hereinabove mentioned or implied. I acknowledgeand agree that this waiver is an essential and material term of this GeneralRelease and that without such waiver the Company would not have agreed to theterms of the Agreement.  I further agreethat 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 Claimbrought by a governmental agency on my behalf, this General Release shall serveas a complete defense to such Claims. I further agree that I am not aware ofany pending charge or complaint of the type described in paragraph 2 as of theexecution of this General Release.

**6.**                                       I agree that neitherthis General Release, nor the furnishing of the consideration for this GeneralRelease, shall be deemed or construed at any time to be an admission by theCompany, any Released Party or myself of any improper or unlawful conduct.

**7.**                                       I agree that I willforfeit all amounts payable by the Company pursuant to the Agreement if Ichallenge the validity of this General Release. I also agree that if I violatethis General Release by suing the Company or the other Released Parties, I willpay all costs and expenses of defending against the suit incurred by theReleased Parties, including reasonable attorneys’ fees, and return all paymentsreceived by me pursuant to the Agreement.

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

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**9.**                                       Any non-disclosureprovision in this General Release does not prohibit or restrict me (or myattorney) from responding to any inquiry about this General Release or itsunderlying facts and circumstances by the Securities and Exchange Commission(SEC), the National Association of Securities Dealers, Inc. (NASD), any otherself-regulatory organization or governmental entity.

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

**11.**                                 I agree that as of thedate hereof, I have returned to the Company any and all property, tangible orintangible, relating to its business, which I possessed or had control over atany 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 Ishall not retain any copies, compilations, extracts, excerpts, summaries orother notes of any such manuals, files, documents, records, software, customerdata base or other data.

**12.**                                 Notwithstandinganything in this General Release to the contrary, this General Release shallnot relinquish, diminish, or in any way affect any rights or claims arising outof any breach by the Company or by any Released Party of the Agreement afterthe date hereof.

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

**BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREETHAT:**

**(a)**                                  I HAVE READ ITCAREFULLY;

**(b)**                                 I UNDERSTAND ALL OFITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOTLIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, ASAMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAYACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEERETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

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**(c)**                                  I VOLUNTARILY CONSENTTO EVERYTHING IN IT;

**(d)**                                 I HAVE BEEN ADVISED TOCONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTERCAREFUL READING AND CONSIDERATION I HAVE CHOSEN NOT TO DO SO OF MY OWNVOLITION;

**(e)**                                  I HAVE HAD AT LEAST 21DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY IN ITS FINALFORM ON _______________ __, _____ TO CONSIDER IT AND THE CHANGES MADE SINCE THE_______________ __, _____ VERSION OF THIS RELEASE ARE NOT MATERIAL AND WILL NOTRESTART THE REQUIRED 21-DAY PERIOD;

**(f)**                                    THE CHANGES TO THEAGREEMENT SINCE _______________ ___, _____ EITHER ARE NOT MATERIAL OR WERE MADEAT MY REQUEST.

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

**(h)**                                 I HAVE SIGNED THIS GENERALRELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINEDTO ADVISE ME WITH RESPECT TO IT; AND

**(i)**                                     I AGREE THAT THEPROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED ORMODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZEDREPRESENTATIVE OF THE COMPANY AND BY ME.

**DATE:  _____________                                                                   ____________________________________**

** **

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**Exhibit B**

**ARBITRATION PROCEDURE**

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

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

**3              Arbitration Procedure.  The following procedures shall govern theconduct of any arbitration under this section. All procedural matters relating to the conduct of the arbitration otherthan those specified below shall be discussed among counsel for the parties andthe arbitrator.  Subject to any agreementof the parties, the arbitrator shall determine all procedural matters notspecified herein.**

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

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

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

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

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

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

**(f)            Within 10 days after the lastsubmission as provided above, the arbitrator shall confer with the parties toselect the date of the hearing on the issues raised by the Claim.  Scheduling of the hearing shall be within thesole discretion of the arbitrator, but in no event more than 30 days after thelast submission by the parties, and shall take place within 50 miles of thecorporate headquarters of PGI at a place selected by the arbitrator or suchother place as is mutually agreed.  Bothparties shall be granted substantially equal time to present evidence at thehearing.  The hearing shall not exceedone business day, except for good cause shown.**

**(g)           Within 30 days after the conclusionof the hearing, the arbitrator shall issue a written decision to be deliveredto both parties and the Additional Notice Parties (the**“Final Determination”).  The Final Determination shall address eachissue disputed by the parties, state the arbitrator’s findings and reasonstherefor, and state the nature and amount of any damages, compensation or otherrelief awarded.

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

**4              Costs of Arbitration.  Each party shall bear its own costs ofconducting the arbitration, and administrative fees shall be shared equallyamong the parties.**

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

**6              Confidentiality of Proceedings.  The parties hereto agree that all of thearbitration proceedings provided for herein, including any notice of claim, theNotice of Arbitration, the submissions of the parties, and the FinalDetermination issued by the arbitrator, shall be confidential and**

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**shall not be disclosed at any timeto any person other than the parties, their representatives, the arbitrator andthe Additional Notice Parties; provided, however, that this provision shall notprevent the party prevailing in the arbitration from submitting the FinalDetermination to a court for the purpose of enforcing the award, subject tocomparable confidentiality protections if the court agrees; and furtherprovided that the foregoing shall not prohibit disclosure to the minimum extentreasonably necessary to comply with (i) applicable law (or requirement havingthe force of law), court order, judgment or decree, including, withoutlimitation, disclosures which may be required pursuant to applicable securitieslaws, and (ii) the terms of contractual arrangements (such as financingarrangements) to which PGI or any Additional Notice Party may be subject solong as such contractual arrangements were not entered into for the primarypurpose of permitting disclosure which would otherwise be prohibited hereunder.**

** **

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