**Exhibit 10.1**

**ExecutionCopy**

**POLYMER GROUP, INC.**

**SEVERANCE AGREEMENT**

THIS SEVERANCE AGREEMENT is entered into on October31, 2006, between Polymer Group, Inc., a Delaware corporation (the “Company”),and James L. Schaeffer (“Executive”).

WHEREAS, the Company and Executive are parties to acertain employment agreement dated as of March 24, 2006 (the “EmploymentAgreement”);

WHEREAS, the Company and Executive are parties to acertain change in control severance compensation agreement dated as of March24, 2006 (the “Change in Control Agreement”);

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

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

# 1.             End of Employment.

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

## (b)           For purposes of thisAgreement, “Subsidiaries” shall mean any corporation or other entity ofwhich the securities or other ownership interests having the voting power toelect a majority of the board of directors or other governing body are, at thetime of determination, owned by the Company, directly or through one of moreSubsidiaries, including without limitation those entities set forth on Annex Iattached hereto.

# 2.             Compensation and Benefits.

## (a)           Salary.  Executive shall be entitled to receive hisbase salary through the Termination Date. As payment of severance under this Agreement, Executive shall beentitled to receive an amount equal to his base salary until December 20, 2006(the “Payment End Date”).  Executiveshall not be entitled to receive any amounts of base salary for any periodafter the Payment End Date.  Suchseverance payments shall be made bi-weekly in accordance with the Company’scurrent payroll practices.  Executiveshall not be entitled to any additional payment for unused vacation days orpaid time off days.

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## (b)           Expenses.  The Company shall reimburse Executive for allreasonable business expenses incurred by him prior to the Termination Datewhich were incurred in the course of performing his duties and responsibilitieswhich are consistent with the Company’s policies in effect from time to timewith respect to travel, entertainment and other business expenses, subject tothe Company’s requirements with respect to reporting and documentation of suchexpenses.

## (c)           Bonus.  Executive shall not be entitled to receiveany amounts that may have been due to him under the Employment Agreement orpursuant to any Company bonus plan in respect of a bonus for the current fiscalyear.

## (d)           Vested RestrictedStock and Vested Stock Options.  Asadditional payment of severance payments under this Agreement, Executive shallbe entitled to the vested portion of his restricted stock grants, totaling46,618 shares (prior to the reduction for the shares withheld by the Company inpayment of taxes on behalf of Executive totaling 15,836 shares, for a currenttotal holding of 30,782 shares), subject to the terms and conditions of the2005 Restricted Stock Plan, and to the vested portion of the stock optionsgrants totaling 48,750 stock options, subject to the terms and conditions ofthe 2003 Stock Option Plan; provided that the provisions of Section 2(c)(ii) ofthe Restricted Stock Grant concerning service and performance vested shares andSection 2(b) of the Restricted Stock Grant concerning immediately vestedshares, and the provisions of Section 6(d)(iii) of the 2003 Stock Option Plan,in each case covering forfeitures on certain terminations, shall not apply to theshares and options referred to in this sentence; provided further, thatExecutive shall be free to sell his shares of restricted stock commencing onDecember 21, 2006.  All other grants ofrestricted stock and stock options are hereby forfeited and cancelled.  All shares of restricted stock previouslywithheld by the Company in satisfaction of amounts due for taxes resulting fromthe grant of shares of restricted stock shall remain with the Company.

## (e)           Withholding.  All amounts payable to Executive as compensationhereunder shall be subject to all required and customary withholding by theCompany.

## (f)            Insurance.  Until September 21, 2007, the Company shall,at its expense, pay both the employer and employee portion of the premiums forgroup medical, dental and vision insurance at the level and with the coveragein effect for Executive and his dependants and beneficiaries immediately priorto the Termination Date.  Executive shallonly be responsible for the deductible or co-pay obligations under such insuranceprograms.  The Company shall pay theconversion premium under the group life insurance plan to convert the existinggroup life insurance coverage of Executive into an individual policy with thesame level of coverage as in effect immediately prior to the Termination Date,with an initial term through September 21, 2007.  The Company shall also pay to Executive foreach month during the period beginning on the Termination Date and ending onSeptember 21, 2007, an amount equal to the amount the Company was paying onbehalf of Executive to provide coverage under the Company’s long-termdisability plan.  Executive shall also beentitled to receive the continuation of his group medical, dental and visioninsurance coverage as provided under the provisions of the Consolidated OmnibusBudget Reconciliation Act (“COBRA”) beginning on March 21, 2007, and continuinguntil September 21, 2008.  For the periodbetween March 21, 2007 and 

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## September 21,2007, the Company shall pay the employer and employee portions of the coverageunder COBRA, other than any co-pay or deductible payments required under suchinsurance.  The Company’s obligationhereunder with respect to the foregoing benefits shall be limited to the extentthat the Executive obtains any such benefits pursuant to a subsequent employer’sbenefit plans, in which case the Company may reduce the coverage of anybenefits it is required to provide the Executive hereunder so long as theaggregate coverage and benefits of the combined benefit plans is no less favorableto the Executive than the coverages and benefits required to be providedhereunder.  This subsection (f) shall notbe interpreted so as to limit any benefits to which the Executive, hisdependants or beneficiaries may otherwise be entitled under any of the Company’semployee benefit plans, programs or practices following the termination ofemployment of the Executive, including without limitation, any applicableretiree medical and life insurance benefits. The Company may offset any amounts Executive owes it or its Subsidiariesagainst any amounts it or its Subsidiaries owes Executive hereunder.

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

# 3.             Confidential Information.

## (a)           Obligation toMaintain Confidentiality.  Executiveacknowledges that the continued success of the Company and its Subsidiaries,depends upon the use and protection of a large body of confidential andproprietary information.  All of suchconfidential and proprietary information existing prior hereto, now existing orto be developed in the future will be referred to in this Agreement as “ConfidentialInformation.”  ConfidentialInformation will be interpreted as broadly as possible to include allinformation of any sort (whether merely remembered or embodied in a tangible orintangible form) that is (i) related to the Company’s or its Subsidiaries’current or potential business and (ii) is not generally or publiclyknown.  Confidential Informationincludes, without specific limitation, the information, observations and dataobtained by him during the course of his employment by the Company and itsSubsidiaries concerning the business and affairs of the Company and itsSubsidiaries, information concerning acquisition opportunities in or reasonablyrelated to the Company’s or its Subsidiaries’ business or industry of whichExecutive becomes aware during such employment, the persons or entities thatare current, former or prospective suppliers or customers of any one or more ofthem during Executive’s employment, as well as development, transition andtransformation plans, methodologies and methods of doing business, strategic,marketing and expansion plans, including plans regarding planned and potentialsales, financial and business plans, employee lists and telephone numbers,locations of sales representatives, new and existing programs and services,prices and terms, customer service, integration processes, requirements andcosts of providing service, support and equipment.  Therefore, Executive agrees that he shall notdisclose to any unauthorized person or use for his own account any of suchConfidential Information, unless and to the extent that any Confidential Information(i) becomes generally known to and available for use by the public otherthan as a result of Executive’s acts or omissions to act or (ii) isrequired to be disclosed pursuant to any applicable law or court order.  Executive agrees to deliver to the Companyall memoranda, notes, plans, records, reports and other documents (and copiesthereof) relating to 

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## the businessof the Company or its Subsidiaries (including, without limitation, allConfidential Information) that he may then possess or have under his control.

## (b)           Ownership ofIntellectual Property.  Executiveagrees to make prompt and full disclosure to the Company or its Subsidiaries,as the case may be, of all ideas, discoveries, trade secrets, inventions,innovations, improvements, developments, methods of doing business, processes,programs, designs, analyses, drawings, reports, data, software, firmware, logosand all similar or related information (whether or not patentable and whether or not reduced to practice) thatrelate to the Company’s or its Subsidiaries’ actual or anticipated business,research and development, or existing or future products or services and thatare conceived, developed, acquired, contributed to, made, or reduced topractice by Executive (either solely or jointly with others) while employed bythe Company or its Subsidiaries and for a period thereafter ending on September21, 2007 (collectively, “Work Product”). Any copyrightable work falling within the definition of Work Productshall be deemed a “work made for hire” under the copyright laws of the UnitedStates, and ownership of all rights therein shall vest in the Company or itsSubsidiary.  To the extent that any WorkProduct is not deemed to be a “work made for hire,” Executive hereby assignsand agrees to assign to the Company or such Subsidiary all right, title andinterest, including without limitation, the intellectual property rights thatExecutive may have in and to such Work Product. Executive shall promptly perform all actions reasonably requested by theBoard to establish and confirm the Company’s or such Subsidiary’s ownership(including, without limitation, providing testimony and executing assignments,consents, powers of attorney, and other instruments).

## (c)           Third PartyInformation. Executive understands that the Company and its Subsidiarieshave received from third parties confidential or proprietary information (“ThirdParty Information”) subject to a duty on the Company’s and its Subsidiaries’part to maintain the confidentiality of such information and to use it only forcertain limited purposes.  Without in anyway limiting the provisions of Section 3(a) above, Executive will holdThird Party Information in the strictest confidence and will not disclose toanyone (other than personnel of the Company or its Subsidiaries who need toknow such information in connection with their work for the Company or suchSubsidiaries) or use, such Third Party Information unless expressly authorizedby a member of the Board in writing.

# 4.             Non-Compete, Non-Solicitation.

## (a)           In furtherconsideration of the compensation to be paid to Executive hereunder, Executiveacknowledges that during the course of his employment with the Company and itsSubsidiaries he became familiar with the Company’s trade secrets and with otherConfidential Information concerning the Company and its predecessors and itsSubsidiaries and that his services shall be of special, unique andextraordinary value to the Company and its Subsidiaries, and therefore,Executive agrees that, from the date of this Agreement until September 21, 2007(the “Noncompete Period”), he shall not directly or indirectly own anyinterest in, manage, control, participate in, consult with, render servicesfor, or in any manner engage in any business competing with the businesses ofthe Company or its Subsidiaries, as such businesses exist or were in processduring his employment by the Company and its Subsidiaries, within anygeographical area in which the Company or its Subsidiaries engage or 

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## plan to engagein such businesses.  Nothing herein shallprohibit Executive from being a passive owner of not more than 2% of theoutstanding stock of any class of a corporation which is publicly traded, solong as Executive has no active participation in the business of such corporation.  In the event Executive is approached by athird party that is not a competitor of the Company and asked to advise suchthird party with respect to a potential acquisition of the Company, Executivemay request the consent of the Company to act in such capacity and the Companywill consider such request in good faith.

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

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

## (d)           In the event of thebreach or a threatened breach by Executive of any of the provisions of thisparagraph 4, the Company would suffer irreparable harm, and in addition andsupplementary to other rights and remedies existing in its favor, the Companyshall be entitled to specific performance and/or injunctive or other equitablerelief from a court of competent jurisdiction in order to enforce or preventany violations of the provisions hereof (without posting a bond or othersecurity).  In addition, in the event ofan alleged breach or violation by Executive of this paragraph 4, the NoncompetePeriod shall be tolled until such breach or violation has been duly cured.  Executive acknowledges that the restrictionscontained in paragraph 4 are reasonable and that he has reviewed the provisionsof this Agreement with his legal counsel.

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

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# 6.             Executive’s Representations.  Executive hereby represents and warrants tothe Company that (i) the execution, delivery and performance of this Agreementby Executive do not and shall not conflict with, breach, violate or cause adefault under any contract, agreement, instrument, order, judgment or decree towhich Executive is a party or by which he is bound, (ii) Executive is not aparty to or bound by any employment agreement, noncompete agreement orconfidentiality agreement with any other person or entity and (iii) upon theexecution and delivery of this Agreement by the Company, this Agreement shallbe the valid and binding obligation of Executive, enforceable in accordancewith its terms.  Executive herebyacknowledges and represents that he has consulted with independent legalcounsel regarding his rights and obligations under this Agreement and that he fullyunderstands the terms and conditions contained herein.

# 7.             Notices. Any notice provided for in this Agreement shall be in writing and shallbe either personally delivered, sent by reputable overnight courier service ormailed by first class mail, return receipt requested, to the recipient at theaddress below indicated:

Notices to Executive:

James L. Schaeffer2331 Mount Isle Harbor DriveCharlotte, N.C.  28214

With a copy to:

William H. SturgesPartnerShumaker, Loop & Kendrick, LLP128 South Tryon StreetSuite 1800Charlotte, NC  28202

Notices to the Company:

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

With a copy to:

H. Kurt von Moltke, P.C.Kirkland & Ellis LLP200 East Randolph DriveChicago, IL  60601

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or such other address or to the attention of suchother person as the recipient party shall have specified by prior writtennotice to the sending party.  Any noticeunder this Agreement shall be deemed to have been given when so delivered, sentor mailed.

# 8.             Severability. Whenever possible, each provision of this Agreement shall be interpretedin such manner as to be effective and valid under applicable law, but if anyprovision of this Agreement is held to be invalid, illegal or unenforceable inany respect under any applicable law or rule in any jurisdiction, suchinvalidity, illegality or unenforceability shall not affect any other provisionof this Agreement or any action in any other jurisdiction, but this Agreementshall be reformed, construed and enforced in such jurisdiction as if suchinvalid, illegal or unenforceable provision had never been contained herein.

# 9.             Complete Agreement.  This Agreement, those documents expresslyreferred to herein and other documents of even date herewith, including theRelease referred to in Section 5, embody the complete agreement andunderstanding among the parties and supersede and preempt any priorunderstandings, agreements or representations by or among the parties, writtenor oral, which may have related to the subject matter hereof in any way.

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

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

# 12.           Counterparts.  This Agreement may be executed in separatecounterparts, each of which is deemed to be an original and all of which takentogether constitute one and the same agreement.

# 13.           Successors and Assigns.  This Agreement is intended to bind and inureto the benefit of and be enforceable by Executive, the Company and theirrespective heirs, successors and assigns, except that Executive may not assignhis rights or delegate his duties or obligations hereunder without the priorwritten consent of the Company.

# 14.           Choice of Law.  All issues and questions concerning theconstruction, validity, enforcement and interpretation of this Agreement andthe exhibits and schedules hereto shall be governed by, and construed inaccordance with, the laws of the State of North Carolina, without giving effectto any choice of law or conflict of law rules or provisions (whether of theState of North Carolina or any other jurisdiction) that would cause theapplication of the laws of any jurisdiction other than the State of NorthCarolina.

# 15.           Amendment and Waiver.  The provisions of this Agreement may beamended or waived only with the prior written consent of the Company (asapproved by the 

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

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

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

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

# 19.           Arbitration.  Except with respect to disputes or claimsunder paragraphs 3 and 4 hereof (which may be pursued in any court of competentjurisdiction as specified below and with respect to which each party shall bearthe cost of its own attorney’s fees and expenses except as otherwise requiredby applicable law), each party hereto agrees that the arbitration procedure setforth in Exhibit B hereto shall be the sole and exclusive method forresolving any 

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## claim ordispute (“Claim”) arising out of or relating to the rights and obligationsacknowledged and agreed to in this Agreement and the employment of Executive bythe Company and its Subsidiaries (including, without limitation, disputes andclaims regarding employment discrimination, sexual harassment, termination anddischarge), whether such Claim arose or the facts on which such Claim is basedoccurred prior to or after the execution and delivery of adoption of thisAgreement.  The parties agree that theresult of any arbitration hereunder shall be final, conclusive and binding onall of the parties.  Nothing in this paragraphshall prohibit a party hereto from instituting litigation to enforce any FinalDetermination (as defined in Exhibit B hereto).  Each party hereto hereby irrevocably submitsto the jurisdiction of any United States District Court or North Carolina statecourt of competent jurisdiction sitting in Mecklenburg County, North Carolina,and agrees that such court shall be the exclusive forum with respect todisputes and claims under paragraphs 3 and 4 and for the enforcement of anyFinal Determination, and irrevocably and unconditionally waives (i) anyobjection to the laying of venue of any such action, suit or proceeding in suchcourt or (ii) any argument, claim, defense or allegation that any such action,suit or proceeding brought in such court has been brought in an inconvenientforum.  Each party hereto irrevocablyconsents to service of process by registered mail or personal service andwaives any objection on the grounds of personal jurisdiction, venue orinconvenience of the forum.

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

# 21.           Number.  In this Agreement, words importing thesingular number only shall include the plural and vice versa, and wordsimporting the masculine gender shall include the feminine and neuter gendersand vice versa, and words importing persons shall include individuals,partnerships, associations, trusts, unincorporated organizations andcorporations.

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

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

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

# 25.           Effectiveness.  Once this Agreement has been duly executedand delivered by each party hereto, all of the provisions shall becomeeffective.

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IN WITNESS WHEREOF, the parties hereto have executedthis Agreement on the date first written above.
|   | Polymer Group, Inc. |
|--------|---------------------|
|   |                |
|   | By:                 |   |
|   |                |   |
|   | Its:                |   |
|   |                |   |
|   |                |   |
|   |                |   |
|   |                |
|   | James L.  Schaeffer |

 

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Exhibit A

GENERAL RELEASE

I, James L. Schaeffer, in  consideration of and subject to theperformance by Polymer Group, Inc., a Delaware corporation (together with itssubsidiaries, the “Company”), of its obligations under the Severance Agreement,entered into on October 31, 2006, (the “Agreement”), do hereby releaseand forever discharge as of the date hereof the Company and its affiliates andall present and former directors, officers, agents, representatives, employees,successors and assigns of the Company and its affiliates and the Company’sdirect or indirect owners (collectively, the “Released Parties”) to theextent provided below.

1.                                       Iunderstand that any payments or benefits paid or granted to me under paragraph2 of the Agreement represent, in part, consideration for signing this GeneralRelease and are not salary, wages or benefits to which I was already entitled.I understand and agree that I will not receive the payments and benefitsspecified in paragraph 2 of the Agreement unless I execute this General Releaseand 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.                                       Exceptas provided in paragraph 4 below, I knowingly and voluntarily (for myself, myheirs, executors, administrators and assigns) release and forever discharge theCompany and the other Released Parties from any and all claims, suits,controversies, actions, causes of action, cross-claims, counter-claims,demands, debts, compensatory damages, liquidated damages, punitive or exemplarydamages, other damages, claims for costs and attorneys’ fees, or liabilities ofany nature whatsoever in law and in equity, existing or hereafter arising,based in whole or in part upon any act or omission, transaction, agreement,event or other occurrence taking place from the beginning of time through thedate this General Release becomes effective and enforceable and whether knownor unknown, suspected, or claimed against the Company or any of the ReleasedParties which I, my spouse, or any of my heirs, executors, administrators orassigns, may have, which arise out of, are connected with, or occurred duringmy employment with, or my separation or termination from, the Company(including, but not limited to, any allegation, claim or violation, arisingunder: Title VII of the Civil Rights Act of 1964, as amended; the Civil RightsAct of 1991; the Age Discrimination in Employment Act of 1967, as amended(including the Older Workers Benefit Protection Act); the Equal Pay Act of1963, as amended; the Americans with Disabilities Act of 1990; the Family andMedical Leave Act of 1993; the Worker Adjustment Retraining and NotificationAct; the Employee Retirement Income Security Act of 1974; any applicableExecutive Order Programs; the Fair Labor Standards Act; or their state or localcounterparts; the South Carolina Human Affairs Law, S.C. Code sections 1-13-10et seq.; S.C. Code sections 41-10-10 et seq., the retaliatory employmentdiscrimination provision of North Carolina law 

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or under any otherfederal, state or local civil or human rights law, or under any other local,state, or federal law, regulation or ordinance; or under any public policy,contract or tort, or under common law; or arising under any policies, practicesor procedures of the Company; or any claim for wrongful discharge, breach ofcontract, infliction of emotional distress, defamation; or any claim for costs,fees, or other expenses, including attorneys’ fees incurred in these matters)(all of the foregoing collectively referred to herein as the “Claims”).

3.                                       Irepresent that I have made no assignment or transfer of any right, claim,demand, cause of action, or other matter covered by paragraph 2 above.

4.                                       Iagree that this General Release does not waive or release any rights or claimsthat I may have under the Age Discrimination in Employment Act of 1967, asamended, which arise after the date 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 Age Discriminationin Employment Act of 1967, as amended).

5.                                       Insigning this General Release, I acknowledge and intend that it shall beeffective as a bar to each and every one of the Claims hereinabove mentioned orimplied. I expressly consent that this General Release shall be given fullforce and effect according to each and all of its express terms and provisions,including those relating to unknown and unsuspected Claims (notwithstanding anystate statute 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.                                       Iagree that neither this General Release, nor the furnishing of theconsideration for this General Release, shall be deemed or construed at anytime to be an admission by the Company, any Released Party or myself of anyimproper or unlawful conduct.

7.                                       Iagree that I will forfeit all amounts payable by the Company pursuant to theAgreement if I challenge the validity of this General Release. I also agreethat if I violate this General Release by suing the Company or the otherReleased Parties, I will pay all costs and expenses of defending against thesuit incurred by the Released Parties, including reasonable attorneys’ fees,and return all payments received by me pursuant to the Agreement.

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8.                                       Iagree that this General Release is confidential and agree not to disclose anyinformation regarding the terms of this General Release, except to my immediatefamily and any tax, legal or other counsel I have consulted regarding themeaning or effect hereof or as required by law, and I will instruct each of theforegoing not to disclose the same to anyone.

9.                                       Anynon-disclosure provision in this General Release does not prohibit or restrictme (or my attorney) from responding to any inquiry about this General Releaseor its underlying facts and circumstances by the Securities and ExchangeCommission (SEC), the National Association of Securities Dealers, Inc. (NASD),any other self-regulatory organization or governmental entity.

10.                                 Iagree to reasonably cooperate with the Company in any internal investigation oradministrative, regulatory, or judicial proceeding. I understand and agree thatmy cooperation may include, but not be limited to, making myself available tothe Company upon reasonable notice for interviews and factual investigations;appearing at the Company’s request to give testimony without requiring serviceof a subpoena or other legal process; volunteering to the Company pertinentinformation; and turning over to the Company all relevant documents which areor may come into my possession all at times and on schedules that arereasonably consistent with my other permitted activities and commitments. Iunderstand that in the event the Company asks for my cooperation in accordancewith this provision, the Company will reimburse me solely for reasonable travelexpenses, including lodging and meals, upon my submission of receipts; provided,that in the event I am required to spend more than 20 hours in any one-yearperiod assisting the Company under this paragraph on any investigation oradministrative, regulatory or judicial proceeding that involves or arises outof matters or actions that are substantially unrelated to any conduct of mineduring my employment with the Company, as opposed to the mere fact that I wasthe Chief Executive Officer of the Company during such time period, the Companyshall reimburse me for my time in excess of 20 hours at the rate of $350.00 perhour.

11.                                 Iagree not to disparage the Company, its past and present investors, officers,directors or employees or its affiliates and to keep all confidential andproprietary information about the past or present business affairs of theCompany and its affiliates confidential unless a prior written release from theCompany is obtained.  I further agreethat as of the date hereof, I have returned to the Company any and allproperty, tangible or intangible, relating to its business, which I possessedor had control over at any time (including, but not limited to,company-provided credit cards, building or office access cards, keys, computerequipment, manuals, files, documents, records, software, customer data base andother data) and that I shall not retain any copies, compilations, extracts,excerpts, summaries or other notes of any such manuals, files, documents,records, software, customer data base or other data.

12.                                 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.

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13.                                 Wheneverpossible, each provision of this General Release shall be interpreted in, suchmanner as to be effective and valid under applicable law, but if any provisionof this General Release is held to be invalid, illegal or unenforceable in anyrespect under any applicable law or rule in any jurisdiction, such invalidity,illegality or unenforceability shall not affect any other provision or anyother jurisdiction, 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)                                  IHAVE READ IT CAREFULLY;

(b)                                 IUNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS,INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENTACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED;THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THEEMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

(c)                                  IVOLUNTARILY CONSENT TO EVERYTHING IN IT;

(d)                                 IHAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVEDONE SO OR, AFTER CAREFUL READING AND CONSIDERATION I HAVE CHOSEN NOT TO DO SOOF MY OWN VOLITION;

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

(f)                                    THECHANGES TO THE AGREEMENT SINCE SEPTEMBER 22, 2006 EITHER ARE NOT MATERIAL ORWERE MADE AT MY REQUEST.

(g)                                 IUNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKEIT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THEREVOCATION PERIOD HAS EXPIRED;

(h)                                 IHAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICEOF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

(i)                                     IAGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED,CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT 

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IN WRITING SIGNED BY ANAUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

DATE:  OCTOBER 31, 2006                                                                ____________________________________

 

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Exhibit B

ARBITRATION PROCEDURE

# 1.             Notice of Claim.  A party asserting a Claim (the “Claimant”)shall deliver written notice to each party against whom the Claim is asserted(collectively, the “Opposing Party”), with a copy to the personsrequired to receive copies of notices under the Agreement (the “AdditionalNotice Parties”), specifying the nature of the Claim and requesting ameeting to resolve same.  The AdditionalNotice Parties shall be given reasonable notice of and invited and permitted toattend any such meeting.  If noresolution is reached within 10 business days after delivery of such notice,the Claimant or the Opposing Party may, within 45 days after giving suchnotice, invoke the arbitration procedure provided herein by delivering to eachOpposing Party and the Additional Notice Parties a notice of arbitration whichshall specify the Claim as to which arbitration is sought, the nature of theClaim, the basis for the Claim and the nature and amount of any damages orother 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 ofthe Company shall confer, whether in person, by telephone or in writing, andattempt to agree 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 toappoint an arbitrator experienced in the area of dispute who does not have anongoing business 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)           Within30 days after the delivery of a Notice of Arbitration, each party shall affordthe other, or its counsel, with reasonable access to documents relatingdirectly to the issues raised in the Notice of Arbitration.  All documents produced and all copies thereofshall be maintained as strictly confidential, shall be used for no purposeother than the arbitration hereunder, and shall be returned to the producingparty upon completion of the arbitration. There shall be no other discovery except that, if a reasonable need isshown, limited depositions may be allowed in the discretion of the arbitrator,it being the expressed intention and agreement of each 

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## party to havethe arbitration proceedings conducted and resolved as expeditiously,economically and fairly as reasonably practicable, and with the maximum degreeof confidentiality.

## (b)           Allwritten communications regarding the proceeding sent to the arbitrator shall besent simultaneously to each party or its counsel, with a copy to the AdditionalNotice Parties.  Oral communicationsbetween any of the parties or their counsel and the arbitrator shall beconducted only when all parties or their counsel are present and participatingin the conversation.

## (c)           Within20 days after selection of the arbitrator, the Claimant shall submit to thearbitrator a copy of the Notice of Arbitration, along with a supportingmemorandum and any exhibits or other documents supporting the Claim.

## (d)           Within20 days after receipt of the Claimant’s submission, the Opposing Party shallsubmit to the arbitrator a memorandum supporting its position and any exhibitsor other supporting documents.  If theOpposing Party fails to respond to any of the issues raised by the Claimantwithin 20 days of receipt of the Claimant’s submission, then the arbitrator mayfind for the Claimant on any such issue and bar any subsequent consideration ofthe matter.

## (e)           Within20 days after receipt of the Opposing Party’s response, the Claimant may submitto the arbitrator a reply to the Opposing Party’s response, or notificationthat no reply is forthcoming.

## (f)            Within10 days after the last submission as provided above, the arbitrator shallconfer with the parties to select the date of the hearing on the issues raisedby the Claim.  Scheduling of the hearingshall be within the sole discretion of the arbitrator, but in no event morethan 30 days after the last submission by the parties, and shall take placewithin 50 miles of the corporate headquarters of the Company at a placeselected by the arbitrator or such other place as is mutually agreed.  Both parties shall be granted substantiallyequal time to present evidence at the hearing. The hearing shall not exceed one business day, except for good causeshown.

## (g)           Within30 days after the conclusion of the hearing, the arbitrator shall issue awritten decision to be delivered to both parties and the Additional NoticeParties (the “Final Determination”).  TheFinal Determination shall address each issue disputed by the parties, state thearbitrator’s findings and reasons therefor, and state the nature and amount ofany damages, compensation or other relief awarded.

## (h)           Theaward rendered by the arbitrator shall be final and non-appealable, except asotherwise provided under the Federal Arbitration Act, and judgment may beentered upon it in accordance with applicable law in such court as hasjurisdiction 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, 

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## the unpaidamount shall bear interest from the date of such delivery at the lesser of (i)prime lending rate announced by Citibank N.A. plus three hundred basis pointsand (ii) the maximum rate permitted by applicable usury laws.  In addition, such party shall promptly reimbursethe other party for any and all costs or expenses of any nature or kindwhatsoever (including attorneys’ fees) reasonably incurred in seeking tocollect such award or to enforce any Final Determination.

# 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 shall not bedisclosed at any time to any person other than the parties, theirrepresentatives, the arbitrator and the Additional Notice Parties; provided,however, that this provision shall not prevent the party prevailing in thearbitration from submitting the Final Determination to a court for the purposeof enforcing the award, subject to comparable confidentiality protections ifthe court agrees; and further provided that the foregoing shall not prohibitdisclosure to the minimum extent reasonably necessary to comply with (i)applicable law (or requirement having the force of law), court order, judgmentor decree, including, without limitation, disclosures which may be requiredpursuant to applicable securities laws, and (ii) the terms of contractualarrangements (such as financing arrangements) to which the Company or anyAdditional Notice Party may be subject so long as such contractual arrangementswere not entered into for the primary purpose of permitting disclosure whichwould otherwise be prohibited hereunder.

 

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**ANNEXI**

**SUBSIDIARIES**

PGI Polymer, Inc.

DT Acquisition Inc.

Fabrene Group, L.L.C.

Bonlam (S.C.), Inc.

FabPro Oriented Polymers, Inc.

Chicopee, Inc.

PGI Nonwovens (Mauritius)

Dominion Textile Mauritius Inc.

Bonlam S.A. de C.V.

Fabrene, Inc.

Dominion Textile (USA) Inc.

Fabrene Corp.

Nanhai Nanxin Non-Wovens Co. Ltd.

Dominion Nonwovens Sudamerica, S.A.

Bonlam Andina Ltd.

Bonlam Holdings BV

DIFCO Performance Fabrics, Inc.

FiberTech Group, Inc.

PNA Corp.

PGI Europe, Inc.

Poly-Bond Inc.

Pristine Brands Corporation

Polyionix Separation Technologies, Inc.

Technetics Group, Inc.

FNA Polymer Corp.

Chicopee Holdings B.V.

FiberGol Corporation

FNA Acquisition, Inc.

PGI Holdings BV

Chicopee Holdings CV

PGI Nonwovens BV

PGI Neunkirchen GmbH

PGI Nonwoven Ltd.

PGI Nonwovens A.B.

Geca Tapes B.V.

Albuma S.A.S.

Geca-Tapes PTE LTD

Nordlys SAS

PGI Nonwovens (China) Co. Ltd.

PGI Nonwoven (Foshan) Co. Ltd.

 
|   | Annex I |   |
|--------|---------|--------|

 

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