EXHIBIT 10.7

Stay Bonus and Severance Benefit letters in the form attached hereto were given
by the Company to 18 of its employees, including John D. Barlow, Jr., Randall L.
Hagan and James E. McCune.

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TO:                                                          November 7, 1996

FROM:  John L. Morgan

                         STAY BONUS & SEVERANCE BENEFIT

        As you know, the Company recently announced a possible sale of the
Company (the Transaction). This letter describes the stay bonus and severance
benefit that the Compensation Committee of the Board of Directors has approved
in contemplation that the Transaction will be completed.

        1. Stay Bonus. The Company recognizes that you and other key
employees make significant contributions to its success. The Company will
continue to need your contributions even after the Transaction is completed.
The Board of Directors approved the payment of stay bonuses in order to
encourage your continued employment with the Company.

        You will receive a stay bonus if (a) you continue to work for the
Company or an Affiliate until the second anniversary of the Control Change
Date, (b) your employment with the Company and its Affiliates is terminated
without Cause before the second anniversary of the Control Change Date or (c)
you resign from employment with the Company and its Affiliates with Good
Reason before the second anniversary of the Control Change Date. The stay
bonus will equal 50% of your base salary as in effect on the Control Change
Date or the date of payment, whichever is larger.

        Your stay bonus will be paid in a single sum, in cash. Applicable
income and employment taxes will be deducted from the stay bonus.

        For purposes of the stay bonus, the terms "Affiliate," "Control
Change Date," "Cause" and "Good Reason" have the same meaning as those terms
are defined in the American Filtrona Corporation Severance Pay Plan (the
Severance Plan).

        2. Severance Benefit. You have been selected to participate in the
Severance Plan. A summary plan

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description for the Severance Plan will be distributed in the near future. You
will receive a severance benefit if (a) your employment with the Company and its
Affiliates is terminated without Cause before the third anniversary of the
Control Change Date or (b) you resign from the Company and its Affiliates with
Good Reason before the third anniversary of the Control Change Date.

        Your benefit under the Severance Plan will equal 100% of your base pay
as in effect on the date you terminate employment or the Control Change Date,
whichever is larger. Your benefit will be paid in a single sum, in cash.
Applicable income and employment taxes will be deducted from the severance
benefit.

        The terms "Affiliate," "Control Change Date," "Cause" and "Good
Reason" are defined in the Severance Plan. Those definitions will also be
included in the SPD.

        The Compensation Committee approved the payment of stay bonuses and
the Severance Plan subject to the completion of the Transaction. No stay
bonuses will be paid, and no payments will be made under the Severance Plan, if
the Transaction is not completed. In addition, the Compensation Committee
reserved the right to amend or withdraw the stay bonuses and the Severance
Plan at any time before the completion of the Transaction.