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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001104659-05-032777.txt : 20060905
<SEC-HEADER>0001104659-05-032777.hdr.sgml : 20060904
<ACCEPTANCE-DATETIME>20050718162536
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001104659-05-032777
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20050718

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			POLYMER GROUP INC
		CENTRAL INDEX KEY:			0000927417
		STANDARD INDUSTRIAL CLASSIFICATION:	BROADWOVEN FABRIC MILS, MAN MADE FIBER & SILK [2221]
		IRS NUMBER:				571003983
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0103

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		4055 FABER PLACE DR., SUITE 201
		CITY:			NORTH CHARLESTON
		STATE:			SC
		ZIP:			29405
		BUSINESS PHONE:		843-329-5151

	MAIL ADDRESS:	
		STREET 1:		4055 FABER PLACE DR., SUITE 201
		CITY:			NORTH CHARLESTON
		STATE:			SC
		ZIP:			29405
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
<html>

<head>





</head>

<body lang="EN-US">

<div>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Parker Poe Adams&nbsp;&amp; Bernstein L.L.P.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Attorneys and Counselors at Law</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="44%" valign="top" style="padding:0in 0in 0in 0in;width:44.84%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">R.
  Douglas Harmon</font></b></p>
  </td>
  <td width="55%" valign="bottom" style="padding:0in 0in 0in 0in;width:55.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">July&nbsp;18, 2005</font></p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Partner</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Telephone:&#160; 704.335.9020 </font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Direct Fax:&#160;&#160; 704.335.4485</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">dougharmon@parkerpoe.com</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Securities and Exchange Commission</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Division of Corporation Finance</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">450 Fifth Street, N.W.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Washington, DC 20549</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Attention: Andrew Blume</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="92%" style="border-collapse:collapse;margin-left:.5in;width:92.0%;">
 <tr>
  <td width="54" valign="top" style="padding:0in 0in 0in 0in;width:40.5pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Re:</font></p>
  </td>
  <td width="608" valign="top" style="padding:0in 0in 0in 0in;width:456.3pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Polymer Group,&nbsp;Inc.</font></p>
  </td>
 </tr>
 <tr>
  <td width="54" valign="top" style="padding:0in 0in 0in 0in;width:40.5pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="608" valign="top" style="padding:0in 0in 0in 0in;width:456.3pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Form&nbsp;10-K for the fiscal year ended January&nbsp;1,
  2005</font></p>
  </td>
 </tr>
 <tr>
  <td width="54" valign="top" style="padding:0in 0in 0in 0in;width:40.5pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="608" valign="top" style="padding:0in 0in 0in 0in;width:456.3pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Form&nbsp;10-Q for the quarterly period
  ended April&nbsp;2, 2005</font></p>
  </td>
 </tr>
 <tr>
  <td width="54" valign="top" style="padding:0in 0in 0in 0in;width:40.5pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="608" valign="top" style="padding:0in 0in 0in 0in;width:456.3pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Filed March&nbsp;29, 2005 and May&nbsp;16,
  2005</font></p>
  </td>
 </tr>
 <tr height="17" style="height:13.05pt;">
  <td width="54" height="17" valign="top" style="height:13.05pt;padding:0in 0in 0in 0in;width:40.5pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="608" height="17" valign="top" style="height:13.05pt;padding:0in 0in 0in 0in;width:456.3pt;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">File No.&nbsp;1-14330</font></p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Ladies and
Gentlemen:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">On behalf of our
client, Polymer Group,&nbsp;Inc. (&#147;PGI&#148; or the &#147;Company&#148;), we are submitting
this response to the additional comments received from the Staff of the
Securities and Exchange Commission (the &#147;Commission&#148;) with regard to PGI&#146;s Annual
Report on Form&nbsp;10-K for the fiscal year ended January&nbsp;1, 2005 and
filed with the Commission on March&nbsp;29, 2005 (the &#147;Form&nbsp;10-K&#148;) and Form&nbsp;10-Q
for the quarterly period ended April&nbsp;2, 2005 and filed with the Commission
on May&nbsp;16, 2005 (the &#147;Form&nbsp;10-Q&#148;).&#160;
The Staff&#146;s additional comments were delivered by letter dated June&nbsp;23,
2005 addressed to James L. Schaeffer, Chief Executive Officer of PGI, and
signed by George F. Ohsiek,&nbsp;Jr., Branch Chief (the &#147;Second Comment Letter&#148;).&#160; The Staff delivered its original comments by
letter dated May&nbsp;18, 2005 from Mr.&nbsp;Ohsiek to Mr.&nbsp;Schaeffer (the &#147;Original
Comment Letter&#148;).&#160; PGI responded by
letter dated June&nbsp;10, 2005 from R. Douglas Harmon of Parker Poe Adams&nbsp;&amp;
Bernstein, L.L.P., counsel to PGI (the &#147;Original Response Letter&#148;).</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We offer the
following responses to the Second Comment Letter.&#160; The numbered paragraphs below correspond to
the numbered paragraphs of the Second Comment Letter and the page&nbsp;numbers
referenced below refer to the page&nbsp;numbers of the Form&nbsp;10-K.&#160; We note that these responses are being
provided to you on or before July&nbsp;18, 2005, rather than July&nbsp;8, 2005
(as requested in the Second Comment Letter), based on approvals granted by
telephone.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="79%" valign="top" style="padding:0in 0in 0in 0in;width:79.76%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CHARLESTON,
  SC</font></p>
  </td>
 </tr>
 <tr>
  <td width="79%" valign="top" style="padding:0in 0in 0in 0in;width:79.76%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">COLUMBIA, SC</font></p>
  </td>
 </tr>
 <tr>
  <td width="79%" valign="top" style="padding:0in 0in 0in 0in;width:79.76%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">RALEIGH, NC</font></p>
  </td>
 </tr>
 <tr>
  <td width="79%" valign="top" style="padding:0in 0in 0in 0in;width:79.76%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="20%" valign="top" style="padding:0in 0in 0in 0in;width:20.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SPARTANBURG,
  SC</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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<div style="font-family:Times New Roman;">

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Form&nbsp;10-K for the Fiscal Year Ended January&nbsp;1, 2005</font></u></b></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Note 11.</font></u><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Debt,
page&nbsp;61</u></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Background</font></u></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>In
connection with the Company&#146;s emergence from Chapter 11, effective March&nbsp;5,
2003, the Company issued $50.0 million of 10% Convertible Subordinated Notes
(the &#147;Junior Notes&#148;) pursuant to an indenture dated as of March&nbsp;5, 2003.&#160; The Junior Notes were only eligible to be
subscribed for by each holder of an allowed Class&nbsp;4 Bankruptcy Claim that
elected to receive Class&nbsp;A Common Stock of the Company.&#160; The Junior Notes were accordingly only issued
to certain Class&nbsp;A Common shareholders of the Company, with the Company&#146;s
majority shareholder beneficially owning or controlling 76% of the aggregate
principle amount of the originally issued Junior Notes.</p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Junior Notes were convertible into shares of Class&nbsp;A Common
Stock of the Company at a conversion price equal to $7.29 per share.&#160; The $7.29 conversion price reflected the
Company&#146;s estimate of the fair value of its common stock based on the best information
available in the circumstances, consisting of valuations provided by
professional advisors, and was not intended to transfer any beneficial
conversion feature that was in-the-money to the Junior Note holders at the
commitment date.&#160; During the four-month
period following the emergence from Chapter 11, PGI&#146;s Class&nbsp;A Common Stock
traded at a weighted average price of $6.63 per share, further supporting the
absence of a beneficial conversion feature.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company exited Chapter 11 with a Restructured Credit Facility that
provided for secured revolving credit borrowings with aggregate commitments of
up to $50.0 million and aggregate term loans and term letters of credit of
$435.3 million.&#160; The effective rate of
interest on the term loans was 12.00%, the maximum rate allowed under the
Restructured Credit Facility.&#160; The
Restructured Credit Facility contained covenants and events of default
customary for financings of this type, including leverage, senior leverage,
interest coverage and adjusted interest coverage.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Although the Company was able to remain in compliance with the
covenants and events of default, the restrictive nature of the terms of the
Restructured Credit Facility and the relatively high interest rates prompted
the Company and its majority shareholder to pursue a recapitalization of the
Company&#146;s debt structure.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To accomplish a successful debt restructuring and recapitalization it
was necessary, as a requirement imposed upon the Company by its senior lenders
under the new lending group, for the Company, at the direction of its majority shareholder,
to take additional actions, including the exchange of the Junior Notes for the
Company&#146;s proposed Series&nbsp;A Convertible Pay-in-kind Preferred Shares (the &#147;PIK
Preferred Shares&#148;).&#160; It was a requirement
of the new senior lending group that the Junior Notes be moved lower in the
capital structure with limited rights.&#160;
The rating agencies also required that the Company&#146;s overall leverage
ratio be reduced in order for the Company to maintain its credit rating in
effect at the time of the recapitalization.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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<div style="font-family:Times New Roman;">

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company&#146;s majority shareholder directed the arms-length negotiations
with another significant holder of the Company&#146;s equity and Junior Notes, regarding
the terms and conditions of the new PIK Preferred Shares that would satisfy the
financial requirements of the Company&#146;s new lending group and the rating
agencies as well as provide an instrument with an equitable and balanced set of
terms acceptable for such an exchange. These related parties, on a combined
basis at the dates of exchange of the Junior Notes for PIK Preferred Shares,
represented approximately 76% of the Company&#146;s common stock, on an if-converted
basis, and approximately 93% of the aggregate principle amount of the Junior
Notes.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The debt restructuring and recapitalization actions were approved by
the Board of Directors of the Company as the transactions were deemed to be in
the best interest of all common shareholders.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Comparison of Instruments (including rate differentials)</font></u></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To accomplish the exchange of Junior Notes for PIK Preferred Shares,
the conversion rate of $7.29 per share was left unchanged and the dividend rate
on the PIK Preferred Shares was established at an estimated market rate of 16.00%
as a result of the increased risk and uncertainty associated with the PIK
Preferred Shares versus the lower risk Junior Notes.&#160; The increased risk and uncertainty is
evidenced by the following:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Interest
payments on the Junior Notes were payable in cash or additional Junior Notes,
at the <u>option of the holder</u>.&#160;
Dividends on the PIK Preferred Shares are payable in additional PIK
Preferred Shares, cash, or a combination thereof, at the <u>option of the
Company</u> (PIK Preferred Shares are the only viable dividend option under the
current Senior Secured Bank Facility);</p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Junior Notes ranked <i><font style="font-style:italic;">pari passu </font></i>with
all debt, excluding debt under the Restructured Credit Facility; the PIK
Preferred Shares rank behind all debt;</p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Junior Notes were guaranteed by certain subsidiaries of the Company; there are
no subsidiary guarantors of the PIK Preferred Shares;</p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>In
the event of optional redemption by the Company, the Junior Notes were
redeemable only for cash.&#160; <u>However,</u>
the PIK Preferred Shares are redeemable in shares of Class&nbsp;A Common Stock,
cash, or a combination thereof, <u>at the Company&#146;s option</u> (the PIK
Preferred Shares were callable at the date of exchange, and the only viable
redemption option, under the current Senior Secured Bank Facility, was and is
through conversion to Class&nbsp;A Common Stock);</p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Junior Notes contained certain restrictive covenants regarding limitations on
indebtedness, restricted payments, liens, disposition of proceeds from asset
sales and transactions with affiliates; the PIK Preferred Shares do not contain
these restrictions; and</p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The
Junior Notes were scheduled to mature in December&nbsp;2007; the PIK Preferred
Shares extended the maturity date approximately five years and contain a
mandatory redemption date of June&nbsp;2012.</p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company believes that the increased rate of interest was
commensurate with the changes in terms and additional risks and uncertainty between
the Junior Notes and the PIK Preferred Shares described above, in particular
the requirement to forego cash interest/dividends, the loss of security
(guarantee), the risks associated with moving lower in the capital structure,
and that the PIK Preferred Shares were immediately callable in exchange for Class&nbsp;A
Common Stock of the Company.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A fact worth repeating is that an important feature of the exchange, as
noted in item 4 above, is that at the dates of exchange, the Company obtained
the right to call the PIK Preferred Shares and redeem such PIK Preferred Shares
through the issuance of Class&nbsp;A Common Stock. &#160;Such redemption at the dates of exchange would
have resulted in the issuance of approximately 7.2 million shares of Class&nbsp;A
Common Stock, and is equivalent to the number of shares available to the Junior
Note holders had they exercised their conversion privileges under the terms of
the Junior Notes.&#160; Also, the Company can
effectively terminate the payment of dividends by calling the PIK Preferred
Shares.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Moreover, at the dates of exchange, the conditions precedent for the
Company to call the PIK Preferred Shares had been met, and the Company had the right
to call such shares at the then-market price of the Class&nbsp;A Common Stock.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accordingly, considering the changes in terms of the instruments
(identified in items 1 through 6 above) taken as a whole, the fact that the
value of the conversion privileges to common were identical in both
instruments, and that the Company had the right to call the PIK Preferred
Shares and redeem such PIK Preferred Shares through the issuance of Class&nbsp;A
Common Stock, the Company considers the fair value of the PIK Preferred Shares
to approximate that of the Junior Notes.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">With respect to the interest differential, the Company does not believe
it would be appropriate to simply discount the differential between the yield
on the new PIK Preferred Shares and the coupon rate on the Junior Notes to
arrive at a fair value differential, due to qualitative factors, which are very
difficult to quantify in terms of value.&#160;
Rather, the intent of the parties was clearly to exchange the Junior
Notes for a new instrument that would satisfy the underwriting requirements of
the senior lenders while preserving the value of the Junior Note holders&#146;
position.&#160; Accordingly, the Company
reiterates its view that the value of the PIK Preferred Shares issued in the exchange
was substantially identical to that of the Junior Notes.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Discussion of Referenced Literature</font></u></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">Accounting Principles Board Opinion 26: Early
Extinguishment of Debt (APB 26 or Opinion 26)</font></u></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Paragraph 20 of APB 26 states that the:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160; &#147;&#133;difference
between the reacquisition price and the net carrying amount of the extinguished
debt should be recognized currently in income of the period of extinguishment
as losses or gains and identified as a separate item.&#148;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This guidance is further supplemented by the footnote
reference to paragraph 20 that states: &#147;Moreover, extinguishment transactions
between related entities may be in essence capital transactions.&#148;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As indicated in the &#147;Background&#148; portion of
this response, the majority shareholder of the Company directed the Company&#146;s
actions and actively participated in the debt restructuring and
recapitalization of the Company.&#160; The
exchange of the Junior Notes for PIK Preferred Shares was a requirement of the
new senior lenders and was a major component of that recapitalization.&#160; The recapitalization enabled the Company to
experience significant cash interest savings for the benefit of all the common shareholders
while, concurrently, the majority shareholder agreed to, among other things,
forego the cash interest option under the Junior Notes for accreting PIK
dividends.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As also indicated in the &#147;Background&#148; section&nbsp;of
this response, the negotiation of the exchange was directed by the Company&#146;s
majority shareholder and another shareholder, which related parties, on a
combined basis, controlled approximately 93% of the aggregate principle amount
of the Junior Notes and approximately 76% of the Company&#146;s common stock, on an
if-converted basis and which related parties after the exchange owned
approximately 93% of the PIK Preferred Shares.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Additionally, as the Junior Notes and the PIK Preferred Shares have the
identical conversion option, exercise of such option, under either instrument,
would have resulted in the issuance of the same number of Class&nbsp;A Common Shares
and, accordingly, conversion under the PIK Preferred Shares would result in the
same dilution to common shareholders as conversion under the Junior Notes.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the exchange of the Junior Notes for the
PIK Preferred Shares, the fair value of the conversion privileges under the
Junior Notes immediately prior to the exchange is identical to the fair value
of the conversion privileges under the PIK Preferred Shares immediately
subsequent to the exchange.&#160; Accordingly,
there has been no incremental consideration given, or performance received, in
the exchange.&#160; Furthermore, since
conversion privileges contained in the Junior Notes and the PIK Preferred Shares
were both deep in-the-money at the dates of exchange (the spread between the
market price of the Class&nbsp;A Common Stock on the dates of exchange and the
conversion price, applied to the number of common shares available for issuance
under the conversion options contained in the Junior Note instrument and the
PIK</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Preferred instrument,
approximated $50.8 million), the fair value of both instruments at the dates of
exchange were substantially all embodied in the underlying value of the Class&nbsp;A
Common Stock, which was identical for both instruments.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Moreover, at the dates of exchange, the conditions precedent for the
Company to call the PIK Preferred Shares had been met, and the Company had the right
to call such shares at the then-market price of the Class&nbsp;A Common Stock.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The fact that the Junior Notes were deep in-the-money at the dates of
exchange makes it difficult to determine the amount of cash that the Company
would have had to pay to extinguish the Junior Notes.&#160; Had they been called by the Company for their
carrying value, which cash call would violate the terms of the Restructured
Credit Facility, the Junior Note holders would have in all likelihood converted
their holdings to Class&nbsp;A Common Stock of the Company, based on the
conversion terms included in the Junior Notes.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company believes that this exchange is,
as referenced in the footnote to paragraph 20, in essence, a capital
transaction and, accordingly, no gain or loss should be recognized.&#160; Additionally, as no securities or assets have
been given up in excess of those that the Company was previously obligated to
issue or pay, the effects of this capital transaction should also not result in
any other deduction from income applicable to common shareholders.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">SFAS No.&nbsp;84 Considerations (&#147;SFAS 84&#148;)</font></u></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SFAS 84 addresses those situations in which a
debtor induces the conversion of convertible debt by offering <i><font style="font-style:italic;">additional</font></i> securities or other consideration, as a &#147;sweetener&#148;,
to debt holders for the purpose of obtaining a prompt conversion of the
convertible debt to equity securities.&#160;
Paragraph 2 to SFAS 84 provides that the scope of the Statement applies only
to conversions that both (a)&nbsp;occur as a result of changed conversion
privileges that are exercisable for only a limited amount of time <u>and</u> (b)&nbsp;include
the issuance of all the equity securities issuable pursuant to conversion
privileges included in the terms of the debt at issuance for each instrument
that is converted.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company notes the accounting prescribed
by paragraph 3 of SFAS 84, which states:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;&#133;the debtor enterprise will recognize an
expense equal to the fair value of all securities and other consideration
transferred in the transaction in excess of the fair value of securities
issuable pursuant to the original conversion terms.&#148;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company&#146;s fact pattern for the exchange
is not consistent with the scope of SFAS 84, as specified in paragraph 2(b)&nbsp;to
that statement, as the Junior Notes were exchanged for PIK Preferred Shares,
rather than for common stock, as included in the original terms of the Junior
Notes.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">However, the Company evaluated the guidance
as embodied in SFAS 84, and agrees with the concept that to the extent that the
fair value of securities and other consideration transferred is in excess of
the fair value of the securities exchanged, the economics of such additional
value given should be reflected in the Company&#146;s financial statements.&#160; Additionally, the Company believes that the
corollary should hold that to the extent the fair value of securities and other
consideration is transferred in an amount approximately equivalent to the fair
value of securities exchanged, there are no economics to be reflected in the
Company&#146;s financial statements.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">EITF Issue 98-5, Paragraph 12 Considerations
(&#147;Issue 98-5&#148; or &#147;Paragraph 12&#148;)</font></u></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Paragraph 12 of Issue 98-5 addresses the
accounting for those cases in which a convertible debt instrument, containing a
non-detachable embedded beneficial conversion feature, is extinguished prior to
conversion.&#160; Paragraph 12 provides that
upon extinguishment, the reacquisition price is considered to include a
repurchase of the beneficial conversion feature; as a result, the reacquisition
price should first be allocated to the repurchase of the value of the
beneficial conversion feature measured using the intrinsic value of the
conversion feature as of the extinguishment date, and the remainder, if any,
allocated to the convertible security.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the case of the Company&#146;s Junior Notes,
the conversion price, as stipulated in the Junior Notes, of $7.29 per share was
not considered an embedded beneficial conversion feature, as it was not deemed
in-the-money at the commitment date. Accordingly, there was no beneficial
conversion feature to be reacquired upon exchange of the Junior Notes for the
PIK Preferred Shares.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">While the Company has reviewed Paragraph 12,
in the case of the exchange of the Company&#146;s Junior Notes for PIK Preferred
Shares, the Company believes that the provisions of Paragraph 12 are not specifically
applicable, as the Junior Notes did not contain a beneficial conversion
feature, as defined in Paragraph 1 of Issue 98-5.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accordingly, consistent with the provisions
of Issue 98-5, the Company has not allocated any such reacquisition price
attributable to the value of the conversion option (contained in the Junior
Notes instrument) at the dates of exchange to PIK Preferred Shares as that
conversion option was not deemed to have any intrinsic value at the commitment
date.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">EITF Issue 00-27, Issue 11 Considerations (&#147;Issue
11&#148;)</font></u></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Issue 11 addresses the accounting for those
cases in which, upon maturity of a nonconvertible instrument, a convertible
instrument is issued as repayment.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Issue 11 clarifies that if the original debt
has matured, the fair value of the newly issued convertible instrument can be
no greater than the redemption amount of the old debt.&#160; In addition, any intrinsic value of the
embedded conversion option in the new convertible debt should be measured and
accounted for under Issue 98-5.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the case of the exchange of the Company&#146;s
Junior Notes for PIK Preferred Shares, the Company believes that the provisions
of Issue 11 are not applicable, as the Junior Notes were a convertible debt
instrument and not a nonconvertible instrument, as they did contain a
conversion feature; in addition, the exchange of the PIK Preferred Shares for
the Junior Notes occurred between 14 and 16 months after original issuance of
the Junior Notes, and well before their scheduled December&nbsp;2007 maturity.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">An important distinction in the Company&#146;s
exchange of Junior Notes for PIK Preferred Shares, not contemplated by Issue
11, is that a conversion feature existed under the original Junior Note
instrument, which was convertible, and the identical value of such conversion
option was preserved in the PIK Preferred instrument by structuring the PIK
Preferred Shares to provide for the same conversion price to Class&nbsp;A Common
Stock as contained in the Junior Note instrument.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accordingly, there was no new or additional
value provided to holders of the Junior Notes from providing such identical
conversion option in the PIK Preferred Shares.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">EITF Issue 00-27, Issue 12(a)&nbsp;Considerations
(&#147;Issue 12(a)&#148;)</font></u></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Issue 12(a)&nbsp;addresses the accounting for
those cases in which there is an intrinsic value of a conversion option, at the
extinguishment date of a convertible instrument, for which there has been no
previous accounting for such conversion option, as there was no intrinsic value
required to be accounted for under Issue 98-5.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Issue 12(a)&nbsp;clarifies that there should
be no allocation of the reacquisition price attributable to the value of the conversion
option at extinguishment if that option had no intrinsic value at the
commitment date.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the case of the exchange of the Company&#146;s Junior
Notes for PIK Preferred Shares, as discussed in &#147;Background&#148; above, the
conversion price reflected the Company&#146;s estimate of the fair value of its Class&nbsp;A
Common Stock based on the best information available in the circumstances and
was not intended to transfer any beneficial conversion feature that was
in-the-money to the Junior Note holders at the commitment date.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Accordingly, the Company has not allocated
any such reacquisition price attributable to the value of the conversion option
(contained in the Junior Notes instrument) at the dates of exchange to PIK
Preferred Shares as that conversion option was not deemed to have any intrinsic
value at the commitment date.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Importantly, as such conversion option was
preserved between the Junior Notes and the PIK Preferred Shares, the Company
believes that it would be inappropriate to account for the exchange in a manner
that suggests that the value of such conversion option was effectively
reacquired, when the identical value was provided, to the same holders
(principally consisting of the Company&#146;s majority shareholder and other
shareholders), via the PIK Preferred Shares.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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<div>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><i><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">EITF Issue 00-27, Issue 12(b)&nbsp;Considerations
(&#147;Issue 12(b)&#148;)</font></u></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Issue 12(b)&nbsp;addresses the reacquisition
of a beneficial conversion option in those situations where a convertible
instrument included a beneficial conversion option at the commitment date and where
the value of the conversion option at the extinguishment date is greater that
the value at the commitment date.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Issue 12(b)&nbsp;clarifies that the amount of
reacquisition price allocated to the conversion option is always calculated based
on the option&#146;s value at the extinguishment date, even if the value as of the
extinguishment date is greater than that at the commitment date.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the case of the exchange of the Company&#146;s Junior
Notes for PIK Preferred Shares, the Company believes that the provisions of
Issue 12(b)&nbsp;are not applicable, as the Junior Notes did not contain a
beneficial conversion option, as defined in Paragraph 1 of Issue 98-5.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Conclusion</font></u></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company believes that, in substance, this
exchange is a capital transaction reflecting a debt restructuring and a
recapitalization, directed by and actively participated in by the Company&#146;s
majority shareholder and involving another related-party shareholder and
significant Junior Note holder, which related parties represented approximately
93% of the Junior Notes and PIK Preferred Shares exchanged and approximately
76% of the Company&#146;s common stock, on an if-converted basis.&#160; Accordingly, as the exchange of the Junior
Notes for the PIK Preferred Shares was a capital transaction, the fair value of
the Junior Notes and the PIK Preferred Shares were substantially identical at
the dates of exchange, and no incremental value was given through the use of
identical conversion options in the Junior Notes and PIK Preferred Shares in
connection with the exchange, the Company believes that no gain or loss, or
other deduction from income applicable to common shareholders, should have been
recognized on the exchange.&#160; The Company
further believes that its accounting for the exchange is consistent with the
principles embodied in the aforementioned literature, and that such accounting
fully reflects the economic substance of the exchange.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Upon further reflection on the aforementioned
accounting literature, the Company has concluded that a reclassification should
have been recorded in its balance sheet at the dates of exchange whereby the
carrying value of the PIK Preferred Shares (in mezzanine equity) would have
been increased to their fair value with the difference charged to additional
paid in capital.&#160; The Company proposes to
make this reclassification and all appropriate disclosures, in the next filing,
which would be the Form&nbsp;10-Q for the quarter ended July&nbsp;2, 2005.&#160; The effect of this reclassification does not
have any effect on the Company&#146;s compliance with the covenants contained in its
current Senior Secured Bank Facility.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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<div style="font-family:Times New Roman;">

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;"><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Note 19.</font></u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Foreign
Currency and Other, page&nbsp;79</u></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PGI
agrees to present, in operating income, gains and losses from foreign currency
transactions associated with operating items, for example, gains and losses
incurred on receivables, payables and all other operating accounts impacted by
the normal course of operations.</p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PGI believes that it is appropriate to exclude from operating income
gains and losses from foreign currency transactions on non-operating items;
specifically, foreign currency gains and losses relating to indebtedness, including
intercompany indebtedness.&#160; Such amounts,
if material, will continue to be separately stated in the income statement, or
note thereto, clearly indicating the nature of the gain or loss.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PGI agrees to make the change in presentation for operating items in
future filings, beginning with the Form&nbsp;10-Q for the quarter ended July&nbsp;2,
2005 with reclassification of prior period amounts presented, as appropriate.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In addition to
the foregoing, PGI reaffirms all representations and acknowledgements made in
the Original Response Letter.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Please call the undersigned if you have any
questions or comments regarding the foregoing.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Sincerely
  yours,</font></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:18.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ R.
  Douglas Harmon</font></p>
  </td>
  <td width="31%" valign="top" style="padding:0in 0in 0in 0in;width:31.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:50.0%;">
  <p style="margin:0in 0in .0001pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">R. Douglas Harmon</font></p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt 3.0in;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.58%;">
  <p style="letter-spacing:-.25pt;line-height:normal;margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:0pt;">cc:</font></p>
  </td>
  <td width="95%" valign="top" style="padding:0in 0in 0in 0in;width:95.42%;">
  <p style="letter-spacing:-.25pt;line-height:normal;margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:0pt;">James L. Schaeffer, Chief Executive Officer, Polymer
  Group,&nbsp;Inc.</font></p>
  </td>
 </tr>
 <tr>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.58%;">
  <p style="letter-spacing:-.25pt;line-height:normal;margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:0pt;">&nbsp;</font></p>
  </td>
  <td width="95%" valign="top" style="padding:0in 0in 0in 0in;width:95.42%;">
  <p style="letter-spacing:-.25pt;line-height:normal;margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:0pt;">Willis C. Moore,&nbsp;III, Vice President and Chief
  Financial Officer, Polymer Group,&nbsp;Inc.</font></p>
  </td>
 </tr>
 <tr>
  <td width="4%" valign="top" style="padding:0in 0in 0in 0in;width:4.58%;">
  <p style="letter-spacing:-.25pt;line-height:normal;margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:1.0pt;letter-spacing:0pt;">&nbsp;</font></p>
  </td>
  <td width="95%" valign="top" style="padding:0in 0in 0in 0in;width:95.42%;">
  <p style="letter-spacing:-.25pt;line-height:normal;margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;letter-spacing:0pt;">Daniel L. Rikard., Vice President and General Counsel,
  Polymer Group,&nbsp;Inc.</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

</div>
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