Exhibit 4.1


 


Execution Copy


 


SHAREHOLDERS AGREEMENT


 


BY AND AMONG


 


POLYMER GROUP, INC.,


 


TESALCA-99, S.A.,


 


TEXNOVO, S.A.


 


AND


 


MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS, L.P.


 


Dated as of November 30, 2009


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE 1 GENERAL PROVISIONS

  	
  1

  
	
  1.1

  	
  Shares Subject to this Agreement

  	
  1

  
	
  1.2

  	
  Sellers Put Option

  	
  1

  
	
  1.3

  	
  Certain Definitions

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 RESTRICTIONS ON TRANSFER OF SHARES

  	
  3

  
	
  2.1

  	
  Transfers Restrictions

  	
  3

  
	
  2.2

  	
  Permitted Transfers

  	
  4

  
	
  2.3

  	
  Notice of Proposed Transfer

  	
  4

  
	
  2.4

  	
  Rule 144 Reporting

  	
  4

  
	
  2.5

  	
  Legends

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 TAG-ALONG RIGHTS

  	
  5

  
	
  3.1

  	
  Tag-Along Rights

  	
  5

  
	
  3.2

  	
  Procedures

  	
  5

  
	
  3.3

  	
  Non-Material Variation of Procedures

  	
  7

  
	
  3.4

  	
  Waiver

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 DRAG-ALONG RIGHTS

  	
  7

  
	
  4.1

  	
  Approved Sale

  	
  7

  
	
  4.2

  	
  Applicability

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 BOARD OF DIRECTORS

  	
  8

  
	
  5.1

  	
  The Seller Director

  	
  8

  
	
  5.2

  	
  Company Action

  	
  9

  
	
  5.3

  	
  Vacancies

  	
  9

  
	
  5.4

  	
  Resignation

  	
  9

  
	
  5.5

  	
  Shareholder Action

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 PREEMPTIVE RIGHTS

  	
  10

  
	
  6.1

  	
  Preemptive Rights

  	
  10

  
	
  6.2

  	
  Procedures

  	
  10

  
	
  6.3

  	
  Non-Material Violation of Procedures

  	
  11

  
	
  6.4

  	
  Waiver

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 MISCELLANEOUS

  	
  11

  
	
  7.1

  	
  Rights Not Transferable; Aggregation

  	
  11

  
	
  7.2

  	
  No Conflict

  	
  11

  
	
  7.3

  	
  Termination

  	
  11

  
	
  7.4

  	
  Notices

  	
  12

  
	
  7.5

  	
  Entire Agreement

  	
  13

  
	
  7.6

  	
  Amendments and Waivers

  	
  13

  
	
  7.7

  	
  Successors and Assigns

  	
  13

  
	
  7.8

  	
  Governing Law; Jurisdiction

  	
  13

  
	
  7.9

  	
  Severability

  	
  14

  



 


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  7.10

  	
  Interpretation

  	
  14

  
	
  7.11

  	
  Headings and Captions

  	
  14

  
	
  7.12

  	
  Enforcement

  	
  14

  
	
  7.13

  	
  Counterparts

  	
  14

  



 


ii

















 


SHAREHOLDERS
AGREEMENT


 


THIS SHAREHOLDERS
AGREEMENT (this “Agreement”) is made as of November 30, 2009 by and
among Polymer Group, Inc., a Delaware corporation (the “Company”), Tesalca-99,
S.A., a company duly incorporated and validly existing under the laws of Spain
(“Tesalca”), Texnovo, S.A., a company duly incorporated and validly
existing under the laws of Spain (“Texnovo” and, together with Tesalca,
the “Sellers”), and MatlinPatterson Global Opportunities Partners L.P.,
a Delaware limited liability partnership (together with MatlinPatterson Global Opportunities
Partners (Bermuda) L.P., MatlinPatterson Global Opportunities Partners B, L.P.,
MatlinPatterson Global Advisers LLC, MatlinPatterson Global Partners LLC,
MatlinPatterson Asset Management LLC and MatlinPatterson LLC, “MatlinPatterson”).


 


WHEREAS, the Company,
the Sellers and Grupo Corinpa, S.L., a company duly incorporated and validly
existing under the laws of Spain, have entered into certain Asset Transfer
Agreement, dated as of October 30, 2009, with respect to the sale of
certain assets of the Sellers to the Company or its designated subsidiary (the “Asset Transfer Agreement”),
the Sellers receiving as consideration 1,048,864 shares of Class A Common
Stock of the Company.


 


WHEREAS, pursuant to the
provisions of the Asset Transfer Agreement, the parties wish to enter into this
Agreement to regulate the relationship among them.


 


Capitalized terms used
but not defined herein shall have the same meanings set forth in the Asset
Transfer Agreement


 


NOW, THEREFORE, in consideration
of the covenants and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:


 


ARTICLE 1




GENERAL PROVISIONS


 


1.1                                 Shares Subject to this Agreement. 
The Sellers and MatlinPatterson agree that the terms and restrictions of
this Agreement shall apply to all shares of the Class A common stock, par
value $.01, of the Company (the “Class A Common Stock”) which any
of them now Owns (as defined below) or hereafter acquires by any means,
including without limitation, by purchase, assignment, conversion of
convertible securities or operation of law, or as a result of any stock
dividend, stock split, reorganization, reclassification, whether voluntary or
involuntary, or other similar transaction, and to any shares of capital stock
of any successor to the Company, whether by sale, merger, consolidation or
other similar transaction (the “Shares”).  As of the date of this Agreement,
MatlinPatterson owns only Class A Common Stock of the Company.


 


1.2                                 Sellers Put Option. 
If the Sellers exercise the Sellers Put Option pursuant to
Section 3.1 of the Asset Transfer Agreement and all of the Phase II
Conditions set forth in Section 3.2 of the Asset Transfer Agreement have
been satisfied other than the condition set forth in
Section 3.2(iii) thereof, then, for purposes of this Agreement, the
Sellers shall be treated as if they had acquired the Consideration for Phase II
as of the date that the Sellers Put Option was exercised (the “Put Exercise
Date”).  By way of example only, if
the aforementioned conditions are met, the Sellers would be treated as if they
owned the Consideration for Phase II


 


1

















 


as of the Put Exercise
Date when determining the Drop Off Date and when calculating the consideration
to be received for the Sellers’ Tag-Along Shares in a sale pursuant to
Article 3 hereof.


 


1.3                                 Certain Definitions. 
As used in this Agreement, the following terms shall have the following
respective meanings:


 


“Affiliate” means,
with respect to any specified Person, any other Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with, such specified Person.  For purposes hereof, the term “control,” or a
variation thereof, means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the Ownership of voting securities, by contract or otherwise.


 


“Board” means the
Board of Directors of the Company.


 


“Business Day”
shall mean any day that is not Saturday, Sunday or other day on which banking
institutions in New York (NY) are authorized or required by law or executive
order to close.


 


“Commission” means
the Securities and Exchange Commission and any successor agency of the federal
government administering the Securities Act and the Exchange Act.


 


“Drop Off Date”
shall mean, (i) for the period from the Closing Date of Phase I until the
Closing Date of Phase II, the first date that any Shares are Transferred (as
defined below) by either Seller (or any Permitted Transferee) to any transferee
that is not a Permitted Transferee, and (ii) for the period from and after
the Closing Date of Phase II, the date upon which the Sellers’ Ownership of the
Shares is less than 5% of the Company’s total outstanding Class A Common
Stock calculated on a fully diluted basis.


 


“Exchange Act” means the Securities Exchange Act of
1934, as amended, and any similar or successor federal statute, and the
rules and regulations of the Commission thereunder, all as the same shall
be in effect from time to time.


 


“Exempt Securities”
shall mean (a) equity securities of the Company issued in connection with
(i) any acquisition of another Person by the Company or any subsidiary of
the Company by merger, stock purchase, purchase of all or substantially all of
the assets, or other reorganization, or (ii) the purchase of all or substantially
all of the assets of another Person, in each case that is approved by a
majority of the Board; (b) common stock or other equity securities issued
to employees, officers, directors, consultants, other persons performing
services for the Company (including distributors and sales representatives) and
their respective Affiliates, in each case, pursuant to any stock option plan,
or similar equity-based compensatory arrangement approved by a majority of the
Board, (c) shares of common stock issued in connection with any stock
split, stock dividend, recapitalization or similar transaction by the Company;
(d) shares of common stock issued pursuant to a firm commitment
underwritten public offering of the Company’s common stock;
(e) non-convertible debt securities or debt instruments; (f) shares
of capital stock issued pursuant to a rights offering made to all holders of
common stock in accordance with applicable U.S. securities laws;
(g) shares of common stock issuable upon exercise of the 


 


2

















 


Company’s Series A
Warrants and the Series B Warrants; and (h) shares of capital stock
issued pursuant to an anti-takeover plan, takeover defense plan or “poison
pill” in the form of a shareholder rights plan or similar plan adopted by the
Company.


 


“Ownership” or “Own”
means record ownership and beneficial ownership, as determined pursuant to
Rule 13d-3 under the Exchange Act.


 


“Person” means an
individual, corporation, partnership, limited liability company, joint venture,
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.


 


“Sale of the Company”
means the direct or indirect sale of the Company to a third party pursuant to
which such party or parties acquire (i) capital stock of the Company
possessing the voting power to elect a majority of the Board (whether by
merger, consolidation or sale, exchange or transfer of the Company’s capital
stock), or (ii) all or substantially all of the Company’s assets
determined on a consolidated basis.


 


“Securities Act”
means the Securities Act of 1933, as amended, and any similar or successor
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.


 


ARTICLE 2



RESTRICTIONS ON TRANSFER OF SHARES


 


2.1                                 Transfers Restrictions.


 


(a)                                  Except as otherwise
provided in Section 2.2, with respect to the Shares issued to the Sellers
on each of the Closing Date of Phase I and the Closing Date of Phase II,
respectively, each Seller agrees not to sell, assign, transfer, gift, pledge,
encumber, hedge or otherwise alienate or dispose of, whether voluntarily or
involuntarily, by operation of law or otherwise (“Transfer”), or agree
to so Transfer, any of such Shares Owned by it or any right or interest therein
for a period of one year after issuance.


 


(b)                                 Each Seller further agrees
not to Transfer at any time any Shares Owned by it, or any right or interest
therein, to any Person that, in the reasonable determination of the Board,
directly competes with the Company or is a customer, supplier or distributor of
the Company; provided, that such restriction shall not apply to
Transfers by either of the Sellers pursuant
to (1) “tag-along” sales in accordance with Article 3 hereof, or
(2) “drag-along” sales in accordance with Article 4 hereof.


 


(c)                                  Each
Seller acknowledges that the Shares have not been registered under the
Securities Act or any state or foreign securities laws and such Seller agrees
not to offer for sale, sell or otherwise Transfer any Shares in the absence of
an effective registration statement covering such Shares under the Securities
Act and any applicable state or foreign securities laws, or an exemption from
the registration requirements thereof.


 


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(d)                                 Any
purported Transfer in violation of any provision of this Agreement and all
actions by the purported transferor and transferee in connection therewith
shall be of no force or effect.  The
Company shall not be required to recognize such purported Transfer for any
purpose, including, without limitation, for purposes of dividend and voting
rights.


 


2.2                                 Permitted Transfers. 
The restrictions on Transfer contained in Section 2.1(a) shall
not apply to Transfers by either of the Sellers (i) to any of its
Affiliates or any successor by merger, reorganization or similar fundamental
corporate transaction, (ii) to any lender to secure financings of such
Seller either existing as of the date of this Agreement or taken to refinance
the existing financings, or (iii) pursuant to (1) “tag-along” sales
in accordance with Article 3 hereof, or (2) “drag-along” sales in
accordance with Article 4 hereof, except to the extent that such sales are
not permissible under applicable U.S. securities laws (collectively, “Permitted
Transferees”); provided, however, that in any such event the
Shares so Transferred in the hands of each such Permitted Transferee shall
remain subject to the provisions of this Agreement, and each such Permitted
Transferee shall so acknowledge in writing, assuming, in the case of its
Affiliates, successor by merger, reorganization or similar fundamental
corporate transaction all the rights, obligations, terms and conditions arising
from this Agreement by signing a declaration of adherence to this Agreement as
a condition precedent to the effectiveness of such Transfer.


 


2.3                                 Notice of Proposed Transfer. 
Prior to any proposed Transfer of any Shares by any Seller, such Seller
shall give written notice to the Company of its intention to effect such
Transfer.  Each such notice shall
describe the manner of the proposed Transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel reasonably satisfactory to the
Company to the effect that the proposed Transfer may be effected without
registration under the Securities Act, whereupon such Seller shall be entitled
to Transfer such securities in accordance with the terms of its notice.


 


2.4                                 Rule 144 Reporting. 
With a view to making available the benefits of Rule 144, which may
at certain times permit the sale of Shares to the public without registration,
at all times after the first anniversary of the Closing Date of Phase I until
such time as all of the Shares are saleable pursuant to Rule 144 without
restrictions, the Company agrees to use its commercially reasonable best
efforts to comply with all of the information reporting requirements of
Rule 144 (as amended from time to time, or any successor
rule thereto).  In this respect, the
Company represents that it has never been a “shell company” under Rule 405
of the Securities Act.


 


2.5                                 Legends.  Each
certificate representing Shares Owned by the Sellers shall bear legends in
substantially the following form:


 


“THE SALE, TRANSFER OR
ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A SHAREHOLDERS AGREEMENT AMONG THE COMPANY AND CERTAIN
HOLDERS OF ITS OUTSTANDING CLASS A COMMON STOCK.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST BY THE HOLDER OF RECORD OF THE CERTIFICATE TO THE
SECRETARY OF THE COMPANY.”


 


4

















 


“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, HEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS THEREOF.”


 


At the request of the
Sellers, and as soon as it is no longer legally required, the Company
undertakes to exchange the above mentioned certificates for new ones which do
not include such legends.


 


ARTICLE 3




TAG-ALONG RIGHTS


 


3.1                                 Tag-Along Rights. 
MatlinPatterson will not sell or Transfer any Shares to any Person,
other than an Affiliate or any limited partner of MatlinPatterson (a “Third
Party”), without compliance with the terms of this Article 3; provided,
however, that the terms and provisions of this Article 3 shall not
be applicable to any sale by MatlinPatterson if (a) prior to and after
giving effect to such sale, MatlinPatterson shall Own at least an aggregate of
54.9% of the Class A Common Stock, calculated on a fully diluted basis, or
(b) MatlinPatterson’s sale to a Third Party is in connection with a tender
offer or other offer by such Third Party open to the Sellers upon the same
terms and conditions offered to MatlinPatterson, or (c) MatlinPatterson’s
sale is made in the market pursuant to Rule 144 and the applicable volume
restrictions or a registration statement. 
All Shares proposed to be sold by MatlinPatterson and not excluded from
the terms and provisions of this Article 3 pursuant to the proviso of the
immediately preceding sentence are referred to herein as “Subject Shares.”  The Sellers shall have the right to
participate in any “tag-along” sales in accordance with this Article 3
during the term of this Agreement, including during the one-year period
described in Section 2.1(a), except to the extent that such sales are not
permissible under applicable U.S. securities laws.  Any Subject Shares Transferred to an
Affiliate of MatlinPatterson shall remain subject to the provisions of this
Article 3, and each such Affiliate shall so acknowledge in writing as a
condition precedent to the effectiveness of such Transfer.


 


3.2                                 Procedures.


 


(a)                                  Prior
to the sale of any Subject Shares to a Third Party, MatlinPatterson shall
deliver to the Company a written notice of the proposed or intended sale of
Subject Shares (the “MatlinPatterson Tag-Along Notice”), which
MatlinPatterson Tag-Along Notice shall (i) identify the Subject Shares
proposed or intended to be sold, and (ii) disclose the number, price,
names of purchasers and other terms upon which they are to be sold.  Within 5 Business Days of the receipt of the
MatlinPatterson Tag-Along Notice, the Company (directly or through its agent)
shall take all steps necessary and/or advisable (including preparing necessary
and/or advisable documentation and making all necessary and/or advisable
filings with the Commission and any other governmental authority) to deliver to
each Seller a written notice of the proposed or 


 


5

















 


intended sale of Subject
Shares (the “Company Tag-Along Notice”). 
The Company Tag-Along Notice shall be satisfactory in all respects to
MatlinPatterson and in compliance with this Agreement and shall
(1) identify the Subject Shares proposed or intended to be sold,
(2) disclose the number, price, names of purchasers and other terms upon
which they are to be sold, (3) inform each Seller of the right to sell
such Seller’s pro rata portion (determined in accordance with the penultimate
sentence of this Section 3.2(a)) of Shares along with MatlinPatterson to
the Third Party, (4) include all other information, disclosures,
statements and documents as may be required by applicable law (which
information, disclosures, statements and documents shall be reasonably
satisfactory to MatlinPatterson), and (5) include a deadline for the
Sellers to deliver a “Shareholder Tag-Along Acceptance Notice,” along
with the Shares to be sold, to MatlinPatterson in accordance with the terms of
the Shareholder Tag-Along Acceptance Notice, which deadline shall in no event
be later than 30 calendar days or earlier than 10 Business Days after receipt
by the Sellers of the Company Tag-Along Notice; provided, that such
deadline may be later than 30 calendar days after the date of receipt of the
Company Tag-Along Notice if (i) MatlinPatterson consents thereto in
writing, or (ii) outside legal counsel to the Company provides a written
opinion addressed to the Company to the effect that a later deadline is
required for the Company to comply with a Law applicable to the Company.  The Company shall enclose a sufficient number
of Shareholder Tag-Along Acceptance Notices with each Company Tag-Along Notice.  The aggregate number of shares of
Class A Common Stock that the Sellers will be entitled to sell pursuant to
this Article 3 prior to the fifth anniversary of the Closing Date of Phase
I shall not exceed the aggregate of the Consideration for Phase I, the
Consideration for Phase II and, if applicable, the number of Shares acquired
pursuant to Article 6 hereof.


 


With regards to
Article 3.2(a)(4) above, MatlinPatterson undertakes to collaborate
with the Company and promptly deliver to it all relevant information necessary
to prepare any disclosures, statements and documents as may be required by
applicable law.


 


For purposes of this
Section 3.2, a Seller’s pro rata portion shall be determined by
multiplying (x) the number of Subject Shares proposed to be sold to a
Third Party by (y) a fraction, the numerator of which is the aggregate
number of issued and outstanding Shares then Owned by such Seller, and the
denominator of which is the aggregate number of shares of Class A Common
Stock then issued and outstanding.


 


(b)                                 To
sell its pro rata portion of Shares along with MatlinPatterson to the Third
Party, each Seller must (i) deliver a Shareholder Tag-Along Acceptance
Notice, along with the Shares to be sold, to MatlinPatterson in accordance with
the instructions set forth on the Shareholder Tag-Along Acceptance Notice; and
(ii) comply with any other applicable terms of the proposed sale
(including executing definitive documentation and any related documents), such
terms being substantially identical for both MatlinPatterson and the Sellers,
in each case, prior to the deadline set forth in the Company Tag-Along Notice
(a Seller satisfying such requirements shall be referred to herein as a “Participating
Seller”).  Upon compliance with the
foregoing procedures, MatlinPatterson may sell the Subject Shares; provided,
that such sale provides for the purchase of each Participating Seller’s pro
rata portion of Shares (the “Tag-Along Shares”) for a period of up to
180 calendar days after the deadline set forth in the Company Tag-Along Notice,
upon terms and conditions (including the per share price) which are not less
favorable to MatlinPatterson and the Sellers than those set forth in the
MatlinPatterson Tag-Along Notice.  Any
Subject Shares not sold by MatlinPatterson prior to the date that is 180 


 


6

















 


calendar days after the
deadline set forth in the Company Party Tag-Along Notice may not be sold
without compliance with this Section 3.2.


 


(c)                                  Promptly
(but in no event later than 3 Business Days) after the consummation of the sale
of the Subject Shares and the Tag-Along Shares by MatlinPatterson and the
Sellers, respectively, to a Third Party, MatlinPatterson shall (i) notify
the Company and the Participating Sellers of such sale, and (ii) cause to
be remitted to the Company the total sales proceeds attributable to the sale of
Tag-Along Shares.  Thereafter, the
Company shall promptly distribute such sales proceeds to the applicable
Sellers.


 


3.3                                 Non-Material Variation of Procedures. The Company, with the approval of the
Board and the written consent of MatlinPatterson, may alter the procedures set
forth in Section 3.2 to the extent required to comply with any applicable
law or as is otherwise advisable; provided, however, that no
alteration to the procedures set forth in Section 3.2 may be made in the
manner set forth in this Section 3.3 if such alteration would result in an
adverse effect on the tag-along rights provided in this Article 3.


 


3.4                                 Waiver. MatlinPatterson may sell Subject Shares without
compliance with the terms and provisions of Section 3.2 with the prior
written consent of the Sellers in each instance.


 


ARTICLE 4




DRAG-ALONG RIGHTS


 


4.1                                 Approved Sale.


 


(a)                                  In the
event that MatlinPatterson (the “Proposing Shareholder”) approves the
Sale of the Company (an “Approved Sale”) and delivers written notice
thereof to the Company and the Sellers not less than 30 calendar days before
the consummation of the Approved Sale, each Seller will vote for, consent to,
cooperate with and will not object or otherwise impede consummation of the
Approved Sale; provided, that Sellers will retain the right to convey
their objections to, and discuss with MatlinPatterson, the consideration to be
received in such Approved Sale.


 


(b)                                 If the
Approved Sale is structured as (i) a merger or consolidation, each Seller
shall vote (to the extent having the right to vote) its Shares to approve such
merger or consolidation and all matters ancillary thereto, whether by written
consent or at a shareholders meeting, (ii) a sale of equity, each Seller
shall agree to sell, and shall sell, all of its Shares on the terms and
conditions so approved, or (iii) a sale of assets, each Seller shall vote
its Shares to approve such sale and any subsequent liquidation of the Company
or other distribution of the proceeds therefrom, whether by written consent or
at a shareholders meeting.  In
furtherance of the foregoing, each Seller shall cooperate with and take, with
respect to such Seller’s Shares, all necessary or desirable actions reasonably
requested by MatlinPatterson in connection with the consummation of the
Approved Sale, including executing the applicable agreements (which agreements
may, subject to the provisions of this Section 4.1, require a Seller to
sell a pro rata portion or all of its Shares and customary representations, indemnities,
holdbacks and escrows); provided, however, in any Approved Sale,
the terms and conditions of such agreements, including, but not limited to, the
form or forms of consideration (in the same relative proportions 


 


7

















 


if more than one form is
received) and the indemnification obligations (which in no event shall expose
any such other Seller to liability greater than the consideration to be
received), shall be on terms substantially identical for the Sellers and
MatlinPatterson.


 


(c)                                  The
provisions of this Section 4.1 shall apply regardless of the form of
consideration received in the Approved Sale; provided, however,
if the consideration received in such Approved Sale is in a form other than
cash or freely transferable public securities (“Other Consideration”),
then each Seller shall have the right to elect to not be bound by this
Section 4.1 unless the Company will, at the written request of such
Seller, which shall be made not later than 15 calendar days after notice of the
nature of the consideration was provided to the Seller, concurrently with the
closing of the Approved Sale, pay to such Seller, in cash, the fair market
value of such Other Consideration in lieu of such Other Consideration.  The Board’s determination of the fair market
value of any Other Consideration shall be conclusive.


 


(d)                                 In
furtherance of the provisions of this Section 4.1, for so long as this
Section 4.1 is in effect, each Seller (and its successors, heirs, legal
representatives, and permitted assigns and transferees) hereby
(i) irrevocably appoints each of the directors of the Company as his or
its agent and attorney-in-fact (the “Drag-Along Agents”) (with full
power of substitution) to execute all agreements, instruments and certificates
and take all actions necessary or desirable to effectuate any Approved Sale as
contemplated under this Section 4.1, and (ii) grants to each
Drag-Along Agent a proxy (which shall be deemed to be coupled with an interest
and to be irrevocable) to vote the Shares having voting power held by such
Seller and exercise any consent rights applicable thereto in favor of any such
Approved Sale as provided in this Section 4.1; provided, however,
that the Drag-Along Agents shall not exercise such powers-of-attorney or
proxies with respect to any such Seller unless such Seller refuses or fails to
comply with its obligations under this Section 4.1.  THE AGREEMENTS CONTAINED IN THIS
SECTION 4.1 ARE COUPLED WITH AN INTEREST AND EXCEPT AS PROVIDED IN THIS
AGREEMENT MAY NOT BE REVOKED OR TERMINATED DURING THE TERM OF THIS
AGREEMENT.


 


4.2                                 Applicability. 
The terms and provisions of this Article 4 shall not be applicable
to any Approved Sale by MatlinPatterson if prior to such Approved Sale
MatlinPatterson Ownership percentage of Class A Common Stock is lower than
the Sellers Ownership percentage of Class A Common Stock.


 


ARTICLE 5




BOARD OF DIRECTORS


 


5.1                                 The Seller Director. 
Effective as of the Closing Date of Phase I until the Drop Off Date,
Sellers shall have the right to jointly nominate one member of the Board (the “Seller
Director”), who shall be remunerated and have the same rights and
obligations as the other members.  A
Seller Director must meet all of the relevant qualifications and standards set
forth in the Company’s corporate governance documents and the rules and
regulations of the Commission and the listing standards of a stock exchange
designated by the Board (the “Listing Standards”).


 


8
















 


Compliance with the
paragraph above will be determined by the Board and Sellers agree that if it is
determined that the Seller Director at any time fails to meet the standards and
qualifications set forth in the paragraph above, the Sellers will cause the
Seller Director to resign from the Board and be replaced in accordance with the
provisions of this Agreement.


 


The first Seller Director
to be appointed shall be Mr. Carlos Cavallé Pinós, as to whose appointment
the Company and MatlinPatterson consent.


 


Without prejudice of the
foregoing and for so long as Sellers have the right to the Seller Director,
Mr. José Durany Pich will be entitled:


 


(a)                                  During the first two years after the
Closing Date of Phase I, at the discretion of the Board, to be invited to and
participate in Board meetings of the Company where the Board determines that
his assistance and/or consultation is advisable with respect to matters
directly or indirectly related to Tesalca-99, S.A. or Texnovo, S.A.  In such instances, the Board shall notify
Mr. José Durany Pich, at the same time and in the same manner that
notifies its members, of such Board meetings.


 


(b)                                 Upon the earlier of the Closing Date of
Phase II and two years after the Closing Date of Phase I, to be appointed as a
Seller Director in place of Mr. Carlos Cavallé Pinós.


 


5.2                                 Company Action. 
Subject to Section 5.1 above, the Company will (i) present the
Seller Director to the Board for consideration and appointment to the Board
effective as of the Closing Date of Phase I, and (ii) following the
Closing Date of Phase I until the Drop Off Date, (A) use commercially
reasonable efforts to cause the Seller Director to be included in the slate of
nominees recommended by the Board to the Company’s shareholders for election as
a director at each annual meeting of the shareholders of the Company, and
(B) use commercially reasonable efforts to cause the election of the
Seller Director, including soliciting proxies in favor of the election of the
Seller Director.


 


5.3                                 Vacancies.  In the event that
a vacancy is created at any time by the death, disability, retirement,
resignation or removal (with or without cause) of the Seller Director, the
Sellers, subject to Section 5.1 above, shall have the right to designate a
replacement Seller Director to fill such vacancy, and the Company shall use
their best efforts to cause such vacancy to be filled with the replacement
Seller Director so designated.


 


5.4                                 Resignation 
Following the Drop Off Date, upon the written request of the Company,
the Sellers shall cause the Seller Director then serving on the Board to
promptly resign from the Board.  The
Sellers hereby agree that if the Seller Director does not so promptly resign,
the Seller Director may be removed from the Board in accordance with the
Company’s Amended and Restated By-laws, as they may be amended from time to
time.


 


5.5                                 Shareholder Action. 
Each of the Sellers and MatlinPatterson shall take, or cause to be
taken, such actions as may be required from time to time to maintain the number
of persons comprising the Board of the Company at nine, and to elect as
directors all of the directors nominated by the Company for election as
directors, including the Seller Director. 
Without limiting the generality of the foregoing, at each annual meeting
of the shareholders, and at each special meeting of the shareholders called for
the purpose of electing directors of the Company, 


 


9

















 


and at any time at which
the shareholders have the right to, or shall, elect directors of the Company,
then, and in each event, each of the Sellers and MatlinPatterson shall vote all
Shares Owned by them (or shall consent in writing in lieu of a meeting of
shareholders, as the case may be) to set the number of, and to elect persons as,
directors of the Company in accordance with this Section 5.5.


 


ARTICLE 6




PREEMPTIVE RIGHTS


 


6.1                                 Preemptive Rights. 
Except for issuances of Exempt Securities, the Company will not issue
any shares of capital stock of the Company and will not issue or grant any
options, warrants, conversion rights or other rights to purchase or acquire any
shares of capital stock of the Company (collectively, “Preemptive Securities”)
without compliance with this Article 6.


 


6.2                                 Procedures


 


(a)                                  Prior to any issuance of any Preemptive
Securities, the Company (directly or through its agent) shall deliver to the
Sellers a written notice of any proposed or intended issuance of Preemptive
Securities (the “Preemptive Notice”), which Preemptive Notice shall
(a) identify and describe the Preemptive Securities proposed or intended
to be issued, (b) disclose the number, price names of purchasers and other
terms upon which they are to be issued, (c) indicate the procedure for the
Sellers to offer to purchase the Sellers’ pro rata portion (determined in
accordance with this Section 6.2(a)) of such Preemptive Securities, and
(d) include a deadline for the Sellers to deliver a Notice of Acceptance
and payment of the purchase price for the Sellers’ pro rata portion of Preemptive
Securities to be purchased thereby to the Company, which deadline shall in no
event be later than 30 calendar days or earlier than 10 Business Days after
receipt by the Sellers of the Preemptive Notice; provided, that such
deadline may be later than 30 calendar days after the date of the Preemptive
Notice if (i) MatlinPatterson consents thereto in writing, or
(ii) outside legal counsel to the Company provides a written opinion
addressed to the Company to the effect that a later deadline is required for the
Company to comply with applicable law. 
For purposes of this Section 6.2, the Sellers’ pro rata portion of
Preemptive Securities shall be determined by multiplying (x) the number of
Preemptive Securities (determined on an as exercised or as converted basis)
proposed to be issued by (y) a fraction, the numerator of which is the
aggregate number of issued and outstanding shares of Class A common stock
then beneficially owned by the Sellers, and the denominator of which is the
aggregate number of issued and outstanding shares of Class A common stock.


 


(b)                                 To purchase their pro rata portion of any
Preemptive Securities to be issued by the Company, the Sellers must deliver a
Notice of Acceptance, along with a wire transfer of immediately available funds
for the purchase price for such Preemptive Securities to the Company (or its
agent) in accordance with the instructions set forth on the Preemptive Notice
prior to the deadline set forth in the Preemptive Notice.  The Company shall issue to the Sellers that
have timely returned a properly completed Notice of Acceptance along with a
wire transfer of immediately available funds for the purchase price, the
applicable number of Preemptive Securities in accordance with the terms set
forth in the Preemptive Notice.


 


10

















 


(c)                                  In the event that the Company complies
with the procedures set forth in this Section 6.2 and the Sellers do not
purchase all of their pro rata portion of the Preemptive Securities, the
Company shall have 180 calendar days from the date of the deadline set forth in
the applicable Preemptive Notice to issue or sell all or any part of the
Preemptive Securities as to which a Notice of Acceptance has not timely been
given by the Sellers to any other purchaser or purchasers (including
MatlinPatterson or its Affiliates) upon the terms and conditions (including the
per share price) which are not more favorable to the purchaser than those set
forth in the Preemptive Notice.  Any
Preemptive Securities not acquired by the Sellers or any other purchaser or
purchasers prior to the date that is 180 calendar days after the deadline set
forth in the applicable Preemptive Notice may not be issued until they are
again offered to the Sellers under the procedures specified in this Article 6.


 


6.3                                 Non-Material Violation of Procedures. 
The Company, with the approval of the Board and the written consent of
MatlinPatterson, may alter the procedures set forth in this Article 6 to
the extent required to comply with any applicable law or as is otherwise
advisable; provided, however, that no alteration to the
procedures set forth in this Article 6 may be made in the manner set forth
in this Section 6.3 if such alteration would result in an adverse effect
on the preemptive rights provided in this Article 6.


 


6.4                                 Waiver.  The Company
may issue Preemptive Securities without compliance with the terms and
provisions of this Article 6 with the prior written consent of the Sellers
in each instance.


 


ARTICLE 7




MISCELLANEOUS


 


7.1                                 Rights Not Transferable; Aggregation. 
The rights and obligations set forth in this Agreement shall terminate
with respect to any Shares Transferred by the Sellers, except for Shares
Transferred to Permitted Transferees pursuant to Section 2.2 above.  All Shares held by any Seller and its
Permitted Transferees shall be aggregated for determining the availability of
any rights under this Agreement.


 


7.2                                 No Conflict. 
The parties represent that the execution of this Agreement and
performance of all the obligations under this Agreement:


 


(a)                              do not breach any law, regulation, order,
rule, ruling, award or resolution of any other nature applicable to the
parties;


 


(b)                             do not breach the provisions of the
Company’s By-laws or Certificate of incorporation; and


 


(c)                             do not contravene any agreement, covenant
or instrument that is binding on the parties and will not give rise to breach
or termination of any such agreement, covenant or instrument.


 


7.3                                 Termination. 
Except for the provisions set forth in Articles 3, 4, 6 and 7, which
shall survive until the later of the Drop Off Date and December 31, 2011,
or as may otherwise be 


 


11

















 


provided in any section
of this Agreement, all rights and obligations of the parties under this
Agreement will terminate on the Drop Off Date.


 


7.4                                 Notices.  All notices,
requests, consents and other communications hereunder shall be in writing,
shall be addressed to the receiving party’s address set forth below or to such
other address as a party may designate by notice hereunder, and shall be either
(a) delivered by hand, (b) made by facsimile transmission,
(c) sent by overnight courier, or (d) sent by registered or certified
mail, return receipt requested, postage prepaid.


 


If to the Company:


 


Polymer
Group, Inc.


9335 Harris
Corners Parkway


Suite 300


Charlotte, NC
28269


Phone: (704) 697-5179


Fax: (704) 697-5120

Attention: Daniel L. Rikard


 


With a copy to (which
shall not constitute notice):


 


Parker Poe
Adams & Bernstein LLP


401 South Tryon
Street


Suite 3000


Charlotte, NC 28202


Phone: (704) 372-9020


Fax: (704) 335-4485

Attention: R. Douglas Harmon


 


If to MatlinPatterson:


 


MatlinPatterson Global
Opportunities Partners L.P.


c/o MatlinPatterson
Global Advisers LLC


520 Madison Avenue


New York, NY 10022-4203


Fax:  (212) 651-4011


Attention:  Robert H. Weiss


 


With a copy to (which
shall not constitute notice):


 


Whalen LLP


19000 MacArthur Boulevard


Suite 600


Irvine, CA 92612


Phone:  (949) 833-1703


Fax:  (949) 833-1710


Attention:  Michael P. Whalen


 


12

















 


If to either Seller:


 


31-3a Anglí, 08017
(Barcelona)

Attention:  Messrs. José Durany Pich
and Juan Pich-Aguilera Roca

Phone: 34 93 3013439

Facsimile: 34 93
3041326

E-mail: jdurany@grupocorinpa.es
and juanpich@grupocorinpa.es


 


All notices, requests,
consents and other communications hereunder shall be deemed to have been given
(w) if by hand, at the time of the delivery thereof to the receiving party
at the address of such party set forth above, (x) if made by facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, (y) if sent by overnight courier, on
the next business day (or if sent overseas, on the second business day)
following the day such notice is delivered to the courier service, or
(z) if sent by registered or certified mail, on the 5th business day
(or if sent overseas, on the 10th business day) following the day such mailing
is made.


 


7.5                                 Entire Agreement. 
This Agreement, together with the Asset Transfer Agreement, embody the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof.  No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms
and provisions of this Agreement.


 


7.6                                 Amendments and Waivers. 
Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in any particular
instance) only with the prior written consent of the parties hereto.  No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of
dealing among the parties hereto, shall operate as a waiver of any such right,
power or remedy of the party.  No single
or partial exercise of any right, power or remedy under this Agreement by a
party hereto, nor any abandonment or discontinuance of steps to enforce any
such right, power or remedy, shall preclude such party from any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder.  The election of any remedy by
a party hereto shall not constitute a waiver of the right of such party to
pursue other available remedies.  No
notice to or demand on a party not expressly required under this Agreement
shall entitle the party receiving such notice or demand to any other or further
notice or demand in similar or other circumstances or constitute a waiver of
the rights of the party giving such notice or demand to any other or further
action in any circumstances without such notice or demand.


 


7.7                                 Successors and Assigns. 
This Agreement shall be binding on the parties hereto and shall inure to
the benefit of the respective successors and assigns of each party hereto.  Nothing in this Agreement shall be construed
to create any rights or obligations except among the parties hereto, and no
person or entity shall be regarded as a third-party beneficiary of this
Agreement.


 


7.8                                 Governing Law; Jurisdiction. 
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York, without giving effect to the
conflicts of law principles thereof. 
Each of the parties hereby irrevocably submits to the 


 


13

















 


jurisdiction of any state
or federal court sitting in the State of New York over any suit, action or
other proceeding brought by any party arising out of or relating to this
Agreement, and each of the parties hereby irrevocably agrees that all claims
with respect to any such suit, action or other proceeding shall be heard and
determined in such courts.


 


7.9                                 Severability. 
In the event that any court of competent jurisdiction shall determine
that any provision, or any portion thereof, contained in this Agreement shall
be unenforceable in any respect, then such provision shall be deemed limited to
the extent that such court deems it enforceable, and as so limited shall remain
in full force and effect.  In the event
that such court shall deem any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Agreement shall nevertheless
remain in full force and effect.


 


7.10                           Interpretation. 
The parties hereto acknowledge and agree that: (a) each party and
its counsel reviewed and negotiated the terms and provisions of this Agreement;
(b) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation
of this Agreement; and (c) the terms and provisions of this Agreement
shall be construed fairly as to all parties hereto and not in favor of or against
any party, regardless of which party was generally responsible for the
preparation of this Agreement.


 


7.11                           Headings and Captions. 
The headings and captions of the various subdivisions of this Agreement
are for convenience of reference only and shall in no way modify or affect the
meaning or construction of any of the terms or provisions hereof.


 


7.12                           Enforcement. 
Each of the parties hereto acknowledges and agrees that the rights
acquired by each party hereunder are unique and that irreparable damage would
occur in the event that any of the provisions of this Agreement to be performed
by the other parties were not performed in accordance with their specific terms
or were otherwise breached.  Accordingly,
in addition to any other remedy to which the parties hereto are entitled at law
or in equity, each party hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by any other party and to
enforce specifically the terms and provisions hereof in any federal or state
court to which the parties have agreed hereunder to submit to jurisdiction.


 


7.13                           Counterparts. 
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.  This
Agreement shall become effective only upon execution by the Company.


 


IN WITNESS WHEREOF, the
undersigned have executed or caused to be executed by theft duly authorized
representative this Shareholders Agreement as of the date first written above.


 


	
   

  	
  POLYMER
  GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  Effective as of
  December 2, 2009

  
	
   

  	
   

  
	
   

  	
  /s/

  
	
   

  	
  By:

  
	
   

  	
  Name: 

  	
  Dennis E. Norman

  
	
   

  	
  Title:

  	
  Vice President –
  Strategy and Corporate Development

  



 


14

















 


	
   

  	
  TESALCA-99,
  S.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ 

  	
  /s/

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Jose Durany

  	
  Juan Pich-Aguilera Roca

  
	
   

  	
  Title:

  	
  Administrator

  	
  Administrator

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TEXNOVO,
  S.A.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ 

  	
  /s/

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: 

  	
  Jose Durany

  	
  Juan Pich-Aguilera Roca

  
	
   

  	
  Title:

  	
  Administrator

  	
  Administrator

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATLINPATTERSON
  GLOBAL OPPORTUNITIES PARTNERS, L.P., MATLINPATTERSON GLOBAL OPPORTUNITIES
  PARTNERS (BERMUDA) L.P., MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS B,
  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: MatlinPatterson
  Global Advisers LLC, its Investment Advisor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: 

  	
  Robert H. Weiss

  
	
   

  	
  Title:

  	
  General Counsel

  



 


15