**Exhibit 10.11**

 

 

 

PLEDGE AGREEMENT

 

By

 

POLYMER GROUP, INC.,

 

and

 

THE DOMESTIC SUBSIDIARIES PARTY HERETO,as Pledgors,

 

and

 

CITICORP NORTH AMERICA, INC.,as Collateral Agent

 

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Dated as of November 22, 2005

 

 

 

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TABLE OF CONTENTS

 
| ** **  | ** ** | ** **                                     | **Page** |
|-------------|------------|------------------------------------------------|----------|
|        |       |                                           |     |
| SECTION 1.  |       | Pledge                                         | 2        |
|        |       |                                           |     |
| SECTION 2.  |       | Delivery  of the Securities Collateral         | 2        |
|        |       |                                           |     |
| SECTION 3.  |       | Representations,  Warranties and Covenants     | 3        |
|        |       |                                           |     |
| SECTION 4.  |       | Registration  in Nominee Name; Denominations   | 4        |
|        |       |                                           |     |
| SECTION 5.  |       | Voting  Rights; Dividends and Interest, etc.   | 4        |
|        |       |                                           |     |
| SECTION 6.  |       | Remedies  upon Event of Default                | 6        |
|        |       |                                           |     |
| SECTION 7.  |       | Application  of Proceeds of Sale               | 7        |
|        |       |                                           |     |
| SECTION 8.  |       | Collateral  Agent Appointed Attorney-in-Fact   | 7        |
|        |       |                                           |     |
| SECTION 9.  |       | Waivers;  Amendment                            | 7        |
|        |       |                                           |     |
| SECTION 10. |       | Securities  Act, etc.                          | 8        |
|        |       |                                           |     |
| SECTION 11. |       | Registration,  etc.                            | 8        |
|        |       |                                           |     |
| SECTION 12. |       | Termination  or Release                        | 9        |
|        |       |                                           |     |
| SECTION 13. |       | Notices                                        | 10       |
|        |       |                                           |     |
| SECTION 14. |       | Further  Assurances                            | 10       |
|        |       |                                           |     |
| SECTION 15. |       | Binding  Effect; Several Agreement; Assignment | 10       |
|        |       |                                           |     |
| SECTION 16. |       | Survival  of Agreement; Severability           | 10       |
|        |       |                                           |     |
| SECTION 17. |       | GOVERNING  LAW                                 | 11       |
|        |       |                                           |     |
| SECTION 18. |       | Counterparts                                   | 11       |
|        |       |                                           |     |
| SECTION 19. |       | Rules of  Interpretation                       | 11       |
|        |       |                                           |     |
| SECTION 20. |       | Jurisdiction;  Consent to Service of Process   | 11       |
|        |       |                                           |     |
| SECTION 21. |       | WAIVER OF  JURY TRIAL                          | 11       |
|        |       |                                           |     |
| SECTION 22. |       | Additional  Pledgors                           | 12       |
|        |       |                                           |     |
| SECTION 23. |       | Financing  Statements                          | 12       |

 

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| ** **  | ** ** | ** **                         | **Page** |
|-------------|------------|------------------------------------|----------|
| SECTION 24. |       | No Deemed  Dividend.               | 12       |
|        |       |                               |     |
| SCHEDULES   |
|        |       |                               |     |
| Schedule I  |       | Domestic Subsidiaries              |     |
| Schedule II |       | Pledged Stock and Debt  Securities |     |

 

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PLEDGE AGREEMENT

 

PLEDGE AGREEMENT (as amended, amended and restated,supplemented or otherwise modified from time to time, this “Agreement”)dated as of [         ], 2005, amongPOLYMER GROUP, INC., a Delaware corporation (the “Borrower”), eachDomestic Subsidiary of the Borrower listed on Schedule I hereto (collectively,together with each Domestic Subsidiary that becomes a party hereto pursuant toSection 22 of this Agreement, the “Subsidiary Guarantors” and, togetherwith the Borrower, the “Pledgors”), CITICORP NORTH AMERICA, INC., ascollateral agent (in such capacity, the “Collateral Agent”) on behalf ofthe Secured Parties (as defined in the Credit Agreement) pursuant to the CreditAgreement (as hereinafter defined), as pledgee, assignee and secured party.

 

RECITALS

 

A.            TheBorrower, the Collateral Agent, Citicorp North America, Inc., as administrativeagent (in such capacity, and together with any successors in such capacity, the“Administrative Agent”) for the Lenders (as hereinafter defined), as documentationagent (in such capacity, the “Documentation Agent”), and as syndicationagent (in such capacity, the “Syndication Agent”) and Citicorp GlobalMarkets Inc. (“CGMI”), as sole lead arranger and sole bookrunner (insuch capacity, the “Lead Arranger”), and the lending institutions fromtime to time party thereto (the “Lenders”) have, in connection with theexecution and delivery of this Agreement, entered into that certain credit agreement,dated as of the date hereof (as amended, amended and restated, supplemented orotherwise modified from time to time, the “Credit Agreement”), providingfor the making of Loans to the Borrower and the issuance of and participationsin Letters of Credit for the account of the Borrower, pursuant to, and upon theterms and subject to the conditions specified in, the Credit Agreement.

 

B.            EachSubsidiary Guarantor has, pursuant to the Guarantee Agreement, dated as of thedate hereof, among other things, agreed to unconditionally guarantee theobligations of the Borrower under the Credit Agreement.

 

C.            TheBorrower and each Subsidiary Guarantor will receive substantial benefits fromthe execution, delivery and performance of the obligations of the Borrowerunder the Credit Agreement and are, therefore, willing to enter into this Agreement.

 

D.            Contemporaneouslywith the execution and delivery of this Agreement, the Borrower and theSubsidiary Guarantors have executed and delivered to the Collateral Agent aSecurity Agreement (as amended, amended and restated, supplemented or otherwisemodified from time to time, the “Security Agreement”).

 

E.             ThisAgreement is given by each Pledgor in favor of the Collateral Agent for thebenefit of the Secured Parties (as defined in the Security Agreement) to securethe payment and performance of the obligations (whether or not constitutingfuture advances, obligatory or otherwise) of the Borrower and any and all ofthe Subsidiary Guarantors from time to time arising under or in respect of thisAgreement, the Credit Agreement, the other Loan Documents and the other Obligations(as defined in the Security Agreement).

 

Capitalized terms used herein and not defined hereinshall have meanings assigned to such terms in the Credit Agreement.

 

NOW, THEREFORE, in consideration of the foregoingand other benefits accruing to each Pledgor, the receipt and sufficiency ofwhich are hereby acknowledged, each Pledgor hereby makes

 

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the followingrepresentations and warranties to the Collateral Agent for the benefit of theSecured Parties (and each of their respective successors and assigns), andagrees as follows:

 

SECTION 1.           *Pledge*. (a) The following liens are hereby granted:

 

(i)*           *As collateral security for the payment andperformance, in full of all the Obligations, each Pledgor hereby pledges andgrants to the Collateral Agent, for the ratable benefit of Secured Parties, alien on and security interest in and to all of the right, title and interest ofsuch Pledgor in, to and under (a) all the shares of capital stock andother Equity Interests owned by it listed on Schedule II hereto and any sharesof capital stock and other Equity Interests obtained in the future by suchPledgor and not deposited into a Securities Account pursuant to the SecurityAgreement and the certificates, if any, representing all such shares orinterests (collectively, the “Pledged Stock”); provided that thePledged Stock shall not include (i) more than 65% of the issued andoutstanding shares of voting stock of any first tier Non-U.S. Subsidiary,(ii) the issued and outstanding shares of any second tier Non-U.S. Subsidiaryor (iii) to the extent that applicable law requires that a Subsidiary ofthe Pledgor issue directors’ qualifying shares, such qualifying shares; (b)(i)all debt securities owned by it listed opposite the name of the Pledgor onSchedule II hereto, (ii) all debt securities in the future issued tothe Pledgor and not deposited into a Securities Account (as defined in theSecurity Agreement) pursuant to the Security Agreement and (iii) all promissorynotes and any other instruments evidencing such debt securities (collectively,the “Pledged Debt Securities” and together with the Pledged Stock, the “PledgedSecurities”); (c) subject to Section 5, all payments of principal orinterest, dividends, cash, instruments and other property from time to timereceived, receivable or otherwise distributed in respect of, in exchange for orupon the conversion of the securities referred to in clauses (a) and (b)above; (d) subject to Section 5, all rights and privileges of thePledgor with respect to the securities and other property referred to inclauses (a), (b) and (c) above; and (e) all proceeds of any and all of theforegoing (all the foregoing, collectively, the “Securities Collateral”).

 

(b)           Upon delivery to the Collateral Agent, (a) anycertificated Pledged Securities now or hereafter included in the SecuritiesCollateral shall be accompanied by stock or bond powers duly executed in blankor other instruments of transfer reasonably satisfactory to the CollateralAgent and by such other instruments and documents as the Collateral Agent mayreasonably request and (b) all other property comprising part of theSecurities Collateral shall be accompanied by proper instruments of assignmentduly executed by the applicable Pledgor and such other instruments or documentsas the Collateral Agent may reasonably request. Each subsequent delivery ofPledged Securities shall be accompanied by a schedule describing the securitiesthen being pledged hereunder, which schedule shall be attached hereto as asupplement to Schedule II and made a part hereof. Each schedule so deliveredshall supplement any prior schedules so delivered.

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TO HAVE AND TO HOLD the Securities Collateral,together with all right, title, interest, powers, privileges and preferencespertaining or incidental thereto, unto the Collateral Agent for the benefit ofthe Secured Parties; subject*,*however*,*to the terms, covenants and conditions hereinafter setforth.

 

SECTION 2*.          **Delivery of the Securities Collateral*. (a)  Each Pledgor agrees topromptly deliver or cause to be delivered to the Collateral Agent any and allPledged Securities, and any and all certificates or other instruments or documentsrepresenting the Securities Collateral, other than those Pledged Securities tobe held in a Securities Account which Securities Account will be subject to a

 

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Control Agreement (asdefined in the Security Agreement) pursuant to the terms of the Security Agreement.

 

(b)           Each Pledgor will cause any Indebtedness forborrowed money owed to such Pledgor by any Person to be evidenced by a dulyexecuted promissory note that is pledged to the Collateral Agent for thebenefit of the respective Secured Parties and delivered to the Collateral Agentpursuant to the terms hereof (provided that this clause (b) shall notapply to any such Indebtedness in an aggregate principal amount less than$500,000 of any Person that is not a Subsidiary).

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(c)           If any Equity Interests now or hereafter acquired byany Pledgor constituting Pledged Stock are uncertificated, such Pledgor shalluse commercially reasonable efforts to cause such Equity Interests to becertificated. If, after using commercially reasonable efforts, such Pledgor isnot able to have such Equity Interests certificated, such Pledgor shall complywith its obligations under Section 3.05(c) of the Security Agreement.

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SECTION 3*.          **Representations, Warranties and Covenants*. Each Pledgor hereby represents,warrants and covenants, as to itself and the Securities Collateral pledged byit hereunder, to and with each Collateral Agent that:

 

(a)           as of the date hereof thePledged Stock represents that percentage as set forth on Schedule II of theissued and outstanding shares of each class of the capital stock or otherEquity Interests of the issuer with respect thereto;

 

(b)           except for the securityinterests granted hereunder, such Pledgor (i) is as of the date hereof thedirect owner, beneficially and of record, of the Pledged Securities indicatedon Schedule II, (ii) holds the Pledged Securities free and clear ofall Liens, other than the Liens created hereunder, (iii) will make noassignment, pledge, hypothecation or transfer of, or create or permit to existany security interest in or other Lien on, the Securities Collateral, otherthan pursuant hereto or in accordance with the Credit Agreement, and (iv)subject to Section 2 and Section 5, will cause any and all Securities Collateral,whether for value paid by such Pledgor or otherwise, to be forthwith depositedwith the Collateral Agent and pledged or assigned hereunder;

 

(c)           except as set forth in theproviso to Section 1(a)(i), the Pledged Stock and Pledged Securities set forthon Schedule II constitute all of the securities owned by such Pledgor that arenot included in the definition of Collateral under the Security Agreement;

 

(d)           such Pledgor (i) has thepower and authority to pledge the Securities Collateral in the manner herebydone or contemplated and (ii) will defend its title or interest thereto ortherein against any and all Liens (other than the Lien created by thisAgreement), however arising, of all Persons whomsoever;

 

(e)           by virtue of (i) theexecution and delivery by the Pledgors of this Agreement, when the PledgedSecurities, certificates or other documents representing or evidencing theSecurities Collateral are delivered to the Collateral Agent in accordance withthis Agreement or (ii) in the case of uncertificated Equity Interests, thefiling of a UCC financing statement or its equivalent in other jurisdictions,each Collateral Agent will obtain a valid and perfected lien upon and securityinterest in such Pledged Securities under New York law and/or any otherapplicable jurisdiction as security for the payment and performance of theObligations, subject to no Liens other than the liens created hereunder orPermitted Liens which arise by operation of law;

 

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(f)            all of the Pledged Stockissued by any Pledgor has been duly authorized and validly issued and is fullypaid and to the extent applicable, nonassessable;

 

(g)           all of the Pledged DebtSecurities issued by any Pledgor have been duly authorized, executed and deliveredand are the enforceable obligations of the issuer thereof; and

 

(h)           all information set forthherein relating to the Pledged Securities is accurate and complete in allmaterial respects as of the date hereof.

 

SECTION 4*.          **Registration in Nominee Name; Denominations*. The Collateral Agent, on behalf of theSecured Parties, shall have the right (in its sole and absolute discretion) tohold the Pledged Securities in its own name as pledgee, the name of its nominee(as pledgee or as sub-agent) or the name of the Pledgors, endorsed or assignedin blank or in favor of the Collateral Agent; provided that theCollateral Agent shall only exercise such right to hold the Pledged Securitiesin its own name as pledge or the name of its nominee (as pledgee or assub-agent) if (a) an Event of Default has occurred and is continuing and (b) ithas provided Borrower with prior written notice of its intent to exercise suchright. During the continuance of any Event of Default, each Pledgor willpromptly give to the Collateral Agent copies of any written notices or otherwritten communications received by it with respect to Pledged Securitiesregistered in the name of such Pledgor. During the continuance of any Event ofDefault, the Collateral Agent shall at all times have the right to exchange thecertificates representing Pledged Securities for certificates of smaller orlarger denominations for any purpose consistent with this Agreement.

 

SECTION 5.           *Voting Rights; Dividends andInterest, etc*. (a)  Unless and until an Event of Default shallhave occurred and be continuing and until prior notice shall have been given tothe Pledgor:

 

(i)            Each Pledgor shall have the right to exercise any and allvoting and/or other consensual rights and powers enuring to an owner of PledgedSecurities or any part thereof for any purpose consistent with the terms ofthis Agreement, the Credit Agreement and the other Loan Documents; provided*,*however, that such Pledgor will not be entitled toexercise any such right if the result thereof would reasonably be expected tomaterially and adversely affect the rights and remedies of any of the SecuredParties under this Agreement, the Credit Agreement or any other Loan Documentor the ability of the Secured Parties to exercise the same;

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(ii)           Each Collateral Agent shall execute and deliver to eachPledgor, or cause to be executed and delivered to each Pledgor, all suchproxies, powers of attorney and other instruments as such Pledgor mayreasonably request for the purpose of enabling such Pledgor to exercise thevoting and/or consensual rights and powers it is entitled to exercise pursuantto subparagraph (i) above and to receive the cash dividends it is entitled toreceive pursuant to subparagraph (iii) below; and

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(iii)          Subject to the next sentence, each Pledgor shall beentitled to receive and retain any and all cash dividends, interest, principaland other amounts paid on the Pledged Securities to the extent and only to theextent that such cash dividends, interest, principal and other amounts arepermitted by or not prohibited by, and otherwise paid in accordance with, theterms and conditions of the Credit Agreement, the other Loan Documents andapplicable laws. All noncash dividends, interest, principal and other amounts,and all dividends, interest, principal and other amounts paid or payable incash or otherwise in connection with a partial or total liquidation or

 

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dissolution, return of capital, capital surplus orpaid-in surplus, and all other distributions (other than distributions referredto in the preceding sentence) made on or in respect of the Pledged Securities,whether paid or payable in cash or otherwise, whether resulting from asubdivision, combination or reclassification of the outstanding capital stockof the issuer of any Pledged Securities or received in exchange for PledgedSecurities or any part thereof, or in redemption thereof, or as a result of anymerger, consolidation, acquisition or other exchange of assets to which suchissuer may be a party or otherwise, shall be and become part of the SecuritiesCollateral, and, if received by any Pledgor, shall be forthwith delivered tothe Collateral Agent in the same form as so received (with any necessary endorsement).

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## (b)           Upon the occurrence andduring the continuance of an Event of Default and following notice to thePledgor, all rights of any Pledgor to dividends, interest, principal or otheramounts that such Pledgor is authorized to receive pursuant to paragraph(a)(iii) above shall cease, and all such rights shall thereupon become vestedin the Collateral Agent, which shall have the sole and exclusive right andauthority to receive and retain such dividends, interest, principal or otheramounts. All dividends, interest, principal or other amounts received by thePledgor contrary to the provisions of this Section 5 shall be held for thebenefit of the Collateral Agent, shall be segregated from other property orfunds of such Pledgor and shall be forthwith delivered to the Collateral Agentupon prior written demand in the same form as so received (with any necessaryendorsement). Any and all money and other property paid over to or received bythe Collateral Agent pursuant to the provisions of this paragraph (b) shall beretained by the Collateral Agent in the Collateral Account established pursuantto the Security Agreement and shall be applied in accordance with the provisionsof Section 7. Within five (5) Business Days after all such Events ofDefault have been cured or waived, the Collateral Agent shall repay to eachPledgor all cash dividends, interest or principal (including interest earnedthereon) that such Pledgor would otherwise be permitted to retain pursuant tothe terms of paragraph (a)(iii) above and which remain in such account; provided,however, the Collateral Agent shall be under no obligation with respectto the investment of such cash dividends, interest or principal, including, forthe avoidance of doubt, any requirement to invest such cash dividends, interestor principal in any class of investment, interest-bearing or otherwise.

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## (c)           Upon the occurrence andduring the continuance of an Event of Default and following notice to thePledgor, all rights of any Pledgor to exercise the voting and consensual rightsand powers it is entitled to exercise pursuant to paragraph (a)(i) of thisSection 5, and the obligations of the Collateral Agent under paragraph (a)(ii)of this Section 5, shall cease, and all such rights shall thereupon becomevested in the Collateral Agent, which shall have the sole and exclusive rightand authority to exercise such voting, managerial and consensual rights andpowers. After all Events of Default have been cured or waived, such Pledgorwill have the right to exercise the voting and consensual rights and powersthat it would otherwise be entitled to exercise pursuant to the terms ofparagraph (a)(i) above.

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## After any and all Events ofDefault have been cured or waived, (i) Pledgor shall have the right to exercisethe voting, managerial and other consensual rights and powers that it wouldotherwise be entitled to pursuant to this Agreement and to receive thepayments, proceeds, dividends, distributions, monies, compensation, property,assets, instruments or rights that it would be authorized to receive and retainpursuant to this Agreement; and (ii) promptly after such cure or waiver, theAgent shall repay and deliver to Pledgor all cash and monies that such Pledgoris entitled to retain pursuant to this Agreement which have not been applied tothe repayment of the Obligations pursuant to the Security Agreement or theCredit Agreement.

 

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## SECTION 6*.          **Remedies upon Event of Default*. Upon the occurrence and during thecontinuance of an Event of Default, subject to applicable regulatory and legalrequirements, the Collateral Agent may sell or otherwise dispose of theSecurities Collateral, or any part thereof, at public or private sale or at anybroker’s board or on any securities exchange, for cash, upon credit or forfuture delivery as the Collateral Agent shall deem appropriate; provided thatany disposition of Securities Collateral by private sale be deemed to have beenmade in a commercially reasonable manner. Each such purchaser at any such saleshall hold the property sold absolutely free from any claim or right on thepart of any Pledgor, and, to the extent permitted by applicable law, thePledgors hereby waive all rights of redemption, stay, valuation and appraisalany Pledgor now has or may at any time in the future have under any rule of lawor statute now existing or hereafter enacted.

 

The Collateral Agent shall give a Pledgor ten (10)Business Days’ prior written notice (which each Pledgor agrees is reasonablenotice within the meaning of Section 9-611 of the Uniform Commercial Code as ineffect in the State of New York or its equivalent in other jurisdictions (the “UCC”))of the Collateral Agent’s intention to make any sale or other disposition ofsuch Pledgor’s Securities Collateral. Such notice, in the case of a publicsale, shall state the time and place for such sale and, in the case of a saleat a broker’s board or on a securities exchange, shall state the board or exchangeat which such sale is to be made and the day on which the SecuritiesCollateral, or portion thereof, will first be offered for sale at such board orexchange. Any such public sale shall be held at such time or times within ordinarybusiness hours and at such place or places as the Collateral Agent may fix andstate in the notice of such sale. At any such sale, the Securities Collateral,or portion thereof, to be sold may be sold in one lot as an entirety or inseparate parcels, as the Collateral Agent may (in its sole and absolutediscretion) determine. The Collateral Agent shall not be obligated to make anysale of any Securities Collateral if it shall determine not to do so,regardless of the fact that notice of sale of such Securities Collateral shallhave been given. The Collateral Agent may, without notice or publication,adjourn any public or private sale or cause the same to be adjourned from timeto time by announcement at the time and place fixed for sale, and such salemay, without further notice, be made at the time and place to which the samewas so adjourned. In case any sale of all or any part of the SecuritiesCollateral is made on credit or for future delivery, the Securities Collateralso sold may be retained by the Collateral Agent until the sale price is paid infull by the purchaser or purchasers thereof, but the Collateral Agent shall notincur any liability in case any such purchaser or purchasers shall fail to takeup and pay for the Securities Collateral so sold and, in case of any suchfailure, such Securities Collateral may be sold again upon like notice. At anypublic (or, to the extent permitted by applicable law, private) sale made pursuantto this Section 6, any Secured Party may bid for or purchase, free fromany right of redemption, stay, valuation or appraisal on the part of anyPledgor (all said rights being also hereby waived and released), the SecuritiesCollateral or any part thereof offered for sale and may make payment on accountthereof by using any Obligation then due and payable to such Secured Party fromany Pledgor as a credit against the purchase price, and such Secured Party may,upon compliance with the terms of sale, hold, retain and dispose of suchproperty without further accountability to any Pledgor therefor. For purposeshereof, (a) a written agreement to purchase the Securities Collateral orany portion thereof shall be treated as a sale thereof, (b) the CollateralAgent shall be free to carry out such sale pursuant to such agreement and(c) no Pledgor shall be entitled to the return of the Securities Collateralor any portion thereof subject thereto, notwithstanding the fact that after theCollateral Agent shall have entered into such an agreement all Events ofDefault shall have been remedied and the Obligations paid in full. As analternative to exercising the power of sale herein conferred upon it, theCollateral Agent may proceed by a suit or suits at law or in equity toforeclose upon the Securities Collateral and to sell the Securities Collateralor any portion thereof pursuant to a judgment or decree of a court or courtshaving competent jurisdiction or pursuant to a proceeding by a court-appointedreceiver. Any sale pursuant to the provisions of this Section shall bedeemed to conform

 

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to the commerciallyreasonable standards as provided in Section 9-611 of the UCC or itsequivalent in other jurisdictions, as applicable.

 

## SECTION 7*.          **Application of Proceeds of Sale*. The proceeds of any sale of SecuritiesCollateral pursuant to Section 6, as well as any Securities Collateralconsisting of cash, shall be applied by the Collateral Agent as provided in theSecurity Agreement.

 

## SECTION 8*.          **Collateral Agent AppointedAttorney-in-Fact*.Subject to Section 25, each Pledgor hereby appoints each Collateral Agent theattorney-in-fact of such Pledgor for the purpose of carrying out the provisionsof this Agreement and taking any action and executing any instrument thateither Collateral Agent may deem reasonably necessary to accomplish thepurposes hereof, which appointment is irrevocable and coupled with an interest,provided that the Collateral Agent shall only take any action pursuantto such appointment upon the occurrence and during the continuation of an Eventof Default. Without limiting the generality of the foregoing, the CollateralAgent shall have the right, upon the occurrence and during the continuance ofan Event of Default, with full power of substitution either in the CollateralAgent’s name or in the name of such Pledgor, to ask for, demand, sue for, collect,receive and give acquittance for any and all moneys due or to become due underand by virtue of any Securities Collateral, to endorse checks, drafts, ordersand other instruments for the payment of money payable to the Pledgor representingany interest or dividend or other distribution payable in respect of theSecurities Collateral or any part thereof or on account thereof and to givefull discharge for the same, to settle, compromise, prosecute or defend anyaction, claim or proceeding with respect thereto, and to sell, assign, endorse,pledge, transfer and to make any agreement respecting, or otherwise deal with,the same; provided, however, that nothing herein contained shallbe construed as requiring or obligating either Collateral Agent to make anycommitment or to make any inquiry as to the nature or sufficiency of anypayment received by such Collateral Agent, or to present or file any claim ornotice, or to take any action with respect to the Securities Collateral or anypart thereof or the moneys due or to become due in respect thereof or anyproperty covered thereby. The Collateral Agent and the other Secured Partiesshall be accountable only for amounts actually received as a result of theexercise of the powers granted to them herein, and neither they nor theirofficers, directors, employees or agents shall be responsible to any Pledgorfor any act or failure to act hereunder, except for their own gross negligence,willful misconduct or bad faith.

 

## SECTION 9*.          **Waivers; Amendment*. (a)  No failure or delay ofthe Collateral Agent in exercising any power or right hereunder shall operateas a waiver thereof, nor shall any single or partial exercise of any such rightor power, or any abandonment or discontinuance of steps to enforce such a rightor power, preclude any other or further exercise thereof or the exercise of anyother right or power. The rights and remedies of the Collateral Agent hereunderand of the other Secured Parties under the other Loan Documents are cumulativeand are not exclusive of any rights or remedies that they would otherwise have.No waiver of any provisions of this Agreement or any other Loan Document orconsent to any departure by any Pledgor therefrom shall in any event be effectiveunless the same shall be permitted by paragraph (b) below, and then such waiveror consent shall be effective only in the specific instance and for the purposefor which given. No notice to or demand on any Pledgor in any case shall entitlesuch Pledgor or any other Pledgor to any other or further notice or demand insimilar or other circumstances.

 

## (b)           Neither this Agreement norany provision hereof may be waived, amended or modified except pursuant to awritten agreement entered into among the Borrower, the Collateral Agent

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## and the Pledgors with respect to which such waiver, amendment ormodification is to apply subject to any consents required in accordance withSection 9.08 of the Credit Agreement.

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# *SECTION 10.        *Securities Act, etc. In view of theposition of the Pledgors in relation to the Pledged Securities, or because ofother current or future circumstances, a question may arise under theSecurities Act of 1933, as now or hereafter in effect, or any similar statutehereafter enacted analogous in purpose or effect (such Act and any such similarstatute as from time to time in effect being called the “Federal SecuritiesLaws”) or equivalent legislation in any other jurisdiction with respect toany disposition of the Pledged Securities permitted hereunder. Each Pledgorunderstands that compliance with the Federal Securities Laws or equivalentlegislation in any other jurisdiction might very strictly limit the course ofconduct of the Collateral Agent if the Collateral Agent was to attempt todispose of all or any part of the Pledged Securities, and might also limit theextent to which or the manner in which any subsequent transferee of any PledgedSecurities could dispose of the same. Similarly, there may be other legalrestrictions or limitations affecting the Collateral Agent in any attempt todispose of all or part of the Pledged Securities under applicable Blue Sky orother state securities laws or similar laws analogous in purpose or effect. EachPledgor recognizes that in light of such restrictions and limitations theCollateral Agent may, with respect to any sale of the Pledged Securities, limitthe purchasers to those who will represent and agree, among other things, toacquire such Pledged Securities for their own account for investment, and notwith a view to the distribution or resale thereof, and upon consummation of anysuch sale the Collateral Agent shall have the right to assign, transfer anddeliver to the purchaser or purchasers thereof the Collateral so sold. EachPledgor acknowledges and agrees that in light of such restrictions andlimitations, the Collateral Agent, in its sole and absolute discretion (butsubject to the other provisions of this Agreement), (a) may proceed to makesuch a sale whether or not a registration statement for the purpose ofregistering such Pledged Securities or part thereof shall have been filed underthe Federal Securities Laws or equivalent legislation in any other jurisdictionand (b) may approach and negotiate with a single potential purchaser to effectsuch sale. Each Pledgor acknowledges and agrees that any such sale might resultin prices and other terms less favorable to the seller than if such sale were apublic sale without such restrictions. In the event of any such sale, theCollateral Agent shall incur no responsibility or liability for selling all orany part of the Pledged Securities at a price that the Collateral Agent, in itssole and absolute discretion, may in good faith deem reasonable under the circumstances,notwithstanding the possibility that a substantially higher price might havebeen realized if the sale were deferred until after registration as aforesaidor if more than a single purchaser were approached. The provisions of thisSection 10 will apply notwithstanding the existence of a public or privatemarket upon which the quotations or sales prices may exceed substantially theprice at which the Collateral Agent sells.

 

# *SECTION 11.        *Registration, etc. Each Pledgor agreesthat, upon the occurrence and during the continuance of an Event of Default hereunder,if for any reason the Collateral Agent desires to sell any of the PledgedSecurities of the Borrower at a public sale, it will, at any time and from timeto time, upon the reasonable written request of the Collateral Agent, use itscommercially reasonable efforts to take or to cause the issuer of such PledgedSecurities to take such action and prepare, distribute, file and/or cause tobecome effective such documents as are required or advisable in the reasonableopinion of counsel for the Collateral Agent to permit the public sale of suchPledged Securities. Each Pledgor further agrees to indemnify, defend and holdharmless the Collateral Agent, each other Secured Party, any underwriter andtheir respective officers, directors, affiliates and controlling Persons (collectively,“indemnitees”) from and against all loss, liability, expenses, costs ofcounsel (including, without limitation, reasonable fees and out-of-pocketexpenses to the Collateral Agent of legal counsel) and claims (including thereasonable costs of investigation) that they may incur insofar as such loss,liability, expense or

 

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# *claimarises out of or is based upon any alleged untrue statement of a material factcontained in any prospectus (or any amendment or supplement thereto) or in anynotification or offering circular, or arises out of or is based upon anyalleged omission to state a material fact required to be stated therein ornecessary to make the statements in any thereof not misleading, except insofaras the same may have been caused by any untrue statement or omission based uponinformation furnished in writing to such Pledgor or the issuer of such PledgedSecurities by the Collateral Agent or any other Secured Party expressly for usetherein. Each Pledgor further agrees, upon such written request referred toabove, to use its reasonable best efforts to qualify, file or register, orcause the issuer of such Pledged Securities to qualify, file or register, anyof the Pledged Securities under the Blue Sky or other securities laws of suchstates as may be requested by the Collateral Agent and keep effective, or causeto be kept effective, all such qualifications, filings or registrations. EachPledgor will bear all reasonable costs and expenses of carrying out itsobligations under this Section 11. Each Pledgor acknowledges that there isno adequate remedy at law for failure by it to comply with the provisions ofthis Section 11 and that such failure would not be adequately compensable indamages, and therefore agrees that its agreements contained in thisSection 11 may be specifically enforced.*

 

# *SECTION 12.        *Termination or Release. (a)  This Agreement and the security interestsgranted hereby (i) shall automatically terminate when all the Obligations havebeen paid in full (except for contingent indemnity obligations not then due),the Lenders have no further commitment to lend under the Credit Agreement or toissue or participate in Letters of Credit and the LC Exposure has been reducedto zero (at which time the Collateral Agent shall execute and deliver to eachPledgor, at such Pledgor’s expense, all UCC termination statements or theirequivalent in any other jurisdiction and other documents which such Pledgorshall reasonably request to evidence such termination) and (ii) to the extentpermitted by applicable law shall continue to be effective or shall bereinstated, as the case may be, if at any time any payment in respect of anyObligation is rescinded or must otherwise be restored by any Secured Party uponany bankruptcy or reorganization of any Pledgor or otherwise. Any execution anddelivery of termination statements or documents pursuant to this Section 12(a)shall be without recourse to or warranty by the Collateral Agent. A SubsidiaryGuarantor shall automatically be released from its obligations hereunder andthe Security Interests in the Collateral of such Subsidiary Guarantor shall beautomatically released in the event that the Equity Interests of suchSubsidiary Guarantor shall be sold, transferred or otherwise disposed of to aPerson that is not an Affiliate of Borrower such that such Person is no longera Subsidiary of Borrower in accordance with the terms of each Loan Document.

 

## (b)           Upon any sale or othertransfer by any Pledgor of any Securities Collateral that is permitted undereach Loan Document to any Person that is not a Pledgor, or upon theeffectiveness of any written consent to the release of the security interestsgranted hereby in any Securities Collateral pursuant to Section 9.08 of theCredit Agreement, the security interests in such Securities Collateral shall beautomatically released. If the capital stock of a Pledgor is sold, transferredor otherwise disposed of to a Person that is not an Affiliate of the Borrowerso that such Pledgor is no longer a Subsidiary of the Borrower pursuant to atransaction permitted by the Credit Agreement, such Pledgor shall be releasedfrom its obligations under this Agreement without further action.

##  

## (c)           In connection with anytermination or release pursuant to paragraph (a) or (b), the Collateral Agentshall execute and deliver to any Pledgor, at such Pledgor’s expense, alldocuments that such Pledgor shall reasonably request to evidence such terminationor release. Any execution and delivery of documents pursuant to this Section 12shall be without recourse to or warranty by the Collateral Agent.

 

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# *SECTION 13.        *Notices. All communications and noticeshereunder shall be in writing and given as provided in Section 9.01 of theCredit Agreement. All communications and notices hereunder to any Pledgor thatis a Domestic Subsidiary shall be given to it at the Borrower at the Borrower’saddress as provided in Section 9.01 of the Credit Agreement, with a copy to theBorrower.

 

# *SECTION 14.        *Further Assurances. Each Pledgor agreesto do such further acts and things, and to execute and deliver such additionalconveyances, assignments, agreements and instruments, as the Collateral Agentmay at any time reasonably request in writing in connection with theadministration and enforcement of this Agreement or with respect to theSecurities Collateral or any part thereof or in order to assure and confirmunto the Collateral Agent, its rights and remedies hereunder.

 

# *SECTION 15.        *Binding Effect; Several Agreement;Assignment. Whenever in this Agreement any of the parties hereto is referred to,such reference shall be deemed to include the permitted successors and assignsof such party; and all covenants, promises and agreements by or on behalf ofany Pledgor that are contained in this Agreement shall bind and inure to thebenefit of its permitted successors and assigns. This Agreement shall becomeeffective as to any Pledgor when a counterpart (including a facsimile copy)hereof executed on behalf of such Pledgor shall have been delivered to theCollateral Agent and a counterpart hereof shall have been executed on behalf ofthe Collateral Agent, and thereafter shall be binding upon such Pledgor and theCollateral Agent and their respective successors and assigns, and shall enureto the benefit of such Pledgor, the Collateral Agent and the other SecuredParties, and their respective successors and assigns, except that no Pledgorshall have the right to assign its rights hereunder or any interest herein orin the Securities Collateral (and any such attempted assignment shall be void),except as expressly contemplated by this Agreement or the other Loan Documents.This Agreement shall be construed as a separate agreement with respect to eachPledgor and may be amended, modified, supplemented, waived or released withrespect to any Pledgor without the approval of any other Pledgor and withoutaffecting the obligations of any other Pledgor hereunder.

 

# *SECTION 16.        *Survival of Agreement; Severability. (a)  All covenants, agreements, representationsand warranties made by any Pledgor herein and in the certificates or otherinstruments prepared or delivered in connection with or pursuant to this Agreementor any other Loan Document shall be considered to have been relied upon by theCollateral Agent and the other Secured Parties and shall survive the making bythe Lenders of the Loans, and the Lenders’ issuance of and participations inLetters of Credit, regardless of any investigation made by the Secured Partiesor on their behalf, and shall continue in full force and effect until thisAgreement shall terminate.

 

## (b)           In the event any one or moreof the provisions contained in this Agreement should be held invalid, illegalor unenforceable in any respect, the validity, legality and enforceability ofthe remaining provisions contained herein shall not in any way be affected orimpaired thereby (it being understood that the invalidity of a particularprovision in a particular jurisdiction shall not in and of itself affect thevalidity of such provision in any other jurisdiction). The parties shallendeavor in good-faith negotiations to replace the invalid, illegal orunenforceable provisions with valid provisions the economic effect of whichcomes as close as possible to that of the invalid, illegal or unenforceableprovisions. It is understood and agreed that this Agreement shall createseparate security interests in the Securities Collateral securing theObligations, as provided in Section 1, and that any determination by any courtwith jurisdiction that the security interests securing any Obligation or classof Obligations is invalid for any reason shall not in and of itself invalidatethe security interests securing any other Obligations hereunder.

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## 10

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# *SECTION 17**.**        ***GOVERNING LAW****. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUEDIN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.**

 

# *SECTION 18.        *Counterparts. This Agreement may be executed intwo or more counterparts, each of which shall constitute an original, but allof which, when taken together, shall constitute a single contract, and shallbecome effective as provided in Section 15. Delivery of an executedcounterpart of a signature page to this Agreement by facsimile transmissionshall be as effective as delivery of a manually executed counterpart of thisAgreement.

 

# *SECTION 19.        *Rules of Interpretation. The rules ofinterpretation specified in Section 1.03 of the Credit Agreement shall beapplicable to this Agreement. Section headings used herein are for convenienceof reference only, are not part of this Agreement and are not to affect theconstruction of, or to be taken into consideration in interpreting, this Agreement.

 

# *SECTION 20.        *Jurisdiction; Consent to Service ofProcess. (a)  Each party hereto herebyirrevocably and unconditionally submits, for itself and its property, to thenonexclusive jurisdiction of any New York State court or Federal court of theUnited States of America sitting in New York City, and any appellate court fromany thereof, in any action or proceeding arising out of or relating to thisAgreement or the other Loan Documents, or for recognition or enforcement of anyjudgment, and each of the parties hereto hereby irrevocably and unconditionallyagrees that, to the extent permitted by applicable law, all claims in respectof any such action or proceeding may be heard and determined in such New YorkState court or, to the extent permitted by applicable law, in such Federalcourt referred to above. Each of the parties hereto agrees that a finaljudgment in any such action or proceeding shall be conclusive and may beenforced in other jurisdictions by suit on the judgment or in any other mannerprovided by applicable law. Nothing in this Agreement shall affect any rightthat the Collateral Agent or any other Secured Party may otherwise have tobring any action or proceeding relating to this Agreement or the other LoanDocuments against any Pledgor or its properties in the courts of any jurisdiction.

 

## (b)           Each party hereto herebyirrevocably and unconditionally waives, to the fullest extent it may legallyand effectively do so, any objection that it may now or hereafter have to thelaying of venue of any suit, action or proceeding arising out of or relating tothis Agreement or the other Loan Documents in any New York State or Federalcourt referred to in paragraph (a) of this Section. Each of the parties heretohereby irrevocably waives, to the fullest extent permitted by law, the defenseof an inconvenient forum to the maintenance of such action or proceeding in anysuch court.

##  

## (c)           Each party to this Agreementirrevocably consents to service of process in the manner provided for noticesin Section 13. Nothing in this Agreementwill affect the right of any party to this Agreement to serve process in anyother manner permitted by law.

##  

# *SECTION 21**.        *****WAIVER OF JURY TRIAL****. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLESTEXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY INRESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR INCONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTYHERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHERPARTY HAS REPRESENTED,**

 

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# ***EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, INTHE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTERINTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONSIN THIS SECTION.***

 

# *SECTION 22.        *Additional Pledgors. Pursuant to Section5.16 of the Credit Agreement, each Domestic Subsidiary of the Borrower that wasnot in existence or not a Domestic Subsidiary on the date of the CreditAgreement is required to enter into this Agreement as a Pledgor upon becoming aDomestic Subsidiary. Upon execution and delivery by the Collateral Agent andsuch Domestic Subsidiary of an instrument in the form of Annex I attached tothe Security Agreement, such Domestic Subsidiary shall become a Pledgorhereunder with the same force and effect as if originally named as a Pledgorherein. The execution and delivery of such instrument shall not require the consentof any Pledgor hereunder. The rights and obligations of each Pledgor hereundershall remain in full force and effect notwithstanding the addition of any newPledgor as a party to this Agreement.

 

# *SECTION 23.        *Financing Statements. Each Pledgor herebyirrevocably authorizes the Collateral Agent at any time and from time to timeto file in any relevant jurisdiction any initial financing statements(including fixture filings) and amendments thereto that contain the informationrequired by Article 9 of the Uniform Commercial Code of each applicablejurisdiction for the filing of any financing statement or amendment relating tothe Securities Collateral, including (i) whether such Pledgor is an organization,the type of organization and any organizational identification number issued tosuch Pledgor, (ii) any financing or continuation statements or other documentswithout the signature of such Pledgor where permitted by law, including thefiling of a financing statement describing the Securities Collateral as “allassets in which the Pledgor now owns or hereafter acquires rights” and (iii) inthe case of a financing statement filed as a fixture filing or coveringSecurities Collateral constituting minerals or the like to be extracted ortimber to be cut, a sufficient description of the real property to which suchSecurities Collateral relates. Each Pledgor agrees to provide all informationdescribed in the immediately preceding sentence to the Collateral Agentpromptly upon request. Copies of such financing statements, as filed, should besent promptly to the Borrower at the address provided in Section 9.01 of theCredit Agreement.

 

# *SECTION 24.        *No Deemed Dividend.Notwithstanding theforegoing, no Pledgor shall be required to take any action pursuant to thisAgreement that the Borrower has reasonably determined would either result inadverse tax consequences under Section 956 of the Code or would contravene anyapplicable law, rule or regulation.

 

[SIGNATUREPAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have dulyexecuted this Agreement as of the day and year first above written.

 
|   | POLYMER GROUP, INC. |
|--------|---------------------|
|   |                |
|   | By:                 |   |
|   |                | Name: |
|   |                | Title: |

 

S-1

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|   | BONLAM (S.C.), INC.                     |
|--------|-----------------------------------------|
|   | CHICOPEE, INC.                          |
|   | DOMINION TEXTILE (USA) INC.             |
|   | FABPRO ORIENTED POLYMERS, INC.          |
|   | FABRENE CORP.                           |
|   | FABRENE GROUP L.L.C.                    |
|   | FIBERGOL CORPORATION                    |
|   | FIBERTECH GROUP, INC.                   |
|   | FNA ACQUISITION, INC.                   |
|   | FNA POLYMER CORP.                       |
|   | LORETEX CORPORATION                     |
|   | PGI EUROPE, INC.                        |
|   | PGI POLYMER, INC.                       |
|   | PNA CORP.                               |
|   | POLY-BOND INC.                          |
|   | POLYIONIX SEPARATION TECHNOLOGIES, INC. |
|   | PRISTINE BRANDS CORPORATION             |
|   | TECHNETICS GROUP, INC.                  |
|   |                                    |
|   |                                    |
|   | By:                                     |   |
|   |                                    | Name: |
|   |                                    | Title: |

 

S-14

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|   | CITICORP NORTH AMERICA, INC., |   |
|--------|-------------------------------|--------|
|   | as  Collateral Agent          |   |
|   |                          |
|   |                          |
|   | By:                           |   |
|   |                          | Name:  |
|   |                          | Title: |
|        |                               |        |  |

 

S-15

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Schedule I to thePledge Agreement

 

DOMESTIC SUBSIDIARIES

 

Bonlam (S.C.), Inc.

Chicopee, Inc.

Dominion Textile (USA) Inc.

FabPro Oriented Polymers, Inc.

Fabrene Corp.

Fabrene Group L.L.C.

FiberGol Corporation

FiberTech Group, Inc.

FNA Acquisition, Inc.

FNA Polymer Corp.

Loretex Corporation

PGI Europe, Inc.

PGI Polymer, Inc.

PNA Corp.

Poly-Bond Inc.

PolyIonix Separation Technologies, Inc.

Pristine Brands Corporation

Technetics Group, Inc.

 

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Schedule II to thePledge Agreement

 

PLEDGED STOCK

 
| **Issuer** | ** ** | **Number   of   Certificate** | ** ** | **Registered Owner** | ** ** | **Number and  Class of Shares/  Type of Interest** | ** ** | **Percentage  of Shares/Interests** | ** ** |
|------------|------------|-------------------------------|------------|----------------------|------------|----------------------------------------------------|------------|-------------------------------------|------------|
|       |       |                          |       |                 |       |                                               |       |                                |       |
|       |       |                          |       |                 |       |                                               |       |                                |       |
|       |       |                          |       |                 |       |                                               |       |                                |       |

 

PLEDGED DEBT SECURITIES

 
| **Issuer** | ** ** | **Payee**  | ** ** | **Principal Amount** | ** ** | **Date of Note** | ** ** | **Maturity Date** | ** ** |
|------------|------------|------------|------------|----------------------|------------|------------------|------------|-------------------|------------|
| ** ** | ** ** | ** ** | ** ** | ** **           | ** ** | ** **       | ** ** | ** **        | ** ** |
| ** ** | ** ** | ** ** | ** ** | ** **           | ** ** | ** **       | ** ** | ** **        | ** ** |
| ** ** | ** ** | ** ** | ** ** | ** **           | ** ** | ** **       | ** ** | ** **        | ** ** |

 

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