Document:

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                                                                    EXHIBIT 10.3

                                                                  EXECUTION COPY

                             SHAREHOLDERS AGREEMENT

         This Shareholders Agreement (this "AGREEMENT") dated as of March 5,
2003 (the "EFFECTIVE DATE") is entered into by and among Polymer Group, Inc., a
Delaware corporation (the "COMPANY"), MatlinPatterson Global Opportunities
Partners L.P., a Delaware limited partnership ("GOF"), Northeast Investors
Trust, a Massachusetts business trust ("NIT"), One Group Income Bond Fund, a
Massachusetts mutual fund ("ONE GROUP INCOME"), One Group High Yield Bond Fund,
a Massachusetts mutual fund ("ONE GROUP HIGH YIELD"), Southern Ute Growth Fund,
an Indian Tribal Fund ("SOUTHERN UTE GROWTH"), Southern Ute Permanent Fund, an
Indian Tribal Fund (together with One Group Income, One Group High Yield and
Southern Ute Growth, "PACHOLDER"), Atlantic Global Funding Ltd., a Cayman
Islands company ("ATLANTIC"), CHYPS 1997-1 Ltd., a Cayman Islands company
("CHYPS 1997"), CHYPS 1999-1 Ltd., a Cayman Islands company (collectively with
Atlantic and CHYPS 1997, "DELAWARE INVESTMENTS") (NIT, Pacholder and Delaware
Investments are collectively referred to herein as the "NON-GOF HOLDERS"), James
G. Boyd, in his individual capacity ("BOYD") and Jerry Zucker, in his individual
capacity ("ZUCKER").

In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto hereby agree as follows:

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

         1.1      DEFINITIONS AND INTERPRETATION.

                  (a)      INTERPRETATION. When a reference is made in this
Agreement to Sections, Exhibits, Appendices or Schedules, such reference shall
be to a Section of or Exhibit, Appendix or Schedule to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to March 5, 2003. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine, or
neuter, as the context requires.

                  (b)      Definitions. When used in this Agreement, the
following terms shall have the meanings set forth below (all terms used in this
Agreement that are not defined in this Article I shall have the meanings set
forth elsewhere in this Agreement).

         1.2      "AFFILIATE" of any Person shall mean any Person, directly or
indirectly, through one or more intermediaries, controlling, controlled by, or
under common control with such Person. The term "control," as used in the
immediately preceding sentence, shall mean with respect to a corporation or
limited liability company, the right to exercise, directly or indirectly,

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more than fifty percent (50%) of the outstanding voting interests in the
controlled corporation or limited liability company, and, with respect to any
individual, partnership, trust, other entity or association, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of the controlled entity or the actions of the
individual, as the case may be.

         1.3      "BOYD" shall have the meaning set forth in the first
introductory paragraph hereto.

         1.4      "Business DAY" shall mean any day that is not a Saturday,
Sunday or other day on which banking institutions in New York, New York are
authorized or required by law or executive order to close.

         1.5      "BYLAWS" shall mean the Bylaws of the Company dated as of
March 5, 2003, as the same may be amended from time to time..

         1.6      "CERTIFICATE OF INCORPORATION" shall mean the Amended and
Restated Certificate of Incorporation of the Company, filed with the Secretary
of State of the State of Delaware on March 5, 2003, as the same may be amended
and restated from time to time.

         1.7      "CHANGE OF CONTROL" shall mean the acquisition by any Person
or group (as defined in Section 13(d)(3) of the Exchange Act), other than any
GOF Party, of beneficial ownership (as defined in Section 13(d) of the Exchange
Act) of all or more than 50% of the assets of the Company and its Subsidiaries,
taken as a whole, or 50% or more of the voting equity of the Company pursuant to
a merger, consolidation, other business combination, reorganization,
restructuring, sale of equity (whether through a new issuance by the Company or
a transfer by a Shareholder), sale of assets, tender offer, exchange offer or
similar transaction or series of transactions.

         1.8      "CLASS A COMMON STOCK" shall mean the Class A Common Stock,
par value $.01 per share, of the Company.

         1.9      "CLASS B COMMON STOCK" shall mean the Class B Common Stock,
par value $.01 per share, of the Company.

         1.10     "CLASS C COMMON Stock" shall mean the Class C Common Stock,
par value $.01 per share, of the Company.

         1.11     "CLASS D COMMON STOCK" shall mean the Class D Common Stock,
par value $.01 per share, of the Company.

         1.12     "CLASS E COMMON STOCK" shall mean the Class E Common Stock,
par value $.01 per share, of the Company.

         1.13     "COMMON STOCK" shall collectively mean the Class A Common
Stock, Class B Common Stock, Class C Common Stock, Class D Common Stock, and
Class E Common Stock.

         1.14     "COMPANY" shall have the meaning set forth in the first
introductory paragraph hereto.

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         1.15     "COMPANY TAG-ALONG NOTICE" shall have the meaning set forth in
Section 3.2.

         1.16     "CONVERTIBLE NOTES" shall mean the 10% convertible
subordinated notes due December 2007, to be issued by the Company on the
Effective Date in an aggregate principal amount of $50,000,000.

         1.17     "CSFB" shall mean Credit Suisse First Boston.

         1.18     "DIA" shall have the meaning set forth in the first
introductory paragraph hereto.

         1.19     "EFFECTIVE DATE" shall have the meaning set forth in the first
introductory paragraph hereto.

         1.20     "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, as each may be amended
from time to time.

         1.21     "EXEMPT SECURITIES" shall mean: (a) shares of Common Stock
issuable upon conversion of the Convertible Notes; (b) shares of Class B Common
Stock issuable pursuant to the anti-dilution provisions of the Class B Common
Stock upon conversion of the Convertible Notes as set forth in Article IV,
Section 2(a)(x) of the Certificate of Incorporation; (c) equity securities of
the Company issued in connection with (i) any acquisition of another Person
(other than an individual) 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 of Directors; (d) up to an aggregate of 4,000,000 shares of Common Stock
(or related options) 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 of Directors; (e) shares of Common Stock
issued in connection with any stock split, stock dividend, recapitalization or
similar transaction by the Company; (f) shares of Common Stock issued pursuant
to a firm commitment underwritten public offering of the Company's Common Stock;
(g) non-convertible debt securities or debt instruments; (h) shares of capital
stock issued pursuant to a rights offering made to all holders of Initial Common
Stock in accordance with applicable Federal securities laws; (i) shares of
Common Stock and other securities issuable pursuant to the Plan; (j) shares of
Common Stock issuable upon exercise of the Series A Warrants and the Series B
Warrants; and (k) 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.

         1.22     "EXPEDITED ISSUANCE" shall have the meaning set forth in
Section 2.3(a).

         1.23     "EXPEDITED PURCHASER" shall have the meaning set forth in
Section 2.3(a).

         1.24     "GOF BOARD MEMBER" shall have the meaning set forth in Section
4.1.

         1.25     "GOF PARTY" shall mean GOF or any Affiliate of GOF.

         1.26     "GOF PARTY TAG-ALONG NOTICE" shall have the meaning set forth
in Section 3.2.

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         1.27     "INITIAL COMMON STOCK" shall mean the issued and outstanding
shares of Common Stock that were issued (a) pursuant to the Plan, (b) upon
conversion of the Convertible Notes or exercise of the Warrants, (c) upon
antidilution adjustments to the Class B Common Stock or Convertible Notes, or
(d) upon stock splits, stock dividends or otherwise, in each case, in respect of
any of the securities set forth in clauses (a), (b) and (c) above.

         1.28     "INITIAL SHAREHOLDERS" shall mean all of the beneficial owners
of Initial Common Stock.

         1.29     "LAW" shall mean any Federal, state, local or foreign statute,
law, regulation, rule, ordinance or code.

         1.30     "NEW POLYMER AFFILIATED TRANSACTION" shall mean entering into
any transaction involving any PGI Affiliate; provided, however, that, in the
case of GOF, CSFB or a PGI Affiliate of GOF or CSFB, that such transaction
exceeds $10,000,000; provided, further, that transactions between the Company,
its Subsidiaries or its Affiliates and Huntsman Company, LLC, its Subsidiaries
or its Affiliates substantially consistent with past practice shall not be a New
Polymer Affiliated Transaction for the purposes of the foregoing.

         1.31     "NON-GOF BOARD MEMBER" shall have the meaning set forth in
Section 4.1.

         1.32     "NON-GOF HOLDER" shall have the meaning set forth in the first
introductory paragraph hereto.

         1.33     "NOTEHOLDER COUNSEL" shall mean counsel, to the holders of
Convertible Notes and/or Initial Common Stock issued upon conversion thereof in
connection with any registration pursuant to Section 5.5, which Noteholder
Counsel shall be chosen by GOF; provided that if GOF and its Affiliates shall
not hold at least fifty percent of the Initial Common Stock issuable upon
conversion of the Convertible Notes (calculated assuming the conversion of all
outstanding Convertible Notes), Noteholder Counsel shall be chosen by the
Non-GOF Holders holding at least fifty percent of the Initial Common Stock
issuable upon conversion of the Convertible Notes held by all Non-GOF Holders
(calculated assuming the conversion of all outstanding Convertible Notes);
provided, further, that such counsel shall be reasonably satisfactory to the
Company.

         1.34     "NOTICE OF ACCEPTANCE" shall mean a written notice, in a form
proscribed by the Company (which form may, at the Company's reasonable
discretion, include purchaser representations and warranties and other terms and
provisions customary for transactions of such type, including without
limitation, representations and warranties as to such Initial Shareholder's
title to the Common Stock and authority to purchase the Preemptive Securities)
delivered by an Initial Shareholder or his nominee to the Company.

         1.35     "OVERSUBSCRIPTION SHARES" shall mean the number of Preemptive
Securities (determined on an as exercised or as converted basis) initially
offered in accordance with Section 2.2 and 2.3 that Initial Shareholders fail to
elect to exercise their right to purchase pursuant thereto (excluding elections
by Initial Shareholders to purchase Oversubscription Shares).

         1.36     "PARTICIPATING SHAREHOLDER" shall have the meaning set forth
in Section 3.2(b).

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         1.37     "PERSON" shall mean an individual, partnership, limited
partnership, limited liability partnership, limited liability company,
corporation, trust, estate, association, custodian, trustee, executor,
administrator, nominee or any other entity.

         1.38     "PGI AFFILIATE" shall mean (a) GOF, (b) Boyd, (c) Zucker, (d)
CSFB, (e) any Insider (as defined in 11 U.S.C. sec 101) of GOF, Boyd, Zucker or
CSFB, (f) the Intertech Group, Inc., (g) the GTC Fund III Limited Partnership
and (h) any other entity directly or indirectly controlling or controlled by or
under direct or indirect common control with GOF, Boyd, Zucker or CSFB, where
control means the power to direct the management or policies of such entity,
directly or indirectly; provided that nothing in this definition shall be an
admission that any such entity is an "affiliate" of the Company for any purpose
other than for the purpose of defining PGI Affiliate in this Agreement.

         1.39     "PLAN" shall mean the Debtors' Joint Second Amended Modified
Plan of Reorganization, dated January 16, 2003.

         1.40     "POST-ISSUANCE OFFER NOTICE" shall have the meaning set forth
in Section 2.3(a).

         1.41     "PREEMPTIVE SECURITIES" shall have the meaning set forth in
Section 2.1.

         1.42     "PRE-ISSUANCE OFFER NOTICE" shall have the meaning set forth
in Section 2.2(a).

         1.43     "SECURITIES ACT" shall mean the Securities Act of 1933, as the
same may be amended from time to time.

         1.44     "SERIES A WARRANTS" shall mean the Series A Warrants to
purchase shares of Class D Common Stock, par value $.01 per share, which
warrants shall be issued by the Company as of the Effective Date.

         1.45     "SERIES B WARRANTS" shall mean the Series B Warrants to
purchase shares of Class E Common Stock, par value $.01 per share, which
warrants shall be issued by the Company as of the Effective Date.

         1.46     "SHAREHOLDERS" shall mean all of the beneficial owners of
issued and outstanding Common Stock.

         1.47     "SHAREHOLDER TAG-ALONG ACCEPTANCE NOTICE" shall mean a written
notice, in a form proscribed by the GOF Party proposing to sell Subject Shares
(which form may, at such GOF Party's reasonable discretion, include seller
representations and warranties and other terms and provisions customary for
transactions of such type, including without limitation, representations and
warranties as to such Initial Shareholder's title to the Common Stock and
authority to sell the same) delivered by an Initial Shareholder or his nominee
to the Company.

         1.48     "SUBJECT SHARES" shall have the meaning set forth in Section
3.1.

         1.49     "SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership, limited partnership, limited liability partnership,
limited liability company or other legal entity in which such Person (either
directly or indirectly through or together with other Subsidiaries) owns

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more than 50% of the voting securities of such corporation, partnership, limited
liability company or other legal entity.

         1.50     "TAG-ALONG SHARES" shall have the meaning set forth in Section
3.2(b).

         1.51     "THIRD PARTY" shall have the meaning set forth in Section 3.1.

         1.52     "WARRANTS" shall mean the Series A Warrants and Series B
Warrants.

         1.53     "ZB BOARD MEMBER" shall have the meaning set forth in Section
4.1.

                                   ARTICLE II
                                PREEMPTIVE RIGHTS

         2.1      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 Section 2.2; PROVIDED, HOWEVER,
that the Company may issue Preemptive Securities solely to Initial Shareholders
without compliance with Section 2.2 if the Company complies with Section 2.3.

         2.2      OFFER PRIOR TO ISSUANCE.

                  (a)      Prior to any issuance of any Preemptive Securities,
the Company (directly or through its agent) shall deliver to each Initial
Shareholder that is the record holder of Initial Common Stock and each broker,
dealer, trust company, commercial bank and other nominee that is the record
holder of Initial Common Stock, in each case, as of a record date set by the
Company for such purpose, a written notice of any proposed or intended issuance
of Preemptive Securities (the "PRE-ISSUANCE OFFER NOTICE"), which Pre-Issuance
Offer Notice shall (a) identify and describe the Preemptive Securities proposed
or intended to be issued, (b) disclose the number, price and other terms upon
which they are to be issued, (c) indicate the procedure for each Initial
Shareholder to offer to purchase such Initial Shareholder's initial pro rata
portion (determined in accordance with this Section 2.2(a)) of such Preemptive
Securities and such Initial Shareholder's pro rata portion of Oversubscription
Shares, and (d) include a deadline for Initial Shareholders or their respective
nominees, as the case may be, to deliver a Notice of Acceptance and payment of
the purchase price for such Initial Shareholder's initial pro rata portion of
Preemptive Securities and any Oversubscription Shares sought to be purchased
thereby to the Company (or its agent), which deadline shall in no event be later
than thirty (30) calendar days or earlier than ten (10) Business Days after the
date of the Pre-Issuance Offer Notice; PROVIDED that such deadline may be later
than thirty (30) calendar days after the date of the Pre-Issuance Offer Notice
if (i) GOF consents thereto in writing, or (ii) outside legal counsel to the
Company (which counsel shall be reasonably satisfactory to GOF) 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. An
Initial Shareholder shall not be entitled to purchase Oversubscription Shares
unless such Initial Shareholder has purchased its full amount of its initial pro
rata portion of Preemptive Securities. For purposes of this Section 2.2, an
Initial Shareholder's initial 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)

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proposed to be issued by (y) a fraction, the numerator of which is the aggregate
number of issued and outstanding shares of Initial Common Stock then
beneficially owned by such Initial Shareholder, and the denominator of which is
the aggregate number of issued and outstanding shares of Initial Common Stock
then beneficially owned by all Initial Shareholders. For the purposes of this
Section 2.2, an Initial Shareholder's pro rata portion of Oversubscription
Shares shall equal the product of (a) the Oversubscription Shares in such
offering multiplied by (b) a fraction, the numerator of which is the aggregate
number of issued and outstanding shares of Initial Common Stock then
beneficially owned by such Initial Shareholder, and the denominator of which is
the aggregate number of issued and outstanding shares of Initial Common Stock
then beneficially owned by all Initial Shareholders who elected to (i) purchase
their full initial pro rata portion of Preemptive Securities and (ii) purchase
Oversubscription Shares.

                  (b)      To purchase its pro rata portion of any Preemptive
Securities to be issued by the Company and any Oversubscription Shares, an
Initial Shareholder or his broker, dealer, trust company, commercial bank or
other nominee must deliver a Notice of Acceptance, along with a certified check
(or other form of payment approved by the Company) for the purchase price for
such Preemptive Securities (including any Oversubscription Shares), to the
Company (or its agent) in accordance with the instructions set forth on the
Notice of Acceptance prior to the deadline set forth in the Pre-Issuance Offer
Notice. The Company shall issue to each Initial Shareholder that has timely
returned a properly completed Notice of Election, along with a certified check
(or other means of payment approved by the Company) for the purchase price, the
applicable number of Preemptive Securities and Oversubscription Shares in
accordance with the terms set forth in the Pre-Issuance Offer Notice.

                  (c)      In the event that the Company complies with the
procedures set forth in this Section 2.2 and not all of the Preemptive
Securities are accepted for purchase (after taking into account all
Oversubscription Shares sought to be purchased by Initial Shareholders), the
Company shall have 180 days from the date of the deadline set forth in the
applicable Pre-Issuance Offer 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 Initial Shareholders to any other purchaser or purchasers
(including Initial Shareholders or their 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 Pre-Issuance Offer Notice. Any Preemptive
Securities not acquired by the Initial Shareholders or any other purchaser or
purchasers prior to the date that is 180 days after the deadline set forth in
the applicable Pre-Issuance Offer Notice may not be issued until they are again
offered to the Initial Shareholders under the procedures specified in this
Section 2.2 or Section 2.3.

         2.3      OFFER AFTER ISSUANCE.

                  (a)      Subject to this Section 2.3(a), the Company may issue
to one or more Initial Shareholders (or an Affiliate thereof) (each an
"EXPEDITED PURCHASER"), without compliance with the procedures set forth in
Section 2.2, such Initial Shareholders' initial pro rata portion (as determined
in accordance with the last sentence of this Section 2.3(a)) of the total amount
of Preemptive Securities proposed to be issued by the Company (an "EXPEDITED
ISSUANCE"). In such event, the Company (directly or through its agent) shall, as
soon as reasonably practicable after an Expedited Issuance, deliver to each
Initial Shareholder that is the

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record holder of Initial Common Stock and each broker, dealer, trust company,
commercial bank and other nominee that is the record holder of Initial Common
Stock, in each case, as of a record date set by the Company for such purpose, a
written notice of the issuance of Preemptive Securities (the "POST-ISSUANCE
OFFER NOTICE"), which Post-Issuance Offer Notice shall (a) identify and describe
the Preemptive Securities that were issued, and disclose the date of such
Expedited Issuance, (b) disclose the number, price and other terms upon which
they were issued, (c) indicate the procedure for each Initial Shareholder to
purchase such Initial Shareholder's initial pro rata portion (determined in
accordance with this Section 2.3(a)) of such Preemptive Securities and such
Initial Shareholder's pro rata portion of Oversubscription Shares on the same
terms as in such Expedited Issuance, and (d) include a deadline of not less than
thirty (30) calendar days for such Initial Shareholders or their respective
nominees, as the case may be, to deliver a Notice of Acceptance and payment of
the purchase price for such Initial Shareholder's initial pro rata portion of
Preemptive Securities and any Oversubscription Shares sought to be purchased to
the Company (or its agent). An Initial Shareholder shall not be entitled to
purchase Oversubscription Shares unless such Initial Shareholder has purchased
its full amount of its initial pro rata portion of Preemptive Securities. For
purposes of this Section 2.3(a), an Initial Shareholder's initial pro rata
portion of Preemptive Securities shall equal (x) the sum of the number of
Preemptive Securities proposed to be issued (or issued) by the Company in the
Expedited Issuance, determined on an as exercised or as converted basis, plus
the additional number of Preemptive Securities proposed to be issued by the
Company, determined on an as exercised or as converted basis, multiplied by (y)
a fraction, the numerator of which is the aggregate number of issued and
outstanding shares of Initial Common Stock beneficially owned by such Initial
Shareholder immediately prior to the Expedited Issuance, and the denominator of
which is the aggregate number of issued and outstanding shares of Initial Common
Stock beneficially owned by all Initial Shareholders immediately prior to the
Expedited Issuance. For the purposes of this Section 2.3, an Initial
Shareholder's pro rata portion of Oversubscription Shares shall equal the
product of (a) the Oversubscription Shares in such offering multiplied by (b) a
fraction, the numerator of which is the aggregate number of issued and
outstanding shares of Initial Common Stock beneficially owned by such Initial
Shareholder immediately prior to the Expedited Issuance, and the denominator of
which is the aggregate number of issued and outstanding shares of Initial Common
Stock beneficially owned immediately prior to the Expedited Issuance by all
Initial Shareholders who elected to (i) purchase their full initial pro rata
portion of Preemptive Securities and (ii) purchase Oversubscription Shares.

                  (b)      To purchase its pro rata portion of Preemptive
Securities and any Oversubscription Shares, an Initial Shareholder (other than
the Expedited Purchasers) or such Initial Shareholder's broker, dealer, trust
company, commercial bank or other nominee must deliver a Notice of Acceptance,
along with a certified check (or other form of payment approved by the Company)
for the purchase price for such Preemptive Securities (including any
Oversubscription Shares), to the Company (or its agent) in accordance with the
instructions set forth on the Notice of Acceptance prior to the deadline set
forth in the Post-Issuance Offer Notice. The Company shall issue to each Initial
Shareholder that has timely returned a properly completed Notice of Election,
along with a certified check (or other means of payment approved by the Company)
for the purchase price, the applicable number of Preemptive Securities and any
Oversubscription Shares in accordance with the terms set forth in the
Post-Issuance Offer Notice.

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         2.4      NON-MATERIAL VARIATION OF PROCEDURES. The Company, with the
approval of its Board of Directors, including at least one Non-GOF Board Member,
and the written consent of GOF, may alter the procedures set forth in Sections
2.2 and 2.3 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 Sections 2.2 or 2.3 may be made in the manner set forth in this Section
2.4 if such alteration would result in a material adverse effect on the
preemptive rights provided in this Article II.

         2.5      WAIVER. The Company may issue Preemptive Securities without
compliance with the terms and provisions of Sections 2.2 and 2.3 with the prior
consent of both (a) the Board of Directors of the Company, including at least
one Non-GOF Board Member, and (b) GOF.

         2.6      TERMINATION. The terms and provisions of this Article II shall
terminate upon the earlier of (a) a Change of Control or (b) the consent of both
(i) the Board of Directors of the Company, including at least one Non-GOF Board
Member, and (ii) GOF.

                                   ARTICLE III
                                TAG-ALONG RIGHTS

         3.1      TAG-ALONG RIGHTS. The GOF Parties will not sell any shares of
Common Stock to any Person that is not a GOF Party (a "THIRD PARTY") without
compliance with the terms of this Article III; PROVIDED, HOWEVER, that the terms
and provisions of this Article III shall not be applicable to any sale by a GOF
Party if (a) prior to and after giving effect to such sale the GOF Parties shall
beneficially own at least an aggregate of 54.9% of the Common Stock of the
Company, assuming the exercise, conversion and exchange of all securities
immediately exercisable, convertible or exchangeable for Common Stock on the
date of determination, or (b) the GOF Party's sale to a Third Party is in
connection with a tender offer by such Third Party open to all holders of
Initial Common Stock and in accordance with the requirements of applicable
Federal securities laws. All shares of Common Stock proposed to be sold by a GOF
Party and not excluded from the terms and provisions of this Article III
pursuant to the proviso of the immediately preceding sentence are referred to
herein as "SUBJECT SHARES".

         3.2      PROCEDURES.

                  (a)      Prior to the sale of any Subject Shares to a Third
Party, the GOF Party shall deliver to the Company a written notice of the
proposed or intended sale of Subject Shares (the "GOF PARTY TAG-ALONG NOTICE"),
which GOF Party Tag-Along Notice shall (a) identify the Subject Shares proposed
or intended to be sold, and (b) disclose the number, price and other terms upon
which they are to be sold. Within three (3) Business Days of the receipt of the
GOF Party Tag-Along Notice, the Company shall set a record date for the
determination of Initial Shareholders entitled to exercise tag-along rights with
respect to the Subject Shares identified in the GOF Party Tag-Along Notice
(which record date shall not be more than 15 calendar days after the receipt of
the GOF Party Tag-Along Notice ) and, within two Business Days of such record
date, 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 U.S. Securities and
Exchange Commission and any other governmental authority) to deliver to each
Initial Shareholder that is the record holder of

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Common Stock and each broker, dealer, trust company, commercial bank and other
nominee that is the record holder of Common Stock, in each case, as of the
record date set by the Company, a written notice of the proposed or intended
sale of Subject Shares (the "COMPANY TAG-ALONG NOTICE"). The Company Tag-Along
Notice shall be satisfactory in all respects to GOF and shall (a) identify the
Subject Shares proposed or intended to be sold, (b) disclose the number, price
and other terms upon which they are to be sold, (c) inform each Initial
Shareholder of his right to sell such Initial Shareholder's pro rata portion
(determined in accordance with the last sentence of this Section 3.2) of shares
of Common Stock along with the GOF Party to the Third Party, (d) include all
other information, disclosures, statements and documents as may be required by
Law (which information, disclosures, statements and documents shall be
reasonably satisfactory to GOF), and (e) include a deadline for Initial
Shareholders or their respective nominees, as the case may be, to deliver a
Shareholder Tag-Along Acceptance Notice, along with the shares of Common Stock
to be sold, to GOF (or its agent) in accordance with the terms of the
Shareholder Tag-Along Acceptance Notice, which deadline shall in no event be
later than thirty (30) calendar days or earlier than ten (10) Business Days
after the date of the Company Tag-Along Notice; PROVIDED that such deadline may
be later than thirty (30) calendar days after the date of the Company Tag-Along
Notice if (i) GOF consents thereto in writing, or (ii) outside legal counsel to
the Company (which counsel shall be reasonably satisfactory to GOF) 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. For purposes of this Section 3.2, an
Initial Shareholder'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 of Initial Common Stock then beneficially owned by such
Initial Shareholder, and the denominator of which is the aggregate number of
shares of Initial Common Stock then issued and outstanding.

                  (b)      To sell his pro rata portion of shares of Common
Stock along with the GOF Party to the Third Party each Initial Shareholder or
his broker, dealer, trust company, commercial bank or other nominee must (a)
deliver a Shareholder Tag-Along Acceptance Notice, along with the shares of
Common Stock to be sold, to GOF (or its agent) in accordance with the
instructions set forth on the Shareholder Tag-Along Acceptance Notice; and (b)
comply with any other applicable terms of the proposed sale (including executing
definitive documentation and any related documents), in each case, prior to the
deadline set forth in the Company Tag-Along Notice (an Initial Shareholder
satisfying such requirements shall be referred to herein as a "PARTICIPATING
SHAREHOLDER"). Upon compliance with the foregoing procedures, the GOF Party may
sell the Subject Shares (less the number of Tag-Along Shares (as defined below))
for a period of up to 180 days after the deadline set forth in the Company
Tag-Along Notice, upon terms and conditions (including the per share price)
which are not more favorable to the GOF Party, in the aggregate, than those set
forth in the GOF Tag-Along Notice; PROVIDED that such sale provides for the
purchase of each Participating Shareholders pro rata portion of Common Stock
(the "TAG-ALONG SHARES") on terms and conditions no less favorable than those
set forth in the GOF Tag-Along Notice. Any Subject Shares not sold by the GOF
Party prior to the date that is 180 days after the deadline set forth in the
Company Party Tag-Along Notice may not be sold without compliance with this
Section 3.2.

                                       10

<Page>

                  (c)      Promptly (but in no event later than three (3)
Business Days) after the consummation of the sale of Subject Shares by a GOF
Party to a Third Party, the GOF Party shall (i) notify the Company 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 (directly
or through its agent) shall promptly distribute such sales proceeds to the
applicable Initial Shareholders.

         3.1      NON-MATERIAL VARIATION OF PROCEDURES. The Company, with the
approval of its Board of Directors, including at LEAST one Non-GOF Board Member,
and the written consent of GOF, 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 a material adverse effect on the tag-along rights
provided in this Article III.

         3.2      WAIVER. A GOF Party may sell Subject Shares without compliance
with the terms and provisions of SECTIONS 3.2 with the prior consent of both (a)
the Board of Directors of the Company, including at least one Non-GOF Board
Member, and (b) GOF.

         3.3      TERMINATION. The terms and provisions of this Article III
shall terminate upon the earlier of (a) a Change of Control or (b) the consent
of both (i) the Board of Directors of the Company, including at least one
Non-GOF Board Member, and (ii) GOF.

                                   ARTICLE IV
                               BOARD OF DIRECTORS

         4.1      NUMBER, TERM, AND QUALIFICATIONS.

                  (a)      INITIAL BOARD OF DIRECTORS. Pursuant to the Plan and
this Agreement, on the Effective Date, the Company's Board of Directors shall be
(a) fixed at nine (9) members, each with one year terms, subject to the removal
provisions of the Company's Bylaws, and (b) composed of five (5) directors
designated by GOF (together with any direct or indirect successors thereto
designated by GOF, the "GOF BOARD MEMBERS"), two (2) directors designated by the
pre-Effective Date Board of Directors of the Company, who shall be Zucker and
Boyd (together with any direct or indirect successors thereto, the "ZB BOARD
MEMBERS"), and two (2) directors designated by the Non-GOF Holders (together
with any direct or indirect successors thereto, the "NON-GOF BOARD MEMBERS").

                  (b)      SUBSEQUENT ELECTIONS.

                  At the annual meeting of stockholders for the calendar years
2003, 2004 and 2005, GOF, each Non-GOF Holder, Zucker (as long as he is a
director) and Boyd (as long as he is a director) each shall vote or cause to be
voted all shares of Common Stock and other voting equity owned by him or it, or
over which he or it has voting control, and otherwise use its respective best
efforts, so as to nominate and elect to the Board of Directors the GOF Board
Members, Non-GOF Board Members and ZB Board Members sitting on the Board of
Directors

                                       11

<Page>

on the date immediately preceding such meeting; provided that if there
shall be any vacancy on the Board of Directors on the date immediately preceding
such meeting as the result of the removal, resignation, death, disability or
otherwise of a GOF Board Member, Non-GOF Board Member or ZB Board Member, GOF,
each Non-GOF Holder, Zucker and Boyd each shall vote or cause to be voted all
shares of Common Stock and other voting equity owned by him or it, or over which
he or it has voting control, and otherwise use its respective best efforts, so
as to nominate and elect a successor designated by GOF, if the director was a
GOF Board Member, designated by the remaining Non-GOF Board Member, if the
director was a Non-GOF Board Member and designated by the remaining ZB Board
Member, if the director was a ZB Board Member; provided that (i) GOF shall not
be required to vote, or cause to be voted, the shares of Common Stock or other
voting equity owned by it or over which it has voting control, or use its best
efforts, to nominate or elect any proposed director if such proposed director
was previously removed from the Board of Directors in accordance with the terms
of this Agreement, and (ii) upon the removal of any ZB Board Member pursuant to
Sections 4.2(c) or (d), the remaining ZB Board Member shall not have the right
to designate a successor to the removed ZB Board Member.

         4.2      VACANCIES.

                  (a)      At any time prior to the third (3rd) anniversary of
the Effective Date, upon the vacancy of any director due to resignation, removal
or otherwise, GOF, each Non-GOF Holder, Zucker and Boyd each shall vote or cause
to be voted all shares of Common Stock and other voting equity owned by him or
it, or over which he or it has voting control, and otherwise use its respective
best efforts, so as to nominate and elect a successor designated by GOF, if the
director was a GOF Board Member, designated by the remaining Non-GOF Board
Member, if the director was a Non-GOF Board Member and designated by the
remaining ZB Board Member, if the director was a ZB Board Member; provided that
(i) GOF shall not be required to vote, or cause to be voted, the shares of
Common Stock or other voting equity owned by it or over which it has voting
control, or use its best efforts, to nominate or elect any proposed director if
such proposed director was previously removed from the Board of Directors in
accordance with the terms of this Agreement, and (ii) upon the removal of any ZB
Board Member pursuant to Sections 4.2(c) or (d), the remaining ZB Board Member
shall not have the right to designate a successor to the removed ZB Board
Member.

                  (b)      At any time on or after the third (3rd) anniversary
of the Effective Date, GOF, each Non-GOF Holder, Zucker and Boyd shall each vote
or cause to be voted all shares of Common Stock and other voting equity owned by
him or it, or over which he or it has voting control, so as to nominate, include
on the Company's slate of directors and elect each GOF Board Member, ZB Board
Member and Non-GOF Board Member that served on the Board of Directors
immediately prior to such election and/or each other Shareholder nominee;
provided that in the case of each such specific nomination (i) such GOF Board
Member, ZB Board Member, Non-GOF Board Member or other Shareholder nominee has
been properly nominated by a Shareholder, and (ii) the nomination thereof has
the support of the affirmative vote of at least 12.5% of the issued and
outstanding shares of Common Stock; provided, further that each share of Common
Stock may be counted in support of only one nominee; provided further that in no
event shall the size of the Company's Board of Directors be increased by
operation of this Section 4.2(b).

                                       12

<Page>

                  (c)      GOF shall not vote, or cause to be voted, the shares
of Common Stock or other voting equity owned by it, or over which it has voting
control, to remove Zucker or any ZB Board Member that is a direct or indirect
successor thereto from the Board of Directors without cause unless (i) Zucker's
employment with the Company or its Subsidiaries is terminated for cause, or (ii)
(A) Zucker's employment with the Company or its Subsidiaries is terminated
without cause or Zucker resigns and (B) the Company tenders or otherwise pays to
Zucker the amounts that he is entitled to receive under his letter agreement
dated May 22, 1998, as amended on May 11, 2002 (as the same may be amended from
time to time, the "Zucker Change of Control Agreement") or any other applicable
agreement; provided, however, that during the pendency of any dispute relating
to (I) Zucker's termination of employment, (II) whether such termination of
employment is for cause, or (III) whether Zucker is entitled to payment under
the Zucker Change of Control Agreement or any other applicable agreement, GOF
shall be permitted to vote, and cause to be voted, the shares of Common Stock or
other voting equity owned by it, and over which it has voting control, to remove
Zucker (or any ZB Board Member that is a direct or indirect successor thereto)
from the Board of Directors. Nothing in this Section 4.2(c) shall limit GOF's
right to vote, or cause to be voted, the shares of Common Stock or other voting
equity owned by it, or over which it has voting control, to remove for cause
Zucker or any ZB Board Member that is a direct or indirect successor thereto
from the Board of Directors.

                  (d)      GOF shall not vote, or cause to be voted, the shares
of Common Stock or other voting equity owned by it, or over which it has voting
control, to remove Boyd or any ZB Board Member that is a direct or indirect
successor thereto from the Board of Directors without cause unless (i) Boyd's
employment with the Company or its Subsidiaries is terminated for cause, or (ii)
(A) Boyd's employment with the Company or its Subsidiaries is terminated without
cause or Boyd resigns and (B) the Company tenders or otherwise pays Boyd the
amounts that he is entitled to receive under his letter agreement dated May 22,
1998, as amended on May 11, 2002 (as the same may be amended from time to time,
the "Boyd Change of Control Agreement") or any other applicable agreement;
provided, however, that during the pendency of any dispute relating to (I)
Boyd's termination of employment, (II) whether such termination of employment is
for cause, or (III) whether Boyd is entitled to payment under the Boyd Change of
Control Agreement or any other applicable agreement, GOF shall be permitted to
vote, and cause to be voted, the shares of Common Stock or other voting equity
owned by it, and over which it has voting control, to remove Boyd (or any ZB
Board Member that is a direct or indirect successor thereto) from the Board of
Directors. Nothing in this Section 4.2(d) shall limit GOF's right to vote, or
cause to be voted, the shares of Common Stock or other voting equity owned by
it, or over which it has voting control, to remove for cause Boyd or any ZB
Board Member that is a direct or indirect successor thereto from the Board of
Directors.

                  (e)      If a ZB Board Member is removed as a director for
cause or otherwise in accordance with Section 4.2(c) or (d), the Company
promptly shall call a special meeting of shareholders for the purpose of
reducing the number of directors on the Company's Board of Directors to
eliminate the vacancy created by such removal and GOF shall, at such special
meeting, vote, and cause to be voted, the shares of Common Stock or other voting
equity owned by it, or over which it has voting control, in favor of reducing
the number of directors on the Company's Board of Directors to eliminate such
vacancy; provided, however, that (i) during the pendency of any dispute
described in the proviso of Section 4.2(c)(ii), GOF shall not vote, or cause to
be voted, the shares of Common Stock or other voting equity owned by it, or over
which

                                       13

<Page>

it has voting control in favor of either the elimination of the vacancy created
by the removal of Zucker or any ZB Board Member that is a direct or indirect
successor thereto or the election of any director to fill such vacancy, and (ii)
during the pendency of any dispute described in the proviso of Section
4.2(d)(ii), GOF shall not vote, or cause to be voted, the shares of Common Stock
or other voting equity owned by it, or over which it has voting control in favor
of either the elimination of the vacancy created by the removal of Boyd or any
ZB Board Member that is a direct or indirect successor thereto or the election
of any director to fill such vacancy.

                  (f)      GOF shall not vote, or cause to be voted, the shares
of Common Stock or other voting equity owned by it, or over which it has voting
control, to remove without cause any Non-GOF Board Member.

         4.3      COMMITTEES. At least one Non-GOF Board Member shall be a
member of each of the audit committee, compensation committee and executive
committee for so long as a Non-GOF Board Member has a right to a seat on the
Board of Directors pursuant to Sections 4.1, 4.2(a) or 4.2(b); PROVIDED that at
least one Non-GOF Board Member is a member of the Company's Board of Directors
during such period and that the member to serve on such committees satisfies all
applicable Federal, state, securities exchange, quotation system, and self
regulatory organization (including, without limitation, the Securities and
Exchange Commission, New York Stock Exchange, Nasdaq and the OTC Bulletin Board,
as the case may be) rules and regulations regarding, concerning and relating to
qualifications and requirements necessary for service on such committees.

         4.4      TERMINATION. The terms and provisions of this Article IV shall
terminate upon a Change of Control.

                                    ARTICLE V
                              AFFIRMATIVE COVENANTS

         5.1      REPORTING OBLIGATIONS.

                  (a)      OBLIGATION TO REGISTER. If a class of the Company's
equity securities is not otherwise registered pursuant to Section 12(d) or
Sections 12(g)(1)(A) or (B) of the Exchange Act, the Company shall (a) use its
best efforts to register the Class A Common Stock, on a voluntary basis, with
the Commission pursuant to Section 12(g) of the Exchange Act and to have such
registration declared effective as soon as possible after the date hereof, and
(b) file all periodic and other reports and filings required to be filed by
issuers with a class of equity securities registered under Sections 12(d) or (g)
of the Exchange Act.

                  (b)      TERMINATION OF OBLIGATION TO REGISTER. The Company
shall not seek to terminate the voluntary registration OF its Class A Common
Stock required by Section 5.1(a) above, and shall continue to file all periodic
and other reports and filings required to be filed by issuers with a class of
equity securities registered under Section 12(g) of the Exchange Act, until the
termination of the covenants in this Article V in accordance with Section 5.6.

         5.2      INCORPORATION. The Company shall maintain its corporate
existence in Delaware; PROVIDED, HOWEVER, that the Company may reincorporate
elsewhere if such reincorporation is

                                       14

<Page>

necessary to effectuate a bona fide business combination or other transaction;
PROVIDED, FURTHER, that any such business combination or other transaction with
a PGI Affiliate shall require the approval of one (1) Non-GOF Board Member.

         5.3      LISTING. On the Effective Date, or as soon as practicable
thereafter, the Company shall use its reasonable best efforts to become a listed
company on the New York Stock Exchange or to become included for quotation on
The Nasdaq Stock Market; provided that the Company shall initially list its
shares of Class A Common Stock and Class B Common Stock for trading on the
Nasdaq bulletin board or over-the-counter market.

         5.4      RELATED PARTY TRANSACTIONS.

                  (a)      Without the written approval of at least one Non-GOF
Board Member, the Company may not enter into any New Polymer Affiliated
Transaction; provided that, solely for the avoidance of doubt, nothing in this
Section 5.4 will require the termination of any of the existing terms or
provisions of, or existing obligations under, any of the following relationships
between the Company and any PGI Affiliate: (a) the existing lease and shared
services agreement relating to the Company's headquarters, among the Company,
The InterTech Group, Inc. and ZS Associates, as in effect on the date hereof;
(b) the shared insurance purchasing arrangement between the Company and The
InterTech Group, Inc., as in effect on the date hereof; and (c) the shared
employee benefits management agreement between the Company and The InterTech
Group, Inc, as in effect on the date hereof. Notwithstanding anything to the
contrary herein, (x) any amendment, modification, extension or change to, or
waiver under, any of the relationships between the Company and any PGI Affiliate
set forth in the final proviso to the immediately preceding sentence shall
require the written approval of at least one Non-GOF Board Member, and (y)
nothing in this Agreement shall restrict or prevent the Company from terminating
any of the relationships, agreements or arrangements set forth in the final
proviso to the immediately preceding sentence.

                  (b)      Notwithstanding the provisions of Section 5.4(a), in
no case shall the Company enter into any agreement to pay, nor shall it pay, any
management fee or transaction fee to any PGI Affiliate, excluding fees of up to
an aggregate of $4,500,000 payable to GOF pursuant to the Plan.

         5.5      REGISTRATION RIGHTS. In the event that the Company, GOF or any
Non-GOF Holder shall determine, based upon the reasonable advice of counsel,
that (a) the Convertible Notes may not be offered for resale or resold, or (b)
the Initial Common Stock issuable upon conversion of the Convertible Notes may
not be issued, offered for resale and/or resold, in each of the cases set forth
in the foregoing clauses (a) and (b), without the registration of such offer,
resale and/or issuance under the Securities Act and the rules and regulations
promulgated thereunder, or an exemption therefrom, GOF or such Non-GOF Holder
shall have the right to cause the Company to use its reasonable best efforts to
register the offer, resale and/or issuance of all Convertible Notes and/or
Initial Common Stock issuable upon the conversation thereof, as the case may be,
under the Securities Act pursuant to a registration statement on Form S-1 or
Form S-3, if available to the Company (or successors to such forms adopted by
the Securities and Exchange Commission or any successor thereto). In the event a
registration is requested pursuant to this Section 5.5, GOF and the Non-GOF
Holders shall reasonably cooperate with the

                                       15

<Page>

Company in the preparation of the registration statement, and the Company shall,
among other things, pay all expenses of the registration (including, without
limitation, the costs and expenses of Noteholder Counsel), provide Noteholder
Counsel with a reasonable opportunity to review and comment upon the
registration statement, communications with the staff of the Securities Exchange
Commission and related documents, and effect such registration as soon as shall
be reasonably practicable.

         5.6      TERMINATION OF COVENANTS. The covenants of the Company
contained in this Article V shall terminate, and be of no further force or
effect, upon the consummation of a going private transaction or Change of
Control.

                                   ARTICLE VI
                                     GENERAL

         6.1      TRANSFER.

                  (a)      TRANSFERS BY GOF PARTIES. Upon any transfer of shares
of Class A Common Stock by a GOF Party that complies with Article III other than
transfers to other GOF Parties (including, without limitation, (a) transfers of
shares of Class A Common Stock that are not deemed Subject Shares pursuant to
Section 3.01; and (b) transfers of shares of Class A Common Stock that are not
subject to Section 3.2 as a result of a waiver obtained pursuant to Section
3.4), such transferred shares and the transferee that acquires them shall not be
subject to the terms of Article III. The rights of GOF under Article IV of this
Agreement may be assigned, in whole or in part, by GOF to any Person to which
GOF transfers Class A Common Stock; provided that the transferee provides
written notice of such assignment to the Company and the other signatories
hereto and agrees in writing to be bound by the terms of Article IV applicable
to GOF.

                  (b)      TRANSFERS BY THE NON-GOF HOLDERS, ZUCKER AND BOYD.
The Non-GOF Holders, Zucker and Boyd shall be prohibited from transferring any
or all of their respective rights or obligations under Article IV to any Person;
provided, however, that nothing in this Section 6.1(b) shall limit the rights
granted to each beneficial owner of Initial Common Stock pursuant to Article II
and Article III and nothing in this Agreement shall prevent any such holders
from transferring their shares of Common Stock.

         6.2      LEGENDS. Each certificate evidencing shares of Initial Common
Stock and each certificate issued in exchange for or upon the transfer of any
shares of Initial Common Stock shall be stamped or otherwise imprinted with a
legend in substantially the following form (in addition to any other legends
required by applicable law or other agreements to which the such shares are
subject):

         "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SHAREHOLDERS' AGREEMENT DATED AS OF MARCH 5, 2003, AMONG POLYMER GROUP, INC.
(THE "COMPANY") AND CERTAIN OF THE COMPANY'S SHAREHOLDERS. THE TERMS OF SUCH
SHAREHOLDERS' AGREEMENT INCLUDES, AMONG OTHER THINGS, A VOTING AGREEMENT AMONG
CERTAIN OF THE COMPANY'S SHAREHOLDERS AND CONTRACTUAL PREEMPTIVE RIGHTS, IN
FAVOR OF THE HOLDER HEREOF AND THE OTHER HOLDERS OF INITIAL COMMON

                                       16

<Page>

STOCK (AS SUCH TERM IS DEFINED THEREIN), ON CERTAIN ISSUANCES BY THE COMPANY. A
COPY OF SUCH SHAREHOLDERS' AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."

         The legend set forth above shall be removed from the certificates
evidencing any shares which cease to be governed by this Agreement.

         6.3      SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

         6.4      ENFORCEMENT.

                  (a)      THIRD PARTY BENEFICIARIES. All holders of Initial
Common Stock shall be third party beneficiaries of Article II, Article III and
Sections 5.1, 5.3, 5.4, 6.4, 6.8 and 6.9 of this Agreement, and shall have the
right to enforce the terms of such provisions as if they were parties hereto.
Notwithstanding the foregoing or anything to the contrary in this Agreement, no
holder of Initial Common Stock shall be deemed a third party beneficiary of, or
have the right to enforce, any Article, Section, term or provision of this
Agreement not explicitly identified in the immediately preceding sentence. All
initial holders of Convertible Notes as of the Effective Date shall be third
party beneficiaries of Section 5.5 of this Agreement and shall have the right to
enforce the terms of such provision as if they were parties hereto provided that
such holder still beneficially owns such Convertible Notes. Notwithstanding the
foregoing or anything to the contrary in this Agreement, no holder of
Convertible Notes shall be deemed a third party beneficiary of, or have the
right to enforce, any Article, Section, term or provision of this Agreement not
explicitly identified in the immediately preceding sentence.

                  (b)      SPECIFIC PERFORMANCE. In addition to any and all
other remedies that may be available at law in the event of any breach of this
Agreement, each party shall be entitled to specific performance of the
agreements and obligations of the Company and the other parties hereunder and to
such other injunctive or other equitable relief as may be granted by a court of
competent jurisdiction.

         6.5      GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York (without
reference to the conflicts of law provisions thereof).

         6.6      NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (a) three (3) business days after being sent by registered or
certified mail, return receipt requested, postage prepaid, (b) one business day
after being sent via a reputable nationwide overnight courier service
guaranteeing next business day delivery (provided that such notice, request,
consent or other communication was deposited with such courier prior to its
deadline for next day delivery), or (c) the same day of such notice being sent
by facsimile (where a fax confirmation is retained and presented to the intended
recipient of such notice, request, consent or other communication when requested
thereby) or by personal delivery, in each case to the intended recipient as set
forth below:

                                       17

<Page>

                  If to the Company, to:

                           Polymer Group, Inc.
                           4838 Jenkins Avenue
                           North Charleston, South Carolina 29405
                           Facsimile: (843) 747-4092
                           Attention: General Counsel

                  with a copy to:

                           Kirkland & Ellis
                           200 East Randolph Drive
                           Chicago, Illinois  60601
                           Facsimile: (312) 861-2200
                           Attention: H. Kurt von Moltke

                  If to GOF, to:

                           MatlinPatterson Global Opportunities Partners L.P.
                           c/o: MatlinPatterson Global Advisers LLC
                           520 Madison Avenue
                           New York, New York 10022
                           Facsimile: (212) 651-4010
                           Attention: Ramon Betolaza

                  with a copy to:

                           Orrick, Herrington & Sutcliffe LLP
                           666 Fifth Avenue
                           New York, NY 10103
                           Facsimile: (212) 506-5151
                           Attention: Duncan N. Darrow, Esq.

                  If to a Non-GOF Holder, at the address set forth below such
Non-GOF Holder's signature hereto.

                  If to Zucker, to:

                           Jerry Zucker
                           C/o Polymer Group, Inc.
                           4838 Jenkins Avenue
                           North Charleston, South Carolina 29405
                           Facsimile: (843) 747-4092

                  If to Boyd, to:

                                       18

<Page>

                           James G. Boyd
                           C/o Polymer Group, Inc.
                           4838 Jenkins Avenue
                           North Charleston, South Carolina 29405
                           Facsimile: (843) 747-4092

Any party may give any notice, request, consent or other communication under
this Agreement using any other means (including, without limitation, personal
delivery, messenger service, telecopy, first class mail or electronic mail), but
no such notice, request, consent or other communication using such other means
shall be deemed to have been duly given unless and until it is actually received
by the party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.

         6.7      COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.

         6.8      AMENDMENTS. Except as may otherwise be set forth in Sections
2.4 and 3.3, all amendments to this Agreement shall be in writing and must be
approved by (a) the Board of Directors of the Company, including at least one
Non-GOF Board Member, and (b) GOF; provided, however, that any amendment to
Article IV must be approved by the director affected by such amendment.

         6.9      ADDITIONAL SHAREHOLDER. Notwithstanding anything to the
contrary contained herein, in connection with the issuance by the Company of
additional shares of Common Stock (including shares of Common Stock issuable
upon the conversion, exercise or exchange of securities issued by the Company),
the Company, with the approval of the Board of Directors, including at least one
Non-GOF Board Member, and the written consent of GOF, may grant to any purchaser
of such shares of Common Stock (or such shares of Common Stock issuable upon the
conversion, exercise or exchange of securities) rights equivalent to those
granted to the Initial Shareholders pursuant to Article II and Article III. Upon
execution and delivery by such purchaser of an additional counterpart signature
page to this Agreement, such Common Stock shall be deemed "Initial Common Stock"
hereunder, and such purchaser shall be deemed an "Initial Shareholder"
hereunder.

         6.10     COUNTERPARTS; Facsimile Signatures. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same document.
This Agreement may be executed by facsimile signatures.

         6.11     NON-GOF BOARD MEMBER VOTE. Notwithstanding anything to the
contrary herein, any waiver, termination, amendment or other action that,
pursuant to any Section of this Agreement, requires the consent or approval of a
Non-GOF Board Member shall require such consent or approval only IF both (a) at
least one Non-GOF Board Member has the right to a seat on the Board of Directors
pursuant to Sections 4.1, 4.2(a) or 4.2(b) of this Agreement, and (b) at the
time such approval is sought one of the following is true (i) at least one
Non-GOF Board

                                       19

<Page>

Member is a member of the board of directors, (ii) if a Non-GOF Board Member is
not a member of the board of directors, a Non-GOF Board Member shall have been a
member of the board of directors within sixty days of such time, or (iii) if a
Non-GOF Board Member is not, and, within sixty days of such time, has not been,
a member of the board of directors, a nomination or designation of a proposed
Non-GOF Board Member shall have been made in good faith pursuant to the terms of
the Shareholders Agreement and not withdrawn, and such nominee or designee shall
not have refused or declined appointment to the board of directors.

         6.12     FRACTIONAL SHARES. Notwithstanding anything to the contrary
herein, the provisions of Article II and Article III shall not be deemed to
grant any shareholder the right to purchase or sell any fractional share, and
(a) with respect to Article II, the Company shall have the right to determine,
in its reasonable discretion, the treatment of fractional share amounts, and (b)
with respect to Article III, the applicable GOF Party shall have the right to
determine, in its reasonable discretion, the treatment of fractional share
amounts.

                                   * * * * * *

                                       20

<Page>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.

                             POLYMER GROUP, INC.

                             By:  /s/James G. Boyd
                             Name:  James G. Boyd
                             Title:  Ex. VP, Treasurer & CFO

                             MATLINPATTERSON GLOBAL
                             OPPORTUNITIES PARTNERS L.P.

                             By:  MatlinPatterson Global Advisers LLC, its
                                  Investment Advisor

                             By:  /s/David J. Matlin
                             Name:  David J. Matlin
                             Title: CEO

                [Counterpart Execution Page to Shareholders Agreement]

<Page>

                             NORTHEAST INVESTORS TRUST

                             By:
                             Name:
                             Title:

                             50 Congress Street, Room 1000
                             Boston, MA 02109

                             ONE GROUP INCOME BOND FUND

                             By:  Banc One High Yield Partners, LLC, its
                                  investment advisor

                             By: /s/James P. Shanahan, Jr.
                             Name: James P. Shanahan, Jr.
                             Title: Manager

                             8044 Montgomery Road, Suite 480
                             Cincinnati, OH 45236

                             ONE GROUP HIGH YIELD BOND FUND

                             By:  Banc One High Yield Partners, LLC, its
                                  investment advisor

                             By: /s/James P. Shanahan, Jr.
                             Name: James P. Shanahan, Jr.
                             Title: Manager

                             8044 Montgomery Road, Suite 480
                             Cincinnati, OH 45236

                [Counterpart Execution Page to Shareholders Agreement]

<Page>

                             SOUTHERN UTE GROWTH FUND

                             By:  Banc One High Yield Partners, LLC, its
                                  investment advisor

                             By: /s/James P. Shanahan, Jr.
                             Name: James P. Shanahan, Jr.
                             Title: Manager

                             8044 Montgomery Road, Suite 480
                             Cincinnati, OH 45236

                             SOUTHERN UTE PERMANENT FUND

                             By:  Banc One High Yield Partners, LLC, its
                                  investment advisor

                             By: /s/James P. Shanahan, Jr.
                             Name: James P. Shanahan, Jr.
                             Title: Manager

                             8044 Montgomery Road, Suite 480
                             Cincinnati, OH 45236

                             ATLANTIC GLOBAL FUNDING LTD.

                             By:  Delaware Investment Advisors, its  collateral
                                  manager

                             By:  /s/Carl E. Mabry
                             Name: Carl E. Mabry
                             Title: Vice-President

                             One Commerce Square, 40th Floor
                             Philadelphia, PA 19103

                [Counterpart Execution Page to Shareholders Agreement]

<Page>

                             CHYPS 1997-1 LTD.

                             By:  Delaware Investment Advisors, its collateral
                                  manager

                             By:  /s/Carl E. Mabry
                             Name: Carl E. Mabry
                             Title: Vice-President

                             One Commerce Square, 40th Floor
                             Philadelphia, PA 19103

                             CHYPS 1999-1 LTD.

                             By:  Delaware Investment Advisors, its collateral
                                  manager

                             By:  /s/Carl E. Mabry
                             Name: Carl E. Mabry
                             Title: Vice-President

                             One Commerce Square, 40th Floor
                             Philadelphia, PA 19103

                [Counterpart Execution Page to Shareholders Agreement]

<Page>

                             /s/ James G. Boyd
                             ----------------------------------
                             James G. Boyd, in his individual capacity

                             /s/Jerry Zucker
                             ----------------------------------
                             Jerry Zucker, in his individual capacity

                [Counterpart Execution Page to Shareholders Agreement]<Page>

                                                                    EXHIBIT 10.4

                          [MATLINPATTERSON LETTERHEAD]

April 11, 2003

Polymer Group, Inc.
P.O. Box 5069
North Charleston, SC 29405

Ladies and Gentlemen:

          MatlinPatterson Global Opportunities Partners L.P. (the "Fund")
currently beneficially owns and controls $38.0 million aggregate principal
amount of the 10% Convertible Subordinated Notes due 2007 (the "Junior Notes")
issued by Polymer Group, Inc. (the "Company") pursuant to the indenture dated as
of March 5, 2003 (the "Indenture"), between the Company and Wilmington Trust
Company, as trustee. The Junior Notes are convertible into shares of the
Company's Class A common stock at the option of the holder at any time and
currently bear cash interest at the rate of 10% per annum (12% in the case of a
default under the Junior Notes). The Fund has also caused to be issued an
irrevocable letter of credit dated as of March 5, 2003 (the "Letter of Credit"),
in favor of JPMorgan Chase Bank, as administrative agent for the lenders under
the Company's Third Amended, Restated and Consolidated Credit Agreement dated as
of March 5, 2003 (the "Credit Agreement"). The Fund and the Company are party to
the Senior Subordinated Note Purchase Agreement dated as of March 5, 2003 (the
"Senior Note Agreement"), which provided for the issuance to the Fund of a
Senior Subordinated Note dated as of March 5, 2003 (the "Senior Note"), to
evidence future drawings under the Letter of Credit. The Senior Note bears
interest on a cash basis at the rate of 10% per annum (12% in the case of a
default under the Senior Note) on any outstanding amounts.

          The Company has obtained the consent of the lenders under the Credit
Agreement to enter into Amendment No. 1 thereto substantially in the form of
Exhibit A attached hereto ("Amendment No. 1 "), and the Company and the lenders
have entered into Amendment No. 1. Solely for the purpose of assisting the
Company in maintaining compliance with the financial covenants during the period
beginning on March 6, 2003 and ending on January 4, 2004 (the "Period"), the
Fund hereby agrees with the Company to take the following steps as follows:

1.   The Fund will amend the Senior Note and such of the Junior
     Notes it holds or controls so that interest that accrues on
     such Senior Note from March 6, 2003 until January 31, 2005
     and interest that accrues on such Junior Notes from March 6,
     2003 until January 5, 2004, will not be required to be paid
     by the Company in cash, but rather will, at the sole option
     of the Company, be payable by having the Company issue an
     additional principal amount of Senior Note and Junior Notes,
     respectively ("PIK Notes"), which PIK Notes shall also
     provide that interest is payable in additional principal
     amount of Senior Note and Junior Notes, respectively, in
     full and complete satisfaction of any and all accrued and
     unpaid interest on such Senior Note and Junior Notes. The
     Fund will also consent to the necessary changes to the
     Senior Note Agreement and the Indenture to allow for the
     issuance of PIK Notes.

<Page>

2.   In the event that on or before May 15, 2004, the Company is
     unable to meet the financial covenants contained in Section
     9.10 (b) of the Credit Agreement (the "Senior Leverage
     Covenant"), Section 9.10 (c) of the Credit Agreement (the
     "Interest Covenant"), or Section 9.10 (d) of the Credit
     Agreement (the "Adjusted Interest Covenant"), the Fund will
     allow the Company to instruct the Agent to (and if the
     Company fails to so instruct the Agent, the Agent may) draw
     under the Letter of Credit and use the proceeds from such
     drawing to make a corresponding dollar-for-dollar reduction
     of an amount outstanding under the Credit Agreement, up to
     the full amount of the remaining balance of the Letter of
     Credit, to be in compliance with such Covenant.

3.   In the event that the Company is unable to meet the
     financial covenant contained in Section 9.10 (a) of the
     Credit Agreement (the "Leverage Covenant"), including in the
     circumstance resulting from a drawing under the Letter of
     Credit to comply with the Senior Leverage Covenant and
     corresponding increase in the amount outstanding under the
     Senior Note, at the request of the Company at any time on or
     before May 15, 2004, the Fund will convert such of its
     Junior Notes into shares of Class A common stock to reduce
     total outstanding indebtedness of the Company such that the
     Company will, following such conversion, be in compliance
     with the Leverage Covenant.

4.   In the event that the Company has undertaken the actions set
     forth in paragraphs 1, 2 and 3 above and, after taking such
     actions the Company is unable to meet the Interest Covenant
     solely for the 12-month period ending on the last day of the
     Company's third fiscal quarter of 2003, the Fund will
     purchase additional securities from the Company in an
     aggregate principal amount of up to $10 million (the "New
     Securities"), such that following any such purchase, the
     Company will be in compliance with the Interest Covenant.
     The New Securities will be in the form of senior
     subordinated debt or equity securities, as may be agreed
     between the Fund and the Company. In the event the New
     Securities are senior subordinated debt securities, any
     interest payments required to be made during the Period
     shall only be made by issuing additional principal amount of
     New Securities, and no cash payment shall be made in respect
     of interest payments on the New Securities during the
     Period.

All of the obligations of the Fund contained in this agreement are subject to
the continuing condition that Amendment No. 1 shall be in full force and effect.
This agreement is for the sole benefit of the Company, is only enforceable by
the Company, and may not be relied upon by any third party. No party shall
become a third party beneficiary as a result of this agreement.

                                        2
<Page>

          If you are in agreement with the above terms, please indicate your
acceptance by signing and returning a copy to us, following which this shall
become a binding agreement.

                                        MatlinPatterson Global Opportunities
                                        Partners L.P.

                                        By: MatlinPatterson Global Advisors
                                            LLC, its investment advisor

                                        By:
                                           -----------------------------------
                                           Name:
                                           Title:

Confirmed and agreed:
Polymer Group, Inc.

By:
    ----------------------
    Name:
    Title:

                                        3

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