THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Polymer Group, Inc. (POLGA.OB)

4/21/2006 Proxy Information

Shareholders Agreement

In connection with the Company’s emergence from bankruptcy on March 5, 2003, PGI, MatlinPatterson Global Opportunities Partners LP and certain other stockholders (collectively “Non-Matlin Global Partners Holders”) entered into a Shareholders Agreement, dated as of March 5, 2003 as amended on December 20, 2004 (the “Shareholders Agreement”). The terms of the Shareholders Agreement are described below.

Mr. Betolaza has been a Partner of MatlinPatterson Global Opportunities Partners L.P. since July 2002.

Mr. Watzky presently is a Partner in MatlinPatterson Global Advisers LLC and has served in that capacity since its inception in July 2002.

Mr. Chan presently is a Managing Partner of MatlinPatterson Global Advisers LLC and has served in that capacity since its inception in July 2002.

Contractual Preemptive Rights. The Shareholders Agreement grants contractual preemptive rights to each holder of the common stock issued: (a) pursuant to the Modified Plan; (b) upon the conversion of the Convertible Notes or exercise of the Warrants, (c) upon antidilution adjustments, or (d) upon stock splits, stock dividends or otherwise, in each case, in respect of the securities set forth in clauses (a), (b) and (c) above (collectively, the “Initial Common Stock”). Such contractual preemptive rights give each holder of Initial Common Stock the right to purchase up to its pro rata share of any shares of capital stock or options, warrants, conversion rights or other rights to acquire shares of capital stock proposed to be issued by us, subject to certain excluded issuances set forth in the Shareholders Agreement and summarized in the immediately following sentence. The contractual preemptive rights may be waived with the prior consent of our Board of Directors, including at least one Non-Matlin Global Partners Board Member, and MatlinPatterson Global Opportunities Partners. The contractual preemptive rights terminate if we experience a change of control or with the consent of our Board of Directors, including at least one Non-Matlin Global Partners Board Member, and MatlinPatterson Global Opportunities Partners.

Tag-Along Rights MatlinPatterson Global Opportunities Partners has granted certain “tag-along” rights to each holder of Initial Common Stock.

Provisions Regarding Our Board of Directors In accordance with the Plan, the Shareholders Agreement sets forth certain covenants of the parties thereto with respect to the composition of our Board of Directors and the voting of the shares held thereby with respect to the nomination, election and removal of directors. Pursuant to the Plan and the Shareholders Agreement, our Board of Directors is (a) fixed at nine members, each with one year terms, subject to the removal provisions of our By-Laws, and (b) composed of five directors designated by MatlinPatterson Global Opportunities Partners (together with any direct or indirect successors thereto designated by MatlinPatterson Global Opportunities Partners, the “MP Board Members”), two directors designated by the Non-Matlin Global Partners Holders (together with any direct or indirect successors thereto, the “Non-Matlin Global Partners Board Members”), and two directors designated by the Board so long as at least one Non-Matlin Global Partners Board Member votes in the affirmative for the nominee. The voting and appointing of members of the board of directors are subject to certain provisions of the Shareholders Agreement.

The Shareholders Agreement contains other provisions regarding, among other things, reporting obligations, registration rights, transferring rights granted by the Shareholders Agreement, third party beneficiaries and enforcement of certain provisions of the Shareholders Agreement thereby, specific performance, amendments, granting of equivalent rights to our additional stockholder, and termination of the requirements for approval of actions by Non-Matlin Global Partners Board Members once they are no longer required to have a seat on the board.

Other Transactions

On December 15, 2004, the Company executed an agreement for consulting services effective December 9, 2004 with William B. Hewitt. Mr. Hewitt has served as a director of PGI since March 5, 2003 and as Chairman of the Board of Directors since April 2, 2003. Pursuant to the consulting agreement, Mr. Hewitt provided the Company with a minimum of 104 days of consulting services a year. In consideration of Mr. Hewitt’s consulting services, the Company paid the following compensation: (i) $15,000 per month to a charity designated by Mr. Hewitt and (ii) $5,000 per month directly to Mr. Hewitt. In addition, the Company made a one-time issuance of 25,000 shares of Common Stock to Mr. Hewitt as of October 26, 2004, pursuant to the Company’s 2004 Restricted Stock Plan, which Mr. Hewitt donated to a charitable organization of his choice, as expressly permitted by the consulting agreement. The Company and Mr. Hewitt mutually agreed to terminate the consulting agreement effective December 31, 2005.