-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GZQW9AMstaBX0dktDYBbJPBCM5kqxGLE7wqQDfltuxOSqGiq2+toVJfNXbKrobvi 17sd3NVPYyg8zVWe25QJ1A== 0000905148-03-000952.txt : 20030317 0000905148-03-000952.hdr.sgml : 20030317 20030317170845 ACCESSION NUMBER: 0000905148-03-000952 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20030317 GROUP MEMBERS: DAVID J. MATLIN GROUP MEMBERS: MARK R. PATTERSON GROUP MEMBERS: MATLIN PATTERSON LLC GROUP MEMBERS: MATLINPATTERSON ASSET MANAGEMENT LLC GROUP MEMBERS: MATLINPATTERSON GLOBAL ADVISERS LLC GROUP MEMBERS: MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS B, L.P. GROUP MEMBERS: MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS L.P. GROUP MEMBERS: MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS(BERMUNDA)L.P GROUP MEMBERS: MATLINPATTERSON GLOBAL PARTNERS LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: POLYMER GROUP INC CENTRAL INDEX KEY: 0000927417 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILS, MAN MADE FIBER & SILK [2221] IRS NUMBER: 571003983 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-46353 FILM NUMBER: 03606465 BUSINESS ADDRESS: STREET 1: 4838 JENKINS AVE CITY: NORTH CHARLESTON STATE: SC ZIP: 29405 BUSINESS PHONE: 8037445174 MAIL ADDRESS: STREET 1: 4838 JENKINS AVENUE CITY: NORTH CHARLESTON STATE: SC ZIP: 29405 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS LP CENTRAL INDEX KEY: 0001203389 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 520 MADISON AVENUE STREET 2: 9TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212 651 9500 SC 13D 1 efc3-0412_5333843sch13d.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) Under the Securities Exchange Act of 1934 Polymer Group, Inc. (Name of Issuer) Common Stock, par value $0.01 per share (Title of Class of Securities) 731745105 (CUSIP Number) MatlinPatterson Global Opportunities Partners L.P. MatlinPatterson Global Opportunities Partners (Bermuda) L.P. MatlinPatterson Global Opportunities Partners B, L.P. MatlinPatterson Global Advisers LLC MatlinPatterson Global Partners LLC MatlinPatterson Asset Management LLC MatlinPatterson LLC Mark R. Patterson David J. Matlin (Name of Persons Filing) Robert Weiss MatlinPatterson Global Advisers LLC 520 Madison Avenue New York, New York 10022 Telephone: (212) 651-9525 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 6, 2003 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-l(e), 13d-l(f) or 13d-l(g), check the following box [ ] Note: Schedules filed in paper format shall include a signed original and five copies of the Schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. The information required on this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Exchange Act") or otherwise subject to the liabilities of that section of the Exchange Act but shall be subject to all other provisions of the Exchange Act (however, see the Notes) (Continued on following pages) (Page 1 of 31 pages) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 2 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MatlinPatterson Global Opportunities Partners L.P. - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/ (b) /x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 0 REPORTING PERSON WITH - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 10,727,193 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,727,193 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,727,193 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 80.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - ------------------------------------------------------------------------------- (Page 2 of 31) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 3 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MatlinPatterson Global Opportunities Partners (Bermuda) L.P. - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/ (b) /x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 0 - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 2,736,403 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,736,403 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,736,403 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.9% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - ------------------------------------------------------------------------------- (Page 3 of 31) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 4 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MatlinPatterson Global Opportunities Partners B, L.P. - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/ (b) /x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 0 REPORTING PERSON WITH - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 132,581 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 132,581 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 132,581 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.6% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - ------------------------------------------------------------------------------- (Page 4 of 31) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 5 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MatlinPatterson Global Advisers LLC - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)/_/ (b)/x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 0 REPORTING PERSON WITH - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 10,727,193 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,727,193 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,727,193 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 80.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IA - ------------------------------------------------------------------------------- (Page 5 of 31) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 6 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) David J. Matlin - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)/_/ (b)/x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 0 REPORTING PERSON WITH - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 10,727,193 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,727,193 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,727,193 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 80.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - ------------------------------------------------------------------------------- (Page 6 of 31) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 7 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Mark R. Patterson - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/ (b) /x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 0 REPORTING PERSON WITH - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 10,727,193 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,727,193 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,727,193 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 80.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - ------------------------------------------------------------------------------- (Page 7 of 31) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 8 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MatlinPatterson Global Partners LLC - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/ (b) /x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 0 REPORTING PERSON WITH - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 10,727,193 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,727,193 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,727,193 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 80.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON HC - ------------------------------------------------------------------------------- (Page 8 of 31) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 9 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MatlinPatterson Asset Management LLC - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/ (b) /x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 0 REPORTING PERSON WITH - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 10,727,193 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,727,193 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,727,193 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 80.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON HC - ------------------------------------------------------------------------------- (Page 9 of 31) SCHEDULE 13D - ------------------------------------------------------------------------------- CUSIP No. 731745105 Page 10 of 31 Pages - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) MatlinPatterson LLC - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/ (b) /x/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF, WC - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) /_/ - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 0 REPORTING PERSON WITH - ------------------------------------------------------------------------------- 8 SHARED VOTING POWER 10,727,193 - ------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 10,727,193 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,727,193 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /_/ - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 80.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON HC - ------------------------------------------------------------------------------- (Page 10 of 31) Introduction. This Schedule 13D Statement (this "Statement") is filed on behalf of (i) MatlinPatterson Global Opportunities Partners L.P., ("Matlin Partners (Delaware)") a limited partnership organized under the laws of Delaware, MatlinPatterson Global Opportunities Partners B, L.P., (the "Opt-Out Fund") a limited partnership organized under the laws of Delaware, and MatlinPatterson Global Opportunities Partners (Bermuda) L.P. ("Matlin Partners (Bermuda)"), collectively with the Opt-Out Fund and Matlin Partners Delaware, "Matlin Partners"), a limited partnership organized under the laws of Bermuda (ii) MatlinPatterson Global Advisers LLC, ("Matlin Advisers") a limited liability company organized under the laws of Delaware, by virtue of their investment authority over securities held by Matlin Partners, (iii) MatlinPatterson Global Partners LLC, ("Matlin Global Partners") a limited liability company organized under the laws of Delaware, as general partner of Matlin Partners, (iv) MatlinPatterson Asset Management LLC, ("Matlin Asset Management") a limited liability company organized under the laws of Delaware, as the holder of all of the membership interests in Matlin Global Partners and Matlin Advisers, (v) MatlinPatterson LLC, ("MatlinPatterson") a limited liability company organized under the laws of Delaware, as the holder of all of the membership interests in Matlin Asset Management, (vi) and Mark Patterson and David Matlin each as a holder of 50% of the membership interests in MatlinPatterson (Matlin Partners (Delaware), Matlin Partners (Bermuda), the Opt-Out Fund, Matlin Advisers, Matlin Global Partners, Matlin Asset Management, MatlinPatterson, Mark Patterson and David Matlin, collectively, the "Reporting Persons" and each a "Reporting Person"), for the purpose of disclosing the acquired beneficial ownership of the Reporting Persons in the Issuer (as defined below) pursuant to the Debtor's Joint Second Amended and Modified Plan of Reorganization (the "Plan"), approved on January 16, 2003 by the United States Bankruptcy Court for the District of South Carolina (Case No. 02-5773(w)). Item 1. Security and Issuer The name of the issuer is Polymer Group, Inc. (the "Issuer"). This Statement relates to the Issuer's Class A Common Stock, par value $.01 per share (the "Class A Common Stock"). The principal executive offices of the Issuer are located at Polymer Group, Inc., 4838 Jenkins Avenue, North Charleston, SC 29405. Item 2. Identity and Background (i) Matlin Partners (Delaware) and the Opt-Out Fund are limited partnerships organized under the laws of Delaware. MatlinPartners (Delaware) generally invests in equity and subordinated debt securities of companies. The Opt-Out Fund holds investments of investors who originally invested in MatlinPartners (Delaware) but opted out of subsequent investments upon the spin off of MatlinPatterson entities from Credit Suisse First Boston in July 2002. The address of Matlin Partners (Delaware) and the Opt-Out Fund's principal business and principal office is c/o Matlin Global Partners 520 Madison Avenue, New York, New York 10022. (Page 11 of 31) (ii) MatlinPartners (Bermuda) is a limited partnership organized under the laws of Bermuda. MatlinPartners (Bermuda) holds participation interests in the investments of MatlinPartners (Delaware). MatlinPartners (Bermuda) generally invests in equity and subordinated debt securities of companies. The address of Matlin Partners (Bermuda)'s principal business and principal office is c/o Quorum International Limited, Reid House, 31 Church Street, Hamilton, Bermuda. (iii) Matlin Global Partners is a limited liability company organized under the laws of Delaware. Matlin Global Partners serves as General Partner of Matlin Partners (Delaware), Matlin Partners (Bermuda) and the Opt-Out Fund. The address of Matlin Global Partners' principal business and principal office is 520 Madison Avenue, New York, New York 10022. The principal business of Matlin Global Partners is acting as the general partner to Matlin Partners (Delaware), Matlin Partners (Bermuda) and the Opt-Out Fund. (iv) Matlin Advisers is a limited liability company organized under the laws of Delaware. Matlin Advisers serves as investment advisor to Matlin Partners (Delaware), Matlin Partners (Bermuda) and the Opt-Out Fund. The address of Matlin Advisers' principal business and principal office is 520 Madison Avenue, New York, New York 10022. Matlin Advisers performs certain investment advisory services on behalf of Matlin Partners (Delaware) and Matlin Partners (Bermuda), pursuant to a certain amended and restated Investment Advisory Agreement dated as of July 17, 2002 among Matlin Advisers, Matlin Partners (Delaware) and Matlin Partners (Bermuda). (v) Matlin Asset Management is a limited liability company organized under the laws of Delaware. Matlin Asset Management is the holder of all of the membership interests in Matlin Global Partners and Matlin Advisers. The address of Matlin Asset Management's principal business and principal office is 520 Madison Avenue, New York, New York 10022. Matlin Asset Management's principal business is owning Matlin Global Partners and Matlin Advisers. (vi) MatlinPatterson is a limited liability company organized under the laws of Delaware. MatlinPatterson is the holder of all of the membership interests in Matlin Asset Management. The address of MatlinPatterson's principal business and principal office is 520 Madison Avenue, New York, New York 10022. MatlinPatterson's principal business is owning Matlin Asset Management. (vii) Mark R. Patterson and David J. Matlin are each the holder of 50% of the membership interests in MatlinPatterson. The address of Mark R. Patterson and David J. Matlin's principal business office is 520 Madison Avenue, New York, New York 10022. Mark R. Patterson's present principal occupation is acting as Chairman of Matlin Advisers and David J. Matlin's present principal occupation is acting as Chief Executive Officer of Matlin Advisers. Mark R. Patterson and David J. Matlin are citizens of the United States of America. (viii) In the past five years, the Reporting Persons have not been (a) convicted in a criminal proceeding (other than traffic violations or similar misdemeanors) or (b) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction in which it was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting (Page 12 of 31) or mandating activities subject to, federal or state securities laws nor has it been found to have violated such laws. Item 3. Source and Amount of Funds or Other Consideration The information set forth in Item 6 is hereby incorporated by reference into this Item 3. Pursuant to the Plan, the Reporting Persons acquired beneficial ownership of 5,499,445 shares of Class A Common Stock in consideration of the cancellation of certain debt instruments (and all pre-petition interest thereon) which has been acquired by the Reporting Persons through a series of trades at an aggregate cost to the Reporting Persons of $150,732,172 as follows: 1,579,425 shares issued in respect of $114,813,000 principal amount 8.75% Senior Subordinated Notes of the Issuer due 2008 (the "8.75% Senior Subordinated Notes") (and all pre-petition interest thereon) acquired by the Reporting Persons at a total cost of $43,108,511; 3,907,871 shares issued in respect of $279,549,000 principal amount 9% Senior Subordinated Notes of the Issuer due 2008 (the "9% Senior Subordinated Notes") and all pre-petition interest thereon acquired by the Reporting Persons at a total cost of $107,413,619; 1,480 shares issued in respect of $113,000 principle amount 9.25% Senior Notes due 2006 of Dominion Textile (USA) Inc. and all pre-petition interest thereon acquired by the Reporting Persons at a total cost of $25,425; and 10,669 shares issued in respect of $821,000 principle amount 8.875% Senior Subordinated Notes due 2003 of Dominion Textile and all pre-petition interest thereon acquired by the Reporting Persons at a total cost of $184,725. The Reporting Persons acquired $38,119,000 face value of the 10% Junior Subordinated Notes due 2007 (the "Convertible Notes") which are immediately convertible into 5,227,749 shares of Class A Common Stock at a conversion price of $7.29. The Reporting Person paid cash at their par value from working capital for the Convertible Notes. No funds were borrowed or otherwise obtained for the purpose of acquiring, holding, trading or voting the Class A Common Stock and Convertible Notes. Item 4. Purpose of Transaction The Class A Common Stock and Convertible Notes held by Matlin Partners were acquired as described in Item 3 and Item 6. The information set forth in Item 3 and Item 6 hereof is hereby incorporated by reference into this Item 4. Matlin Partners currently holds such Class A Common Stock and Convertible Notes for investment purposes subject to the next paragraph. Subject to the agreements and arrangements described in Item 6 hereof, the Reporting Persons continuously evaluate the Issuer's businesses and prospects, alternative investment opportunities and all other factors deemed relevant in determining whether additional Class A Common Stock or Convertible Notes of the Issuer will be acquired by Matlin Partners and/or by other accounts and funds which Matlin Global Partners is the general partner and/or investment manager or whether Matlin Partners and/or any such other accounts or funds will dispose of Class A Common Stock or Convertible Notes of the Issuer. At any time, additional Class A Common Stock or Convertible Notes may be acquired or some or all of the Class A Common Stock or Convertible Notes of the Issuer beneficially owned by Matlin Partners may be sold, in either case in the open market, in privately negotiated transactions or otherwise. Except as otherwise disclosed herein, no Reporting Person currently has any agreements, beneficially or otherwise, which would be related to or would result in any of the matters described in Items 4(a) - (j) of Schedule 13D; however, as part of the ongoing evaluation of this investment and investment alternatives, any Reporting Person may consider such matters, and, subject to applicable law, may formulate a plan with respect to such matters, and, from time to time, any Reporting Person may hold discussions with or make formal (Page 13 of 31) proposals to management or the Board of Directors of the Issuer, other shareholders of the Issuer or other third parties regarding such matters. Lap Chan, an employee of Matlin Advisers, serves on the Board of Directors of the Issuer. As a director of the Issuer, Lap Chan may have influence over the corporate activities of the Issuer, including activities which may relate to items described in Items 4(a) - (j) of Schedule 13D. Ramon Betolaza, an employee of Matlin Advisers, serves on the Board of Directors of the Issuer. As a director of the Issuer, Ramon Betolaza may have influence over the corporate activities of the Issuer, including activities which may relate to items described in Items 4(a) - (j) of Schedule 13D. Michael Watzky, an employee of Matlin Advisers, serves on the Board of Directors of the Issuer. As a director of the Issuer, Michael Watzky may have influence over the corporate activities of the Issuer, including activities which may relate to items described in Items 4(a) - (j) of Schedule 13D. Item 5. Interest in Securities of the Issuer (a) (i) As of the date hereof, (A) Matlin Partners (Delaware), is a direct beneficial owner of 10,727,193 shares of Class A Common Stock consisting of 5,499,445 shares of common stock and $38,119,000 aggregate face value of the Convertible Notes, which are immediately convertible into 5,227,749 shares of Class A Common Stock and (B) MatlinPatterson, Matlin Asset Management, Matlin Advisers, Matlin Global Partners, Mark R. Patterson and David J. Matlin are each an indirect beneficial owner of 10,727,193 shares of Class A Common Stock consisting of 5,499,445 shares of common stock and $38,119,000 aggregate face value of the Convertible Notes, which are immediately convertible into 5,227,749 shares of Class A Common Stock. The 10,727,193 shares of Class A Common Stock represent beneficial ownership of approximately 80.3% of the Issuer's issued and outstanding shares of Class A Common Stock (assuming conversion of the Convertible Notes beneficially owned by the Reporting Persons). (ii) Matlin Partners (Delaware) and Matlin Partners (Bermuda) have entered into a Participation Agreement (the "Bermuda Participation Agreement") dated as of May 15, 2001. Pursuant to such agreement, Matlin Partners (Bermuda) holds a participation interest in its pro rata share of the right, title and interest in the Class A Common Stock and Convertible Notes beneficially owned by Matlin Partners (Delaware). Matlin Partners (Bermuda)'s pro rata share is (i) 25.2% in relation to the Class A Common Stock beneficially owned by Matlin Partners (Delaware) representing 1,386,011 shares of Class A Common Stock and (ii) 25.83% in relation to the Convertible Notes or $9,844,361 in aggregate face value of the Convertible Notes which portion is immediately convertible into 1,350,392 shares of Class A Common Stock. As a result of such participation interest, Matlin Partners (Bermuda) may be deemed to be the beneficial owner of 2,736,403. shares of Class A Common Stock. The 2,736,403 shares of Class A Common Stock represent beneficial ownership of approximately 28.9% of the Issuer's issued and outstanding shares of Class A Common Stock (assuming conversion of the Convertible Notes in which Matlin Partners (Bermuda) has a participation interest). (Page 14 of 31) (iii) Matlin Partners (Delaware) and the Opt-Out Fund have entered into a Participation Agreement (the "Opt-Out Fund Participation Agreement") dated as of July 16, 2002. Pursuant to such agreement, the Opt-Out Fund holds a participation interest in 2.4108% of the right, title and interest in the Class A Common Stock beneficially owned by Matlin Partners (Delaware) representing 132,581 shares of Class A Common Stock. As a result of such participation interest, the Opt-Out Fund may be deemed to be the beneficial owner of 132,581 shares of Class A Common Stock. The 132,581 shares of Class A Common Stock represent beneficial ownership of approximately 1.63% of the Issuer's issued and outstanding shares of Class A Common Stock (assuming no conversion of any of the Convertible Notes). (iv) Matlin Global Partners serves as General Partner of Matlin Partners. By reason of such relationships, Matlin Global Partners may be deemed to beneficially own share the shares owned by Matlin Partners (Delaware). (v) Matlin Advisers serves as investment advisor to Matlin Partners. By reason of such relationships, Matlin Advisers may be deemed to beneficially own the shares owned by Matlin Partners (Delaware). (vi) Matlin Asset Management is the holder of all of the membership interests in Matlin Global Partners and Matlin Advisers. By reason of such relationships, Matlin Asset Management may be deemed to beneficially own the shares owned by Matlin Partners (Delaware). (vii) MatlinPatterson is the holder of all of the membership interests in Matlin Asset Management. By reason of such relationship, MatlinPatterson may be deemed to beneficially own the shares owned by Matlin Partners (Delaware). (viii) Mark R. Patterson and David J. Matlin are the holders of all of the membership interests in MatlinPatterson. By reason of such relationships, each of Mark Patterson and David Matlin may be deemed to share voting and dispositive power over the shares owned by Matlin Partners (Delaware). (b) To the best knowledge of MatlinPatterson, Matlin Asset Management, Matlin Advisers and Matlin Global Partners with respect to the directors and executive officers named in this Statement, none of the persons (i) beneficially owns any shares of Class A Common Stock (other than in his or her capacity as a controlling member, executive officer or director of such corporation or limited liability company) or (ii) has the right to acquire any Class A Common Stock owned by other parties. The filing of this Statement shall not be construed as an admission by any of the Reporting Persons that it is, for purposes of Section 13(d) of the Exchange Act, the beneficial owner of shares of Class A Common Stock owned by other parties. (Page 15 of 31) Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer I. Polymer Group, Inc.'s Joint Second Amended Modified Plan of Reorganization A. Background In 2001, the Issuer breached certain financial covenants in its Second Amended, Restated and Consolidated Credit Facility (the "Credit Facility"), dated as of July 3, 1997. As a result, the lenders under the Credit Facility (the "Senior Lenders") exercised their right to block the payments of interest due to the holders of the 9% Senior Subordinated Notes on January 2, 2002, and to the holders of the 8.75% Senior Subordinated Notes (collectively with the 9% Senior Subordinated Notes, the "Senior Subordinated Notes") on March 1, 2002, respectively. On March 15, 2002, the Issuer and Matlin Global Partners, which then held approximately 67% of the Senior Subordinated Notes, executed a term sheet (the "Exchange Offer Term Sheet") setting forth the terms of a proposed recapitalization of the Issuer and its domestic subsidiaries (collectively, the "Debtors"), together with an agreement pursuant to which, among other things, Matlin Global Partners agreed to support the Issuer's recapitalization plan (the "Exchange Offer Support Agreement"). The recapitalization plan was to take the form of an exchange offer (the "Exchange Offer") that was to remain open through April 15, 2002, and which was subsequently extended to May 15, 2002. Both Exchange Offer Term Sheet and Exchange Offer Support Agreement have been terminated. On March 25, 2002, during the pendency of the Exchange Offer, certain creditors of the Debtors (the "Petitioning Creditors") filed an involuntary bankruptcy petition (the "Involuntary Petition") against the Debtors in the United States Bankruptcy Court for the District of South Carolina (the "Bankruptcy Court"). On April 26, 2002, the Bankruptcy Court dismissed the Involuntary Petition in connection with a Dismissal Agreement between the Debtors and the Petitioning Creditors (the "Dismissal Agreement"). The Dismissal Agreement provided that the Debtors would extend the Exchange Offer through May 15, 2002. The Debtors and Matlin Global Partners also agreed to forbear through, and including, May 15, 2002, from implementing any modifications to the Senior Subordinated Notes and the indentures governing them. The Petitioning Creditors agreed to forbear through, and including, May 12, 2002 (the "Forbearance Period"), from exercising any and all remedies under the indentures for the Senior Subordinated Notes, the Senior Subordinated Notes or any applicable law, including any filing of an involuntary petition against any of the Debtors. During the Forbearance Period, the Debtors agreed (i) not to file a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in a jurisdiction other than Columbia, South Carolina, and (ii) to contest any involuntary petition under the Bankruptcy Code filed in any such other jurisdiction, in each case, without the prior written consent of the Petitioning Creditors. Matlin Global Partners and the Petitioning Creditors agreed not to file an involuntary petition against the Debtors in any venue other than the Bankruptcy Court. Negotiations proceeded among the Debtors, Matlin Global Partners and (Page 16 of 31) the Petitioning Creditors, but no agreement was reached regarding a consensual restructuring of the Debtors. Eventually, the Exchange Offer, Exchange Offer Term Sheet and Exchange Offer Support Agreement were terminated. Subsequently, Matlin Global Partners and the Issuer executed a term sheet (the "Bankruptcy Term Sheet"), dated as of May 10, 2002, setting forth the terms of a bankruptcy reorganization of the Debtors, and a support agreement (the "Bankruptcy Support Agreement"), dated as of May 10, 2002, pursuant to which, among other things, Matlin Global Partners agreed to support a joint plan of reorganization on terms and conditions set forth in the Bankruptcy Term Sheet. On May 11, 2002, the Debtors (other than Bonlam (S.C.), Inc., for which the petition date was April 23, 2002) filed voluntary petitions for reorganization under the Bankruptcy Code in the Bankruptcy Court. On June 14, 2002, the Debtors filed a plan of reorganization (the "Prearranged Plan") and a disclosure statement. The Official Committee of Unsecured Creditors (the "Committee") opposed the Prearranged Plan. As a result of this opposition, the Debtors, Matlin Global Partners and the Committee entered into negotiations, and eventually agreed upon a revised plan of reorganization that each party supported. During the course of such negotiations, the Bankruptcy Term Sheet and Bankruptcy Support Agreement terminated. On January 16, 2003, the Bankruptcy Court approved the Plan, with the support of the Senior Lenders, Matlin Global Partners and the members of the Committee. The Plan was consummated on March 6, 2003. B. Description of Certain Provisions of the Plan (1) Reorganization of the Issuer. The Plan provided for, among other things: (1) the restructuring of the Credit Facility, including a payment of $50,000,000 on the effective date of the Plan to the agent under the Credit Facility for the benefit of the existing Senior Lenders, exclusive of the proceeds (the "Chicopee Sale Proceeds") of the sale of the South Brunswick facility owned by Chicopee, Inc.; (2) the payment to the Senior Lenders of 100% of the Chicopee Sale Proceeds; (3) the payment of an additional amount of at least $5,000,000 to the Senior Lenders; (4) the retirement of the Debtors' obligations under the Senior Subordinated Notes, wherein each holder of Senior Subordinated Notes and other general unsecured creditors (other than Critical Vendor Claims and Intercompany Claims (each as defined in the Plan)) would receive on, or as soon as practicable after, the effective date of the Plan in exchange for its allowed claim against the Debtors, (a) its pro rata share of Class A Common Stock, or (b) at the election of any such holder who was a Qualified Institutional Buyer (as defined in Rule 144A under the Securities Act of 1933 (the "Securities Act")), its pro rata share of Class C Common Stock, par value $.01 per share, of the Issuer; (5) the payment in full of all Critical Vendor Claims and Intercompany Claims (each as defined in the Plan); (6) the offering of $50,000,000 of the Convertible Notes to each holder of an allowed unsecured claim, on a pro rata basis; (7) that Matlin Global Partners would issue, or cause to be issued, a letter of credit in the aggregated amount of $25,000,000 (the "Exit Letter of Credit") in favor of the agent under the Credit Facility, as restructured pursuant to the Plan, to support the amortization payments required to be made by the Issuer on December 31, 2003, June 30, 2004, and (Page 17 of 31) December 31, 2004; (8) that upon any drawing under the Exit Letter of Credit (if any) (or any advances made, or caused to be made, by Matlin Global Partners solely in lieu of drawing on the Exit Letter of Credit), Matlin Global Partners would be entitled to a 10% Senior Subordinated Note due 2007 (the "New Senior Subordinated Note") equal to the amount (if any) drawn against the Exit Letter of Credit (or such other advance made or caused to be made by Matlin Global Partners); (9) that holders of the Issuer's common stock outstanding immediately prior to the effective date of the Plan and rights therefor (including options and subscription rights) (the "Old Polymer Equity Interests") would receive 100% of the Class B Common Stock, par value $.01 per share, of the Issuer (the "Class B Common Stock") (which will not be diluted by any conversions of the Convertible Notes) and the Series A Warrants (the "Series A Warrants") and Series B Warrants (the "Series B Warrants" and, collectively with the Series A Warrants, the "Warrants") to purchase, respectively, Series D Common Stock, par value $.01 per share, and Series E Common Stock, par value $.01 per share, of the Issuer in exchange for their Old Polymer Equity Interests; and (10) mutual releases among the Issuer, Matlin Global Partners, the Committee, the members of the Committee, the Senior Lenders, the past and present directors, management and professionals of the Issuer and its subsidiaries and affiliates, and certain other persons and entities. In the event that any holder of Senior Subordinated Notes other than Matlin Global Partners did not elect to subscribe for Convertible Notes, holders of Senior Subordinated Notes other than Matlin Global Partners that did subscribe for Convertible Notes were given the right to elect to purchase their pro rata share of such unsubscribed Convertible Notes. Matlin Global Partners agreed to act as "standby purchaser" to ensure that all such Convertible Notes were purchased and that the issuance of such Convertible Notes resulted in proceeds of $50,000,00. (2) Provisions Relating to the Organizational Documents of the Issuer and its Subsidiaries and Corporate Governance. The Plan sets forth requirements with respect to the organizational documents of the Issuer and its subsidiaries and certain arrangements among the Issuer and its shareholders (including, without limitation, covenants with respect to the voting of the Common Stock, par value $.01 per share, of the Issuer (the "Common Stock"), contractual preemptive rights in connection with the issuance of capital stock of the Issuer (subject to exceptions), tag-along rights in connection with certain sales of Common Stock by Matlin Global Partners and other obligations of the Issuer). The arrangements regarding the voting of the Issuer's Common Stock, contractual preemptive rights in connection with the issuance of capital stock of the Issuer (subject to exceptions), tag-along rights in connection with certain sales of Common Stock by Matlin Global Partners and certain other obligations of the Issuer are memorialized in a Shareholders Agreement, which was executed upon the consummation of the Plan and is described below. Additionally, the Issuer's Rights Agreement, dated as of April 15, 1996, by and among the Issuer and First Union Bank of North Carolina was terminated pursuant to the Plan and an order of the Bankruptcy Court. C. Hold Back of Class A Common Stock In connection with the consummation of the Plan, the Issuer has informed Matlin Global Partners that it held back 1,355,693 shares of Class A Common Stock from distribution to holders of allowed unsecured claims pending the resolution of certain claims against the Debtors (Page 18 of 31) for up to approximately $104,590,813. To the extent disputed claims are allowed by Order of the Bankruptcy Court, such claims will be satisfied by the issuance of Class A Common Stock. To the extent the aggregate awards under such disputed claims total less than $104,590,813, a portion of the 1,355,693 shares of Class A Common Stock held back will be distributed to holders of allowed unsecured claims (including Matlin Global Partners) on a pro rata basis. II. Shareholders Agreement In order to effectuate certain provisions of the Plan, Matlin Global Partners, the Issuer, Northeast Investors Trust ("NIT"), One Group Income Bond Fund ("One Group Income"), One Group High Yield Bond Fund ("One Group High Yield"), Southern Ute Growth Fund ("Southern Ute Growth"), Southern Ute Permanent Fund (together with One Group Income, One Group High Yield and Southern Ute Growth, "Pacholder"), Atlantic Global Funding Ltd. ("Atlantic"), CHYPS 1997-1 Ltd. ("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-Matlin Global Partners Holders"), Jerry Zucker ("Zucker") and James G. Boyd ("Boyd") entered into a Shareholders Agreement, dated as of March 5, 2003 (the "Shareholders Agreement"). The terms of the Shareholders Agreement are described below. A. Contractual Preemptive Rights Pursuant to the Shareholders Agreement, the Issuer granted contractual preemptive rights to each holder of the Common Stock issued: (a) pursuant to the Plan; (b) upon the 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 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 the Issuer, subject to certain excluded issuances set forth in the Shareholders Agreement and summarized in the immediately following sentence. Issuances of the following securities of the Issuer are not subject to the preemptive rights: (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 Issuer's Amended and Restated Certificate of Incorporation; (c) equity securities of the Issuer issued in connection with (i) any acquisition of another entity (other than an individual) by the Issuer or any subsidiary of the Issuer 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 entity, in each case that is approved by a majority of the Issuer's 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 Issuer (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 Issuer's Board of Directors; (e) shares of Common Stock issued in connection with any stock split, stock dividend, recapitalization or similar transaction by the (Page 19 of 31) Issuer; (f) shares of Common Stock issued pursuant to a firm commitment underwritten public offering of the Issuer'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 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 Issuer. The contractual preemptive rights may be waived with the prior consent of the Issuer's Board of Directors, including at least one Non-Matlin Global Partners Board Member (as defined below), and Matlin Global Partners. The contractual preemptive rights terminate upon a change of control of the issuer (as defined in the Shareholders Agreement) or with the consent of the Issuer's Board of Directors, including at least one Non-Matlin Global Partners Board Member, and Matlin Global Partners. B. Tag-Along Rights Pursuant to the Shareholders Agreement, Matlin Global Partners has granted "tag-along" rights to each holder of Initial Common Stock. In the event Matlin Global Partners proposes to sell any of its Common Stock of the Issuer, subject to certain exempt transactions set forth in the Shareholders Agreement, each holder of Initial Common Stock shall have the right to sell, along side Matlin Global Partners, its pro rata share of the total number of shares proposed to be sold by Matlin Global Partners to the proposed purchaser on the same terms and conditions as Matlin Global Partners. The tag-along rights may be waived with the prior consent of the Issuer's Board of Directors, including at least one Non-Matlin Global Partners Board Member, and Matlin Global Partners. The tag-along rights terminate upon a change of control of the issuer (as defined in the Shareholders Agreement) or with the consent of the Issuer's Board of Directors, including at least one Non-Matlin Global Partners Board Member, and Matlin Global Partners. C. Provisions Regarding the Issuer's 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 the Issuer's Board of Directors and the voting of the shares held thereby with respect to the nomination, election and removal of directors. (1) Number, Term and Qualifications; Subsequent Elections. Pursuant to the Plan and the Shareholders Agreement, as of March 6, 2003 (the "Effective Date"), the Issuer's Board of Directors will be (a) fixed at nine members, each with one year terms, subject to the removal provisions of the Issuer's Bylaws, and (b) composed of five directors designated by Matlin Global Partners (together with any direct or indirect successors thereto designated by Matlin Global Partners, the "MP Board Members"), two 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 directors designated by the Non-Matlin Global Partners Holders (together with any direct or indirect successors thereto, the "Non-Matlin Global Partners Board Members"). (Page 20 of 31) At the annual meeting of stockholders for the calendar years 2003, 2004 and 2005, Matlin Global Partners, each Non-Matlin Global Partners 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 Matlin Global Partners Board Members, Non-Matlin Global Partners Board Members and ZB Board Members sitting on the Issuer's Board of Directors on the date immediately preceding such meeting; provided that if there shall be any vacancy on the Issuer's Board of Directors on the date immediately preceding such meeting as the result of the removal, resignation, death, disability or otherwise of a Matlin Global Partners Board Member, Non-Matlin Global Partners Board Member or ZB Board Member, Matlin Global Partners, each Non-Matlin Global Partners 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 Matlin Global Partners, if the director was a Matlin Global Partners Board Member, designated by the remaining Non-Matlin Global Partners Board Member, if the director was a Non-Matlin Global Partners Board Member and designated by the remaining ZB Board Member, if the director was a ZB Board Member; provided that (a) Matlin Global Partners 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 the Shareholders Agreement, and (b) upon the removal of any ZB Board Member pursuant to Sections 4.2(c) or (d) of the Shareholders Agreement (summarized in Paragraphs II(C)(2)(c) and (d) of this Item 6), the remaining ZB Board Member shall not have the right to designate a successor to the removed ZB Board Member. (2) Vacancies. (a) At any time prior to the third anniversary of the Effective Date, upon the vacancy of any director due to resignation, removal or otherwise, Matlin Global Partners, each Non-Matlin Global Partners 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 Matlin Global Partners, if the director was a Matlin Global Partners Board Member, designated by the remaining Non-Matlin Global Partners Board Member, if the director was a Non-Matlin Global Partners Board Member and designated by the remaining ZB Board Member, if the director was a ZB Board Member; provided that (i) Matlin Global Partners 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 Issuer's Board of Directors in accordance with the terms of the Shareholders Agreement, and (ii) upon the removal of any ZB Board Member pursuant to Sections 4.2(c) or (d) of the Shareholders Agreement (summarized in Paragraphs II(C)(2)(c) and (d) of this Item 6), the remaining ZB Board Member shall not have the right to designate a successor to the removed ZB Board Member. (Page 21 of 31) (b) At any time on or after the third anniversary of the Effective Date, Matlin Global Partners, each Non-Matlin Global Partners Holder, Zucker and Boyd is to 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 Issuer's slate of directors and elect each Matlin Global Partners Board Member, ZB Board Member and Non-Matlin Global Partners 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 Matlin Global Partners Board Member, ZB Board Member, Non-Matlin Global Partners 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 Issuer's Board of Directors be increased by operation of this provision. (c) Matlin Global Partners may 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 Issuer's Board of Directors without cause unless (i) Zucker's employment with the Issuer or its subsidiaries is terminated for cause, or (ii) (A) Zucker's employment with the Issuer or its subsidiaries is terminated without cause or Zucker resigns and (B) the Issuer 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, Matlin Global Partners 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 Issuer's Board of Directors. Nothing in this provision limits Matlin Global Partners' 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 Issuer's Board of Directors. (d) Matlin Global Partners may 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 Issuer's Board of Directors without cause unless (i) Boyd's employment with the Issuer or its subsidiaries is terminated for cause, or (ii) (A) Boyd's employment with the Issuer or its subsidiaries is terminated without cause or Boyd resigns and (B) the Issuer 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, (Page 22 of 31) Matlin Global Partners 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 Issuer's Board of Directors. Nothing in this provision limits Matlin Global Partners' 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 Issuer's 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) of the Shareholders Agreement (summarized in Paragraphs II(C)(2)(c) and (d) of this Item 6), the Issuer is to promptly call a special meeting of shareholders for the purpose of reducing the number of directors on the Issuer's Board of Directors to eliminate the vacancy created by such removal and Matlin Global Partners 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 Issuer'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) of the Shareholders Agreement (summarized in Paragraph II(C)(2)(c)(ii) of this Item 6), Matlin Global Partners 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 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) of the Shareholders Agreement (summarized in Paragraph II(C)(2)(d)(ii) of this Item 6), Matlin Global Partners 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) Matlin Global Partners 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-Matlin Global Partners Board Member. (3) Committees. At least one Non-Matlin Global Partners Board Member shall be a member of each of the audit committee, compensation committee and executive committee for so long as a Non-Matlin Global Partners Board Member has a right to a seat on the Issuer's Board of Directors pursuant to Sections 4.1, 4.2(a) or 4.2(b) of the Shareholders Agreement (summarized in Paragraphs II(C)(1), (2)(a) and (2)(b) of this Item 6); provided that at least one Non-Matlin Global Partners Board Member is a member of the Issuer'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. (Page 23 of 31) (4) Termination. The provisions of the Shareholders Agreement regarding the composition of the Issuer's Board of Directors and the voting of the shares held by the parties thereto with respect to the nomination, election and removal of directors shall terminate upon a change of control of the Issuer (as defined in the Shareholders Agreement). D. Additional Obligations of the Issuer In accordance with the Plan and pursuant to the Shareholders Agreement, the issuer is subject to the following additional obligations. (1) Reporting Obligations. If a class of the Issuer's equity securities is not otherwise registered pursuant to Section 12(d) or Sections 12(g)(1)(A) or (B) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, the Issuer shall (a) use its best efforts to register the Class A Common Stock, on a voluntary basis, with the Securities and Exchange 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. The Issuer shall not seek to terminate any voluntary registration of its Class A Common Stock required by the Shareholders Agreement (as summarized 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 such obligation in accordance with the Shareholders Agreement. (2) Incorporation. The Issuer shall maintain its corporate existence in Delaware; provided, however, that the Issuer may reincorporate elsewhere if such reincorporation is 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 Non-Matlin Global Partners Board Member. (3) Listing. On the Effective Date, or as soon as practicable thereafter, the Issuer 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 Issuer 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. (4) Related Party Transactions. Without the written approval of at least one Non-Matlin Global Partners Board Member, the Issuer may not enter into any New Polymer Affiliated Transaction (as defined in the Shareholders Agreement); provided that, solely for the avoidance of doubt, nothing in this provision requires the termination of any of the existing terms or provisions of, or existing obligations under, any of the following relationships between the Issuer and any PGI Affiliate (as defined in the Shareholders Agreement): (i) the existing lease and shared services agreement relating to the Issuer's headquarters, among the Issuer, The InterTech Group, Inc. and ZS Associates, as in effect on the Effective Date; (b) the shared insurance purchasing arrangement between the Issuer and The InterTech Group, Inc., as in effect on the Effective Date; and (c) the shared employee benefits management agreement between the Issuer and The InterTech Group, Inc, as in effect on the Effective Date. Notwithstanding (Page 24 of 31) 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-Matlin Global Partners Board Member, and (y) nothing in this Agreement shall restrict or prevent the Issuer from terminating any of the relationships, agreements or arrangements set forth in the final proviso to the immediately preceding sentence. Notwithstanding the foregoing, in no case shall the Issuer 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 Matlin Global Partners pursuant to the Plan. (5) Registration Rights. In the event that the Issuer, Matlin Global Partners or any Non-Matlin Global Partners 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, Matlin Global Partners or such Non-Matlin Global Partners Holder shall have the right to cause the Issuer 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 Issuer (or successors to such forms adopted by the Securities and Exchange Commission). In the event a registration is requested pursuant to this provision, Matlin Global Partners and the Non-Matlin Global Partners Holders shall reasonably cooperate with the Issuer in the preparation of the registration statement, and the Issuer shall, among other things, pay all expenses of the registration, including, without limitation, the costs and expenses of one counsel to Matlin Global Partners and the Non-Matlin Global Partners Holders, provide such 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. (6) Termination of Obligations. The obligations of the Issuer summarized in this Paragraph II(D) of Item 6 shall terminate upon a change of control of the Issuer (as defined in the Shareholders Agreement) or a going private transaction involving the Issuer. E. Miscellaneous Provisions The Shareholders Agreement contains other provisions regarding, among other things, transfers 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 additional shareholders of the Issuer, and termination of the requirements for approval of actions by Non-Matlin Global Partners Board Members. In particular, any waiver, termination, amendment or other action that, pursuant to the Shareholders Agreement, requires the consent or approval of a Non-Matlin Global Partners Board Member shall require such consent or approval only if both (1) at least one Non-Matlin Global Partners Board Member has the right to a seat on the Issuer's Board of Directors pursuant to the Shareholders Agreement, and (b) at the time such approval is sought one of the following (Page 25 of 31) is true (i) at least one Non-Matlin Global Partners Board Member is a member of the Issuer's Board of Directors, (ii) if a Non-Matlin Global Partners Board Member is not a member of the Issuer's Board of Directors, a Non-Matlin Global Partners Board Member shall have been a member of the Issuer's Board of Directors within sixty days of such time, or (iii) if a Non-Matlin Global Partners Board Member is not, and, within sixty days of such time, has not been, a member of the Issuer's Board of Directors, a nomination or designation of a proposed Non-Matlin Global Partners 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 Issuer's Board of Directors. III. Senior Subordinated Note Purchase Agreement In order to facilitate the issuance of a New Senior Subordinated Note in the amount of any drawing under the Exit Letter of Credit, Matlin Global Partners, the Issuer and the Issuer's domestic subsidiaries, as guarantors, entered into a Senior Subordinated Note Purchase Agreement (the "Senior Subordinated Note Purchase Agreement"), dated as of March 5, 2003, and pursuant thereto, the Issuer issued to Matlin Global Partners a New Senior Subordinated Note. The Senior Subordinated Note Purchase Agreement and Senior Subordinated Note provide that upon any drawing under the Exit Letter of Credit, the principal amount due under the New Senior Subordinated Note will automatically increase by the amount of such drawing. The Issuer is required to pay interest on any amount outstanding under the New Senior Subordinated Note semi-annually in arrears on January 1 and June 1 of each year, commencing on June 1, 2003, at a rate of 10% per annum, and default interest in an amount of 2% per annum will be payable on the principal amount in addition to the existing 10% rate. The Issuer shall, to the extent lawful, pay interest at a rate of 12% per annum on overdue interest. The Issuer's obligations under the Senior Subordinated Note Purchase Agreement and Senior Subordinated Note are guaranteed by the Issuer's domestic subsidiaries. Both the Issuer's obligations under the Senior Subordinated Note and the guarantees thereof are subordinate to the indebtedness outstanding under the Issuer's restructured Credit Facility. The Senior Subordinated Note Purchase Agreement contains customary representations and warranties and standard default terms. Additionally, the Senior Subordinated Note Purchase Agreement contains affirmative and negative covenants of the Issuer with respect to (a) delivery of information, (b) transactions with affiliates, (c) limitation on indebtedness, (d) disposition of proceeds of asset sales, (e) limitation on restricted payments, (f) corporate existence, (g) limitation on liens, (h) future domestic subsidiary guarantors, (i) designation of unrestricted subsidiaries, and (j) mergers and similar transactions involving the Issuer or the guarantors. References to, and descriptions of, the Plan, Shareholders Agreement and the Senior Subordinated Note Purchase Agreement as set forth above in this Item 6, are qualified in their entirety by reference to the copies of the Plan, Shareholders Agreement and Senior Subordinated Note Purchase Agreement included as Exhibits 7, 5 and 4, respectively, to this (Page 26 of 31) Schedule 13D, and incorporated in this Item 6 in their entirety where such references and descriptions appear. Reference is made to the descriptions of the Bermuda Participation Agreement in Item 5 of this Statement and to the Bermuda Participation Agreement which is annexed hereto as Exhibit 2, which is incorporated herein by reference. Reference is made to the descriptions of the Opt-Out Fund Participation Agreement in Item 5 of this Statement and to the Opt-Out Fund Participation Agreement which is annexed hereto as Exhibit 3, which is incorporated herein by reference. Item 7. Materials to be Filed as Exhibits Exhibit No. Description ----------- ----------- 1 Joint Filing Agreement, dated as of March 17, 2003, by and among MatlinPatterson LLC, MatlinPatterson Asset Management LLC, MatlinPatterson Global Advisers LLC, MatlinPatterson Global Partners LLC, MatlinPatterson Global Opportunities Partners L.P., MatlinPatterson Global Opportunities Partners (Bermuda) L.P., MatlinPatterson Global Opportunities Partners B, L.P. Mark Patterson and David Matlin. 2 Participation Agreement, dated as of May 15, 2001 by and between MatlinPatterson Global Opportunities L.P. (formerly, CSFB Global Opportunities Partners, L.P.) and MatlinPatterson Global Opportunities Partners (Bermuda) L.P. (formerly, CSFB Global Opportunities Partners (Bermuda), L.P.) 3 Participation Agreement, dated as of July 16, 2002 by and between MatlinPatterson Global Opportunities L.P. and MatlinPatterson Global Opportunities Partners B, L.P. 4 Senior Subordinated Note Purchase Agreement, dated March 5, 2003, by and between the Issuer and its affiliates and MatlinPatterson Global Opportunities Partners L.P. 5(a) Shareholders Agreement, dated as of March 5, 2003, by and the Issuer, MatlinPatterson Global Opportunities Partners L.P., Northeast Investors Trust, One Group Income Bond Fund, One Group High Yield Bond Fund, Southern Ute Growth Fund, Southern Ute Permanent Fund, CHYPS 1997-1 Ltd., CHYPS 1999-1 Ltd., James G. Boyd and Jerry Zucker. 6(b) Amended Modified Disclosure Statement for Joint Amended Modified Plan of Reorganization of the Issuer and its affiliates under Chapter 11 of the Bankruptcy Code, dated November 25, 2002. 7 Debtor's Joint Second Amended Modified Plan of Reorganization of the Issuer and its affiliates under Chapter 11 of the Bankruptcy Code, dated (Page 27 of 31) January 16, 2003. (a) Incorporated by reference from Exhibit 3 to the Registration Statement on Form 8-A filed on March 6, 2003 by Polymer Group, Inc. (b) Incorporated by reference from Exhibit T3E1 to the Application for Qualification of Indentures on Form T-3 filed on December 17, 2002 by Polymer Group, Inc. (Page 28 of 31) SIGNATURE After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this Statement is true, complete and correct. Dated: March 17, 2003 MATLINPATTERSON LLC By: /s/ Mark R. Patterson ---------------------------------------- Name: Mark R. Patterson Title: Member MATLINPATTERSON ASSET MANAGEMENT LLC By: /s/ Mark R. Patterson ---------------------------------------- Name: Mark R. Patterson Title: Chairman MATLINPATTERSON GLOBAL ADVISERS LLC By: /s/ Mark R. Patterson ---------------------------------------- Name: Mark R. Patterson Title: Chairman MATLINPATTERSON GLOBAL PARTNERS LLC By: /s/ Mark R. Patterson ---------------------------------------- Name: Mark R. Patterson Title: Director MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS L.P. By: MatlinPatterson Global Partners LLC By: /s/ Mark R. Patterson --------------------------------------- Name: Mark R. Patterson Title: Director (Page 29 of 31) MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS B, L.P. By: MatlinPatterson Global Partners LLC By: /s/ Mark R. Patterson ---------------------------------------- Name: Mark R. Patterson Title: Director MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS (BERMUDA) L.P. By: MatlinPatterson Global Partners LLC By: /s/ Mark R. Patterson ---------------------------------------- Name: Mark R. Patterson Title: Director DAVID J. MATLIN By: /s/ David J. Matlin ---------------------------------------- Name: David J. Matlin MARK R. PATTERSON By: /s/ Mark R. Patterson ---------------------------------------- Name: Mark R. Patterson (Page 30 of 31) EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- 1 Joint Filing Agreement, dated as of March 17, 2003, by and among MatlinPatterson LLC, MatlinPatterson Asset Management LLC, MatlinPatterson Global Advisers LLC, MatlinPatterson Global Partners LLC, MatlinPatterson Global Opportunities Partners L.P., MatlinPatterson Global Opportunities Partners (Bermuda) L.P., MatlinPatterson Global Opportunities Partners B, L.P. Mark Patterson and David Matlin. 2 Participation Agreement, dated as of May 15, 2001 by and between MatlinPatterson Global Opportunities L.P. (formerly, CSFB Global Opportunities Partners, L.P.) and MatlinPatterson Global Opportunities Partners (Bermuda) L.P. (formerly, CSFB Global Opportunities Partners (Bermuda), L.P.) 3 Participation Agreement, dated as of July 16, 2002 by and between MatlinPatterson Global Opportunities L.P. and MatlinPatterson Global Opportunities Partners B, L.P. 4 Senior Subordinated Note Purchase Agreement, dated March 5, 2003, by and between Polymer Group, Inc. and its affiliates and MatlinPatterson Global Opportunities Partners L.P. 5(a) Shareholders Agreement, dated as of March 5, 2003, by and among Polymer Group, Inc., MatlinPatterson Global Opportunities Partners L.P., Northeast Investors Trust, One Group Income Bond Fund, One Group High Yield Bond Fund, Southern Ute Growth Fund, Southern Ute Permanent Fund, CHYPS 1997-1 Ltd., CHYPS 1999-1 Ltd., James G. Boyd and Jerry Zucker. 6(b) Amended Modified Disclosure Statement for Joint Amended Modified Plan of Reorganization of Polymer Group, Inc. and its affiliates under Chapter 11 of the Bankruptcy Code, dated November 25, 2002. 7 Debtor's Joint Second Amended Modified Plan of Reorganization of Polymer Group, Inc. and its affiliates under Chapter 11 of the Bankruptcy Code, dated January 16, 2003. (a) Incorporated by reference from Exhibit 3 to the Registration Statement on Form 8-A filed on March 6, 2003 by Polymer Group, Inc. (b) Incorporated by reference from Exhibit T3E1 to the Application for Qualification of Indentures on Form T-3 filed on December 17, 2002 by Polymer Group, Inc. (Page 31 of 31) EX-1 3 efc3-0412_exh1.txt MATLIN PATTERSON POLYMER Exhibit 1 JOINT FILING AGREEMENT Dated as of March 17, 2003 In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing of MatlinPatterson LLC, MatlinPatterson Asset Management LLC, MatlinPatterson Global Advisers LLC, MatlinPatterson Global Partners LLC, MatlinPatterson Global Opportunities Partners L.P., MatlinPatterson Global Opportunities Partners (Bermuda) L.P., MatlinPatterson Global Opportunities Partners B, L.P., David J. Matlin and Mark R. Patterson, on behalf of each of them a statement on Schedule 13D (including amendments thereto) with respect to shares of common stock, par value $0.01 per share, of Polymer Group, Inc., and that this Agreement be included as an Exhibit to such joint filing. This Agreement may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned hereby execute this Agreement this 17th day of March 2003. MATLINPATTERSON LLC By: /s/ Mark R. Patterson ----------------------------------- Name: Mark R. Patterson Title: Member MATLINPATTERSON ASSET MANAGEMENT LLC By: /s/ Mark R. Patterson ----------------------------------- Name: Mark R. Patterson Title: Chairman MATLINPATTERSON GLOBAL ADVISERS LLC By: /s/ Mark R. Patterson ----------------------------------- Name: Mark R. Patterson Title: Chairman (Page 1 of 3) MATLINPATTERSON GLOBAL PARTNERS LLC By: /s/ Mark R. Patterson ------------------------------------ Name: Mark R. Patterson Title: Director MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS L.P. By: MatlinPatterson Global Partners LLC By: /s/ Mark R. Patterson ------------------------------------ Name: Mark R. Patterson Title: Director MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS B, L.P. By: MatlinPatterson Global Partners LLC By: /s/ Mark R. Patterson ------------------------------------ Name: Mark R. Patterson Title: Director MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS (BERMUDA) L.P. By: MatlinPatterson Global Partners LLC By: /s/ Mark R. Patterson ------------------------------------ Name: Mark R. Patterson Title: Director (Page 2 of 3) DAVID J. MATLIN By: /s/ David J. Matlin ----------------------------------- Name: David J. Matlin MARK R. PATTERSON By: /s/ Mark R. Patterson ----------------------------------- Name: Mark R. Patterson (Page 3 of 3) EX-2 4 efc3-0412_exh2.txt MATLIN PATTERSON POLYMER Exhibit 2 PARTICIPATION AGREEMENT (Delaware and Bermuda Partnerships) PARTICIPATION AGREEMENT dated as of May 15, 2001 (this "Agreement") by and between CSFB Global Opportunities Partners, L.P. a Delaware limited partnership (the "Delaware Partnership"), and CSFB Global Opportunities Partners (Bermuda), L.P. (the "Bermuda Partnership", and together with the Delaware Partnership, the "Partnerships"). Preliminary Statement This Agreement sets forth the terms and conditions on which the Bermuda Partnership will participate in, and be a beneficial owner of, a portion of each investment (and certain other assets) held by the Delaware Partnership. Each of the Partnerships is a private investment fund managed by CSFB Global Opportunities Advisers, LLC and each is in the process of raising funds. The Partnerships intend to invest proportionately with each other in the same investments. This Agreement is being entered into as a convenience to enable the Delaware Partnership and the Bermuda Partnership to adjust after each closing their respective ownership interests in their investments to be proportionate to the aggregate Capital Commitments made to each Partnership, as contemplated under each Partnership's respective partnership agreement, without the additional expense and administrative burden of transferring the ownership (or partial ownership) of investments between the Delaware Partnership and the Bermuda Partnership after each such closing. 1. Definitions. Capitalized terms not defined herein shall have the meanings given to them in the partnership agreement of the Delaware Partnership. 2. Participations. (a) From and after the date of this Agreement, at the time each Investment Asset (as defined below) is acquired, the Delaware Partnership hereby agrees to sell to the Bermuda Partnership, and the Bermuda Partnership agrees to purchase from the Delaware Partnership, without further action, a participation interest (each, a "Participation") in the Delaware Partnership's right, title and interest in such Investment Asset. The amount of the Bermuda Partnership's Participation in each Investment Asset shall equal its Pro Rata Share of such Investment Asset. "Investment Asset" means each investment (including expenses related to such investment) of the Delaware Partnership acquired at any time during the term of this Agreement, whether such investment is in the form of debt or equity securities, commodities, currencies, loans, derivatives, trade claims, short positions or any other type of asset acquired or held by the Delaware Partnership for investment purposes, together with all interest, dividends, income distributions and other earnings in respect of each such Investment Asset and cash, to the extent the Bermuda Partnership has provided cash to the Delaware Partnership, or an Investment Asset has been liquidated. The Bermuda Partnership's "Pro Rata Share" of each Investment Asset shall be a fraction (expressed as a percentage), the numerator of which is the amount of the aggregate Capital Commitments made to the Bermuda Partnership and the denominator of which is the Overall Capital Commitments. (b) Each Investment Asset shall be held by the Delaware Partnership in its own name but, to the extent of the Bermuda Partnership's interest therein, subject to the Bermuda Partnership's rights with respect thereto, as herein set forth. (c) The Bermuda Partnership shall have no direct interest in any Investment Asset except that, as a participant, the Bermuda Partnership shall participate, based upon its Pro Rata Share of each such Investment Asset, in any and all benefits, payments, recoveries and any other amounts received by the Delaware Partnership from or in connection with the Investment Assets. (d) The Bermuda Partnership's Pro Rata Share shall be adjusted immediately after each closing of the Delaware Partnership, each closing of the Bermuda Partnership and any other event (each such event, an "Adjustment Event") which causes a change in the relative proportions of Capital Commitments made to the Bermuda Partnership and the Delaware Partnership. Immediately after each Adjustment Event, the Delaware Partnership shall sell to the Bermuda Partnership, and the Bermuda Partnership shall purchase from the Delaware Partnership, or the Bermuda Partnership shall sell to the Delaware Partnership, and the Delaware Partnership shall purchase from the Bermuda Partnership, as may be required, such amount of the Participation Interest in each Investment Asset as will result in the Bermuda Partnership owning a Participation equal to its adjusted Pro Rata Share of each Investment Asset. (e) As soon as practicable after the Last Closing Date, the Bermuda Partnership's Pro Rata Share of each Investment Asset shall be transferred to the Bermuda Partnership. 3. Manner of Payment. On the date the Delaware Partnership acquires an Investment Asset, the Bermuda Partnership shall deposit with, or otherwise make available to, the Delaware Partnership, cash to fund the Bermuda Partnership's Participation in such Investment Asset in an amount equal to the cost of the Bermuda Partnership's Pro Rata Share of such Investment Asset. 4. Relationship of Parties. The Delaware Partnership neither is nor shall be deemed to be a fiduciary of, or otherwise have a trust relationship with, or be an agent of, the Bermuda Partnership in connection with this Agreement or any transaction contemplated herein, and the Delaware Partnership shall have no obligation, duty or responsibility to the Bermuda Partnership except as expressly set forth herein. Each Participation in an Investment Asset sold hereunder shall constitute an assignment, without recourse to the Delaware Partnership, of an undivided interest in and to such Investment Asset. This Agreement shall not be construed as a loan by the Bermuda Partnership to the Delaware Partnership. Nothing in this Agreement shall be construed as creating a partnership, joint venture, association, syndicate, unincorporated business or other separate entity. 2 5. Obligations Absolute. The obligations of the Bermuda Partnership hereunder shall be absolute, unconditional and irrevocable and shall be paid and performed strictly in accordance with the terms hereof. 6. Delivery of Documents and Information. (a) Unless prohibited from doing so by any document governing any Investment Asset (each, a "Document"), the Delaware Partnership will furnish to the Bermuda Partnership (i) a copy of each material financial statement, subscription agreement, transfer agreement or tax form the Delaware Partnership receives from time to time pursuant to any Document and (ii) a copy of each amendment or other modification of, or waiver or consent granted in connection with, any Document. (b) Failure of the Delaware Partnership to provide any information referred to in the foregoing subsection (a) above shall not result in any liability of the Delaware Partnership or excuse the Bermuda Partnership from the performance of any of its obligations hereunder. 7. Modification of Documents. Etc. The Delaware Partnership may (in its sole discretion), without the approval or consent of the Bermuda Partnership, (a) agree to any amendment or other modification of any Document and (b) exercise or refrain from exercising any right or remedy the Delaware Partnership may have under any Document. 8. Limitation on the Liability of the Delaware Partnership. (a) The Delaware Partnership shall not be liable to the Bermuda Partnership for any error in judgment or for any action taken or omitted to be taken by the Delaware Partnership, except for gross negligence, willful misconduct, fraud or bad faith of the Delaware Partnership. Subject to the preceding sentence, the Delaware Partnership will exercise the same care in administering the Bermuda Partnership's interest in each Investment Asset as the Delaware Partnership exercises with respect to each such Investment Asset for its own account and risk, and the Delaware Partnership shall have no further responsibility to the Bermuda Partnership. Without limiting the foregoing, the Delaware Partnership may rely on the advice of counsel concerning legal matters and on any written communication or telephone conversation which it believes to be genuine and correct and to have been signed, sent or made by the proper person or persons. (b) The Delaware Partnership makes no representation or warranty in connection with, and assumes no responsibility for, the financial or other condition of any borrower or company to which an Investment Asset relates, or other party to any Document or the performance of the obligations of any such Person under any Document, or for the due execution, authenticity, validity, enforceability or colleetibility of any thereof. The Delaware Partnership shall have no duty to file any document relating to any collateral or to maintain any such filing. The Delaware Partnership shall have no obligation to make any claim on, or assert any lien upon or assert any setoff against any property held by it. The Delaware Partnership may make loans or otherwise extend credit to, or purchase equity in, and generally engage in any kind of investment business with, any borrower or other person obligated in respect of an Investment 3 Asset, or any bank that may have originated a loan or acquired an Investment Asset (if the originator or acquirer (as applicable) is not the Delaware Partnership). 9. Independent Investigation. The Bermuda Partnership represents that it has entered into this Agreement on the basis of its own credit evaluation, the Delaware Partnership has not made any representations or warranties to the Bermuda Partnership, except as otherwise set forth herein, and no act hereafter taken by the Delaware Partnership, including, without limitation, any review of the affairs of any Borrower or any other party to any Document, shall be deemed to constitute any representation or warranty by the Delaware Partnership to the Bermuda Partnership. The Bermuda Partnership represents and warrants to, and agrees with, the Delaware Partnership that it has made and will continue to make, independently and without reliance upon the Delaware Partnership or counsel to the Delaware Partnership and based on such documents and information as it deems appropriate, (A) its own appraisal of and investigation into the operations, financial condition, creditworthiness, affairs, status and nature of each Borrower and other party to any Document, and (B) its own decision to enter into this Agreement and to take any action hereunder. 10. Existing Agreements. The parties hereto acknowledge that Hemisphere Global Opportunities, Ltd. is the general partner of each of the Partnerships, and agree that notwithstanding anything to the contrary contained in this Agreement, this Agreement shall not be deemed to modify, supersede, amend or otherwise effect the duties and obligations of the general partner under the partnership agreements of either Partnership. 11. Indemnification. The Bermuda Partnership agrees to indemnify and hold harmless the Delaware Partnership for the Bermuda Partnership's respective Pro Rata Share of any and all liabilities, claims, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever (collectively, "Losses") which may be imposed on, incurred by or asserted against the Delaware Partnership in connection with an Investment Asset. The Delaware Partnership hereby agrees that, in the event it incurs any Losses which are not related to an Investment Asset in which the Bermuda Partnership has a Participation under this Agreement, it will not hold the Bermuda Partnership liable for any of the foregoing. This section 11 shall survive termination of this Agreement. 12. Notices. Unless otherwise specified herein, all notices and other communications provided for hereunder shall be in writing and shall be mailed, by certified or registered mail, postage prepaid (return receipt requested), telecopied, telexed, telegraphed or delivered, to such party at its address or at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this section. All such notices and other communications shall be effective {a} if mailed, when received or three days after matting, whichever is earlier; (b) if telegraphed, when delivered to the telegraph company; (c) if telecopied, when transmitted; (d) if telexed, when the appropriate answerback has been received; or (e) if delivered, upon delivery. 4 13. Termination. This Agreement shall terminate upon the transfer of all the Investment Assets as provided in section 2(e) hereof and/or distribution of all Proceeds of all Investment Assets to the Bermuda Investors. 14. Miscellaneous. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York. 5 IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the date above first written. CSFB GLOBAL OPPORTUNITIES PARTNERS, L.P. By: Hemisphere Global Opportunities Partners, Ltd., In its capacity as General Partner of CSFB Global Opportunities Partners, L.P. By: /s/ Marty Brandt ------------------------------------------------ Name: Marty Brandt Title: Director CSFB GLOBAL OPPORTUNITIES PARTNERS (BERMUDA), L.P. By: Hemisphere Global Opportunities Partners, Ltd., In its capacity as the General Partner of CSFB Global Opportunities Partners (Bermuda), L.P. By: /s/ Marty Brandt ------------------------------------------------ Name: Marty Brandt Title: Director EX-3 5 efc3-0412_exh3.txt MATLIN PATTERSON POLYMER Exhibit 3 PARTICIPATION AGREEMENT (Opt-Out Partnership) PARTICIPATION AGREEMENT dated as of July 16, 2002 (this "Agreement") by and between Matlin Patterson Global Opportunities Partners L.P. (f/k/a CSFB Global Opportunities Partners, L.P.), a Delaware limited partnership (the "Delaware Partnership"), and Matlin Patterson Global Opportunities Partners B, L.P. (the "Opt-Out Partnership", and together with the Delaware Partnership, the "Partnerships"), permit the Delaware Partnership to own and manage the Investments in which the Opt-Out Investors have an interest as determined under the Fifth Amended and Restated Agreement of Limited Partnership of the Delaware Partnership, dated July 1, 2002, as such agreement may be amended from time to time (the "Delaware Partnership Agreement"). Preliminary Statement This Agreement sets forth the terms and conditions on which the Opt-Out Partnership will participate in, and be a beneficial owner of, a portion of certain Investments held by the Delaware Partnership. Each of the Partnerships is a private investment fund managed by Matlin Patterson Global Advisers LLC (the "Investment Adviser"). The Opt-Out Investors are limited partners of the Delaware Partnership who, in connection with the Spin-off of the Investment Professionals of the Investment Adviser from CSFB, elected not to participate in future Investments (other than Convertible Investments) and to receive the Proceeds of their share of existing Investments as such Investments are realized and Proceeds become available. The General Partner of the Delaware Partnership used its authority under the Delaware Partnership Agreement to transfer the Opt-Out Investors to the Opt-Out Partnership on the date hereof. This Agreement is being entered into as a convenience to permit the Delaware Partnership to own and manage the Investments in which the Opt-Out Investors have an interest, as determined under the Delaware Partnership Agreement without the additional expense and administrative burden of transferring the ownership (or partial ownership) of Investments between the Delaware Partnership and the Opt-Out Partnership. 1. Definitions. Capitalized terms not defined herein shall have the meanings given to them in the Delaware Partnership Agreement. 2. Participations. (a) In consideration for the Opt-Out Investors becoming limited partners in the Opt-Out Partnership, the Delaware Partnership as of the date of this Agreement, hereby agrees to sell to the Opt-Out Partnership, and the Opt-Out Partnership agrees to purchase from the Delaware Partnership, without further action, a participation interest (each a "Participation") in the Delaware Partnership's right, title and interest in each Opt-Out Asset. The amount of the Opt-Out Partnership's Participation in each Opt-Out Asset shall equal, at all times, its Pro Rata Share (as defined below) of such Opt-Out Asset. "Opt-Out Asset" means each investment (including expenses related to such investment) of the Delaware Partnership listed on Schedule A hereto, whether such investment is in the form of debt or equity securities, commodities, currencies, loans, derivatives, trade claims, short positions or any other type of asset acquired or held by the Delaware Partnership for investment purposes, together with all interest, dividends, income distributions and other earnings in respect of each such Opt-Out Asset and cash, to the extent the Opt-out Partnership has provided cash to the Delaware Partnership, or an Opt-Out Asset has been liquidated; provided that any asset of the Delaware Partnership from which an Opt-Out Investor was excluded from participating shall not be an Opt-Out Asset. The Opt-Out Partnership's "Pro Rata Share" of each Opt-Out Asset shall be a fraction (expressed as a percentage), the numerator of which is the amount of the aggregate Capital Commitments of the Opt-Out Investors and the denominator of which is the Overall Capital Commitments. (b) Each Opt-Out Asset shall be held by the Delaware Partnership in its own name but, to the extent of the Opt-Out Partnership's interest therein, subject to the Opt-Out Partnership's rights with respect thereto, as herein set forth. (c) The Opt-Out Partnership shall have no direct interest in any Opt-Out Asset except that, as a participant, the Opt-Out Partnership shall participate, based upon its Pro Rata Share of each such Opt-Out Asset, in any and all benefits, payments, recoveries and any other amounts received by the Delaware Partnership from or in connection with the Opt-Out Assets. (d) The Delaware Partnership shall not reinvest the Proceeds of any Opt-Out Asset, except to the extent assets attributable to Opt-Out Investors may be reinvested under the Delaware Partnership Agreement, and the Delaware Partnership shall either distribute such Proceeds to the Opt-Out Partnership (or to the Opt-Out Investors on behalf of the Opt-Out Partnership) or apply such Proceeds to reserves or to pay expenses and management fees as required under the Delaware Partnership Agreement. (e) As soon as practicable after the Last Closing Date, the Opt-Out Partnership's Pro Rata Share of each Opt-Out Asset shall be transferred to the Opt-Out Partnership. 3. Manner of Payment. The Opt-Out Partnership shall deposit with, or otherwise make available to, the Delaware Partnership, cash to fund the Opt-Out Partnership's Participation in each Opt-Out Asset in an amount equal to the cost of the Opt-Out Partnership's Pro Rata Share of such Opt-Out Asset. 4. Relationship of Parties. The Delaware Partnership neither is nor shall be deemed to be a fiduciary of, or otherwise have a trust relationship with, or be an agent of, the Opt-Out Partnership in connection with this Agreement or any transaction contemplated herein, and the Delaware Partnership shall have no obligation, duty or responsibility to the Opt-Out Partnership except as expressly set forth herein. Each Participation in an Opt-Out Asset sold hereunder shall constitute an assignment, without recourse to the Delaware Partnership, of an 2 undivided interest in and to such Opt-Out Asset. This Agreement shall not be construed as a loan by the Opt-Out Partnership to the Delaware Partnership. Nothing in this Agreement shall be construed as creating a partnership, joint venture, association, syndicate, unincorporated business or other separate entity. 5. Obligations Absolute. The obligations of the Opt-Out Partnership hereunder shall be absolute, unconditional and irrevocable and shall be paid and performed strictly in accordance with the terms hereof. 6. Delivery of Documents and Information. (a) Unless prohibited from doing so by any document governing any Opt-Out Asset (each, a "Document"), the Delaware Partnership will furnish to the Opt-Out Partnership (i) a copy of each material financial statement, subscription agreement, transfer agreement or tax form the Delaware Partnership receives from time to time pursuant to any Document and (ii) a copy of each amendment or other modification of, or waiver or consent granted in connection with, any Document. (b) Failure of the Delaware Partnership to provide any information referred to in the foregoing subsection (a) above shall not result in any liability of the Delaware Partnership or excuse the Opt-Out Partnership from the performance of any of its obligations hereunder. 7. Modification of Documents, Etc. The Delaware Partnership may (in its sole discretion), without the approval or consent of the Opt-Out Partnership, (a) agree to any amendment or other modification of any Document, and (b) exercise or refrain from exercising any right or remedy the Delaware Partnership may have under any Document. 8. Limitation on the Liability of the Delaware Partnership. (a) The Delaware Partnership shall not be liable to the Opt-Out Partnership for any error in judgment or for any action taken or omitted to be taken by the Delaware Partnership, except for gross negligence, willful misconduct, fraud or bad faith of the Delaware Partnership. Subject to the preceding sentence, the Delaware Partnership will exercise the same care in administering the Opt-Out Partnership's interest in each Opt-Out Asset as the Delaware Partnership exercises with respect to each such Opt-Out Asset for its own account and risk, and the Delaware Partnership shall have no further responsibility to the Opt-Out Partnership. Without limiting the foregoing, the Delaware Partnership may rely on the advice of counsel concerning legal matters and on any written communication or telephone conversation which it believes to be genuine and correct and to have been signed, sent or made by the proper person or persons. (b) The Delaware Partnership makes no representation or warranty in connection with, and assumes no responsibility for, the financial or other condition of any borrower or company to which an Opt-Out Asset relates, or other party to any Document or the performance of the obligations of any such Person under any Document, or for the due execution, authenticity, validity, enforceability or collectibility of any thereof. The Delaware 3 Partnership shall have no duty to file any document relating to any collateral or to maintain any such filing. The Delaware Partnership shall have no obligation to make any claim on, or assert any lien upon or assert any setoff against any property held by. it. The Delaware Partnership may make loans or otherwise extend credit to, or purchase equity in, and generally engage in any kind of investment business with, any borrower or other person obligated in respect of an Opt-Out Asset, or any bank that may have originated a loan or acquired an Opt-Out Asset (if the originator or acquirer (as applicable) is not the Delaware Partnership). 9. Independent Investigation. The Opt-Out Partnership represents that it has entered into this Agreement on the basis of its own credit evaluation, the Delaware Partnership has not made any representations or warranties to the Opt-Out Partnership, except as otherwise set forth herein, and no act hereafter taken by the Delaware Partnership, including, without limitation, any review of the affairs of any Borrower or any other party to any Document, shall be deemed to constitute any representation or warranty by the Delaware Partnership to the Opt-Out Partnership. The Opt-Out Partnership represents and warrants to, and agrees with, the Delaware Partnership that it has made and will continue to make, independently and without reliance upon the Delaware Partnership or counsel to the Delaware Partnership and based on such documents and information as it deems appropriate, (A) its own appraisal of and investigation into the operations, financial condition, creditworthiness, affairs, status and nature of each Borrower and other party to any Document, and (B) its own decision to enter into this Agreement and to take any action hereunder. 10. Existing Agreements. The parties hereto acknowledge that Hemisphere Global Opportunities, Ltd. is the general partner of the Delaware Partnership and Matlin Patterson Global Partners LLC is the general partner of the Opt-Out Partnership, and agree that notwithstanding anything to the contrary contained in this Agreement, this Agreement shall not be deemed to modify, supercede, amend or otherwise effect the duties and obligations of the general partners, or their successors under partnership agreements of either Partnership. 11. Indemnification. The Opt-Out Partnership agrees to indemnify and hold harmless the Delaware Partnership for the Opt-Out Partnership's respective Pro Rata Share of any and all liabilities, claims, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever (collectively, "Losses") which may be imposed on, incurred by or asserted against the Delaware Partnership in connection with an Opt-Out Asset. The Delaware Partnership hereby agrees that, in the event it incurs any Losses which are not related to an Opt-Out Asset in which the Opt-Out Partnership has a Participation under this Agreement, it will not hold the Opt-Out Partnership liable for any of the foregoing. This section 11 shall survive termination of this Agreement. 12. Notices. Unless otherwise specified herein, all notices and other communications provided for hereunder shall be in writing and shall be mailed, by certified or registered mail, postage prepaid (return receipt requested), telecopied, telexed, telegraphed or delivered, to such party at its address or at such other address as shall be designated by such 4 party in a written notice to the other party complying as to delivery with the terms of this section. All such notices and other communications shall be effective (a) if mailed, when received or three days after mailing, whichever is earlier; (b) if telegraphed, when delivered to the telegraph company; (c) if telecopied, when transmitted; (d) if telexed, when the appropriate answerback has been received; or (e) if delivered, upon delivery. 13. Termination. This Agreement shall terminate upon the transfer of all the Opt-Out Assets as provided in section 2(e) hereof and/or distribution of all Proceeds of all Opt-Out Assets to the Opt-Out Investors. 14. Miscellaneous. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York. 5 IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the date above first written. MATLIN PATTERSON GLOBAL OPPORTUNITIES PARTNERS L.P. By: Hemisphere Global Opportunities, Ltd., In its capacity as General Partner of Matlin Patterson Global Opportunities Partners L.P. By: /s/ Marty Brandt ------------------------------------------------ Name: Marty Brandt Title: Director MATLIN PATTERSON GLOBAL OPPORTUNITIES PARTNERS B, L.P. By: Matlin Patterson Global Partners LLC, In its capacity as the General Partner of Matlin Patterson Global Opportunities Partners B, L.P. By: /s/ Mark R. Patterson ------------------------------------------------ Name: Mark R. Patterson Title: Director 6 EX-4 6 efc3-0412_exh4.txt MATLIN PATTERSON POLYMER Exhibit 4 EXECUTION COPY SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT, dated as of March 5, 2003 (the "Effective Date"), between POLYMER GROUP, INC., a Delaware corporation (the "Borrower"), each of the entities identified under the caption "GUARANTORS" on the signature pages hereto (individually and together with any entity that shall become a guarantor hereunder pursuant to Section 6.01(h) hereof, a "Guarantor", and, together with the Borrower, the "Obligors") and MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS LP, a Delaware limited partnership ("GOF"). WHEREAS, on May 11, 2002, the Borrower and its domestic subsidiaries (other than Bonlam (S.C.), Inc., for which the petition date was April 23, 2002) filed voluntary petitions for reorganization under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of South Carolina (the "Bankruptcy Court"); WHEREAS, on January 3, 2003, the Bankruptcy Court issued an order confirming the Borrower's and its domestic subsidiaries' Joint Second Amended Modified Plan of Reorganization (the "Plan") and on January 16, 2003 the Bankruptcy Court entered a supplemental order confirming the Plan; WHEREAS, (a) the Plan and the Credit Agreement contemplate that GOF shall issue or cause to be issued a letter of credit in favor of the Administrative Agent, as beneficiary, in the face amount of $25,000,000, in substantially the form of Exhibit A hereto (the "Letter of Credit"); and (b) such Letter of Credit shall, in accordance with the terms thereof and of the Credit Agreement, support the payments due under the Credit Agreement from the Borrower to the Administrative Agent on December 31, 2003, June 30, 2004 and December 31, 2004 to the extent that the Borrower fails to meet such payment obligations; WHEREAS, GOF has caused, or, simultaneously with the execution and delivery of this Agreement, is causing, the Letter of Credit to be issued; and WHEREAS, the Plan requires (and the Credit Agreement contemplates) that, upon any drawing under the Letter of Credit, the Borrower shall issue to GOF senior subordinated promissory notes in the face amount of such drawing, with such additional terms and conditions as are more fully set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Acquired Indebtedness" means Indebtedness of a Person (a) assumed in connection with an Acquisition from such Person or (b) existing at the time such Person becomes a Restricted Subsidiary or is merged or consolidated with or into the Borrower or any Subsidiary. "Acquired Person" means, with respect to any specified Person, any other Person which merges with or into or becomes a Subsidiary of such specified Person. "Acquisition" means (i) any capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) by the Borrower or any Restricted Subsidiary to any other Person, or any acquisition or purchase of Equity Interests of any other Person by the Borrower or any Restricted Subsidiary, in either case pursuant to which such Person shall become a Restricted Subsidiary or shall be consolidated with or merged into the Borrower or any Restricted Subsidiary or (ii) any acquisition by the Borrower or any Restricted Subsidiary of the assets of any Person which constitute substantially all of an operating unit or line of business of such Person or which is otherwise outside of the ordinary course of business. "Administrative Agent" means JPMorgan Chase Bank, as administrative agent under the Credit Agreement, together with any successor thereto. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by, or under direct or indirect common control with such specified Person. The term "control," "controlling", "controlled by" or "under common control with" with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities by agreement or otherwise. "Affiliate Transaction" has the meaning set forth in Section 6.01(b). "Agreement" means this Senior Subordinated Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Asset Sale" means any direct or indirect sale, conveyance, transfer, lease (that has the effect of a disposition) or other disposition (including, without limitation, any merger, consolidation or sale-leaseback transaction) to any Person other than the Borrower or a Wholly Owned Restricted Subsidiary, in one transaction or a series of related transactions, of (i) any Equity Interest of any Restricted Subsidiary (other than directors' qualifying shares, to the extent mandated by applicable law); (ii) any assets of the Borrower or any Restricted Subsidiary which constitute substantially all of an operating unit or line of business of the Borrower or any Restricted Subsidiary; or (iii) any other property or asset of the Borrower or any Restricted Subsidiary outside of the ordinary course of business (including the receipt of proceeds paid on account of the loss of or damage to any property or asset and awards of compensation for any asset taken by condemnation, eminent domain or similar proceedings). For the purposes of this definition, the term "Asset Sale" shall not include (a) any transaction consummated in compliance with Section 6.02 and the creation of any Lien not prohibited by Section 6.01(g); (b) sales of property or equipment that has become worn out, obsolete or damaged or otherwise unsuitable 2 for use in connection with the business of the Borrower or any Restricted Subsidiary, as the case may be; (c) any transaction consummated in compliance with Section 6.01(d); (d) any transfers of properties and assets between Wholly Owned Restricted Subsidiaries; (e) any transaction pursuant to which the Borrower or any Restricted Subsidiary transfers property to a Person and the Borrower or such Restricted Subsidiary leases such property from such Person; provided, however, that such transaction complies with Sections 6.01(d) and (e); (f) sales of Investments (i) that were originally made pursuant to clauses (a), (b), (c) or (d) of the definition of Permitted Investments or (ii) to the extent that such Investments were treated as Restricted Payments; and (g) any Qualified Securitization Transaction. In addition, solely for purposes of Section 6.01(d), any sale, conveyance, transfer, lease or other disposition of any property or asset, whether in one transaction or a series of related transactions, involving assets with a Fair Market Value not in excess of $25,000,000 in any fiscal year shall be deemed not to be an Asset Sale; provided, further, that any sale, conveyance, transfer, lease or other disposition of any property or assets, including without limitation the Chicopee Sale consummated on or prior to the Effective Date shall be excluded in any determination made pursuant to this sentence. "Assignment and Acceptance" means an assignment and acceptance entered into by GOF or an Eligible Assignee and an Eligible Assignee in substantially the form of Exhibit B hereto. "Bankruptcy Code" means Title I of the Bankruptcy Reform Act of 1978, as amended from time to time, as set forth in sections 101 et seq. of Title 11 of the United States Code, and applicable portions of Titles 18 and 28 of the United States Code. "Bankruptcy Court" has the meaning set forth in the first whereas clause. "Bankruptcy Law" means the Bankruptcy Code or any similar Federal, state or foreign law for the relief of debtors. "Bonlam" means Bonlam S.A. de C.V., a corporation duly organized and validly existing under the laws of Mexico. "Borrower" has the meaning set forth in the first introductory paragraph hereto. "Borrowing" has the meaning set forth in Section 2.01. "Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions are not required by law or authorized to close in New York, New York. "Bylaws" means the Bylaws of the Borrower in substantially the form attached as Exhibit C hereto. "Capital Lease Obligations" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be properly capitalized on the balance sheet in accordance with GAAP. 3 "Capital Stock" means any and all shares or other equivalents (however designated) of capital stock, including all common stock and all preferred stock, in the case of a corporation, partnership interests or other equivalents (however designated) in the case of a partnership, membership interests or other equivalents (however designated) in the case of a limited liability company, or common shares of beneficial interest or other equivalents (however designated) in the case of a trust. "Cash Equivalents" means: (a) U.S. Dollars; (b) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition; (c) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500,000,000; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (b) and (c) above entered into with any financial institution meeting the qualifications specified in clause (c) above; (e) commercial paper rated P-1, A-1 or the equivalent thereof by Moody's or S&P, respectively, and in each case maturing within six months after the date of acquisition; and (f) corporate securities having a rating equal to or higher than BBB -- and Baa3, or the equivalents thereof, by both S&P and Moody's, respectively, if both such entities rate the securities, or having such rating from one of such entities if only one such entity is rating such securities. "CERCLA" has the meaning set forth in Section 5.01(m)(iii). "CERCLIS" has the meaning set forth in Section 5.01(m)(iii). "Certificate of Incorporation" means the Borrower's Amended and Restated Certificate of Incorporation in substantially the form of Exhibit D hereto. "Change of Control" means the occurrence of any of the following events (whether or not approved by the Board of Directors of the Borrower): (i) any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, is or becomes the "beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than 50% of the total voting power of the then outstanding Voting Equity Interests of the Borrower; (ii) the Borrower consolidates with, or merges with or into, another Person (other than the Borrower or any Wholly Owned Restricted Subsidiary) or the Borrower or any Significant Restricted Subsidiary sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the assets of the Borrower and its Subsidiaries (determined on a consolidated basis) to any Person (other than the Borrower or any Wholly Owned Restricted Subsidiary), other than any such transaction where immediately after such transaction the Person or Persons that "beneficially owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have 4 "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time upon the happening of an event or otherwise) immediately prior to such transaction, directly or indirectly, a majority of the total voting power of the then outstanding Voting Equity Interests of the Borrower, as the case may be, "beneficially own" (as so determined), directly or indirectly, a majority of the total voting power of the then outstanding Voting Equity Interests of the surviving or transferee Person; or (iii) the Borrower is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions of Section 6.02. "Chicopee Sale" means the sale of the warehouse in Dayton, New Jersey, owned by Chicopee, Inc., a Delaware corporation. "Class C Dividends" means the special annual dividend on the Borrower's Class C Common Stock, par value $.01 per share, required to be paid by the Borrower pursuant to its Amended and Restated Certificate of Incorporation. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter period of the most recent four consecutive fiscal quarters for which financial statements are available ending prior to the date of such determination (the "Four Quarter Period") to (ii) Consolidated Fixed Charges for such Four Quarter Period; provided, however, that (1) if the Borrower or any Restricted Subsidiary has incurred any Indebtedness since the beginning of such Four Quarter Period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such Four Quarter Period and the discharge of any other Indebtedness repaid, repurchased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such Four Quarter Period, (2) if since the beginning of such Four Quarter Period the Borrower or any Restricted Subsidiary shall have made any Asset Sale, the Consolidated EBITDA for such Four Quarter Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Sale for such Four Quarter Period or increased by an amount equal to the Consolidated EBITDA (if negative) directly attributable thereto for such Four Quarter Period and Consolidated Fixed Charges for such Four Quarter Period shall be reduced by an amount equal to the Consolidated Fixed Charges directly attributable to any Indebtedness of the Borrower or any Restricted Subsidiary repaid, repurchased or otherwise discharged with respect to the Borrower and its continuing Restricted Subsidiaries in connection with such Asset Sale for such Four Quarter Period (or, if the Equity Interests of any Restricted Subsidiary are sold, the Consolidated Fixed Charges for such Four Quarter Period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Borrower and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such Four Quarter Period the Borrower or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any such Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an Acquisition of assets, including any Acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or 5 substantially all of an operating unit or a line of a business or which constitutes Replacement Assets, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving pro forma effect to (x) such Investment or Acquisition of assets (including the Incurrence of any Indebtedness) as if such Investment or Acquisition occurred on the first day of such Four Quarter Period and (y) net cost savings that the Borrower reasonably believes in good faith could have been achieved during the Four Quarter Period as a result of such Investment or Acquisition and which cost savings could then be reflected in pro forma financial statements under GAAP (provided that both (A) such cost savings were identified and quantified in an Officer's Certificate delivered to the each of the holders of Senior Subordinated Notes at the time of the consummation of the Investment or Acquisition and (B) with respect to each Investment or Acquisition completed prior to the 90th day preceding such date of determination, actions were commenced or initiated by the Borrower within 90 days of such Investment or Acquisition to effect such cost savings identified in such Officer's Certificate) and (4) if since the beginning of such Four Quarter Period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Borrower or any Restricted Subsidiary since the beginning of such Four Quarter Period) shall have made any Asset Sale or any Investment or Acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Borrower or a Restricted Subsidiary during such Four Quarter Period, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or Acquisition of assets occurred on, with respect to any Investment or Acquisition, the first day of such Four Quarter Period and, with respect to any Asset Sale, the day prior to the first day of such Four Quarter Period. For purposes of this definition, whenever pro forma effect is to be given to an Acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Fixed Charges associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in accordance with GAAP. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any agreement under which Hedging Obligations are outstanding applicable to such Indebtedness if such agreement under which such Hedging Obligations are outstanding has a remaining term as at the date of determination in excess of 12 months); provided, however, that the Consolidated Fixed Charges of the Borrower attributable to interest on any Indebtedness Incurred under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the Four Quarter Period. "Consolidated EBITDA" means, for any period, the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Income Tax Expense for such period; (ii) Consolidated Interest Expense for such period; (iii) Consolidated Non-Cash Charges for such period; and (iv) expenses relating to employee profit sharing arising in connection with applicable Mexican statutory requirements less (A) all non-cash items increasing Consolidated Net Income for such period and (B) all cash payments during such period relating to non-cash charges that were added back in determining Consolidated EBITDA in any prior period. 6 "Consolidated Fixed Charge" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense and (ii) the product of (x) the amount of all dividend payments on any series of Preferred Equity Interest of such Person (other than dividends paid solely in Qualified Equity Interests) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated Federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Income Tax Expense" means, with respect to the Borrower for any period, the provision for Federal, state, local and foreign income taxes payable by the Borrower and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to the Borrower for any period, without duplication, the sum of (i) the interest expense of the Borrower and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Hedging Obligations, (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (e) all capitalized interest and all accrued interest and (ii) the interest component of Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Borrower and the Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, for any period, the consolidated net income (loss) of the Borrower and the Restricted Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such person is not a Restricted Subsidiary, except (A) to the extent of cash actually distributed by such Person during such period to the Borrower or a Restricted Subsidiary as a dividend or other distribution, (B) with respect to foreign joint ventures, to the extent that cash is available for distribution (without restriction and not committed for other purposes) during such period to the Borrower or a Restricted Subsidiary as a dividend or other distribution, but is not distributed due to adverse tax or other business reasons, such cash shall be included and (C) the Borrower's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income; (ii) any net income (loss) of any person acquired by the Borrower or a Restricted Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income (but not loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Borrower to the extent of such restrictions; (iv) any gain or loss realized upon the sale or other disposition of any asset of the Borrower or the Restricted Subsidiaries (including pursuant to any sale/leaseback transaction) outside of the ordinary course of business; (v) any extraordinary gain or loss; (vi) the cumulative effect of a change in accounting principles; (vii) any restoration to income of any contingency reserve of an extraordinary, non-recurring or unusual nature, except to the extent that provision for such reserve was made out of Consolidated Net 7 Income accrued at any time following the Effective Date; and (viii) gains and losses resulting from foreign currency transaction adjustments. "Consolidated Non-Cash Charges" means, with respect to any Person, for any period the sum of (i) depreciation, (ii) amortization and (iii) other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding, for purposes of clause (iii) only, such charges which require an accrual of or a reserve for cash charges for any future period). "Credit Agreement" means the Third Amended, Restated and Consolidated Credit Agreement, dated as of March 5, 2003, as in effect on the date hereof, between the Borrower, the Subsidiaries of the Borrower identified on the signature pages thereof and any Subsidiary that is later added thereto, the lenders named therein, and JPMorgan Chase Bank, as administrative agent, as further amended, including any deferrals, renewals, extensions, replacements, refinancings, restructurings or refundings thereof, or amendments, modifications or supplements thereto and any agreement providing therefor (including any restatements thereof and any increases in the amount of the commitment thereunder), whether by or with the same or any other lender, creditor, group of lenders or group of creditors, and including related notes, guarantee and note agreements and other instruments and agreements executed in connection therewith. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Debtor Subsidiary" means a Subsidiary of the Borrower that is subject to the Plan. "Default" means any event that is or with the passage of time or giving of notice or both, would be an Event of Default. "Designated Guarantor Senior Indebtedness" means, with respect to any Guarantor, any Indebtedness of such Guarantor outstanding under the Credit Agreement. "Designated Senior Indebtedness" means (a) any Indebtedness outstanding under the Credit Agreement, and (b) any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding, together with any commitments to lend additional amounts, of at least $25,000,000, if the instrument governing such Senior Indebtedness expressly states that such Indebtedness is "Designated Senior Indebtedness" for purposes of this Agreement and a resolution of the Borrower's Board of Directors setting forth such designation by the Borrower has been delivered to each of the holders of Senior Subordinated Notes. "Designation" has the meaning set forth in Section 6.01(i). "Designation Amount" has the meaning set forth in Section 6.01(i). "Disclosure Statement" means the Amended Modified Disclosure Statement of the Borrower and its Debtor Subsidiaries. 8 "Disposition" means, with respect to any Person, any merger, consolidation or other business combination involving such Person (whether or not such Person is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets. "Disqualified Equity Interest" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable, at the option of the holder thereof (except, in each case, upon the occurrence of a Change of Control), in whole or in part, or exchangeable into Indebtedness on or prior to Termination Date. "Domestic Restricted Subsidiary" means a Restricted Subsidiary of the Borrower organized under the laws of the United States or any political subdivision thereof or the operations of which are located substantially inside the United States. "Effective Date" has the meaning set forth in the first introductory paragraph hereto. "Eligible Assignee" means, (a) any Affiliate of GOF, and (b) any other Person or Persons approved by GOF, or by an assignee pursuant to this Agreement, as applicable, and, so long as no Event of Default shall have occurred and be continuing, approved by the Borrower, which approval shall not be unreasonably delayed, conditioned or withheld. "Environmental Claims" means, with respect to any Person, any written notice, claim, demand or other written communication (collectively, a "claim") by any other Person alleging or asserting such Person's liability for investigatory costs, cleanup costs, governmental response costs, damages to natural resources or other Property, personal injuries, fines or penalties arising out of, based on or resulting from (i) the presence, or Release into the environment, of any Hazardous Material at any location, whether or not owned by such Person, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. The term "Environmental Claim" shall include, without limitation, any claim by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" means all laws, rules, regulations, codes, ordinances, technical standards, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters. "Equity Interest" in any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however 9 designated) corporate stock or other equity participations, including partnership interests, whether general or limited, in such Person, including any Preferred Equity Interests but excluding the Junior Subordinated Convertible Notes. "Equity Rights" means, with respect to any Person, any outstanding subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including, without limitation, any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or outstanding securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Internal Revenue Code of which the Borrower is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Internal Revenue Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Internal Revenue Code, described in Section 414(m) or (o) of the Internal Revenue Code of which the Borrower is a member. "ERISA Plan" means an employee benefit or other plan established or maintained by the Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan. "Event of Default" has the meaning specified in Section 7.01. "Exchange Act" means the Securities Exchange Act of 1934, as the same may be amended from time to time. "Fair Market Value" means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction; provided, however, that the Fair Market Value of any such asset or assets shall be determined conclusively by the Board of Directors of the Borrower acting in good faith, and shall be evidenced by resolutions of the Board of Directors of the Borrower delivered to each of the holders of Senior Subordinated Notes. "Foreign Corrupt Practices Act" means the U.S. Foreign Corrupt Practices Act of 1977, as amended from time to time. "Foreign Restricted Subsidiary" means a Restricted Subsidiary of the Borrower not organized under the laws of the United States or any political subdivision thereof and the operations of which are located substantially outside of the United States. "Four Quarter Period" has the meaning set forth in the definition of Consolidated Coverage Ratio. 10 "Funding Guarantor" has the meaning set forth in Section 3.05. "GAAP" has the meaning specified in Section 1.03. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GOF" has the meaning set forth in the first introductory paragraph hereto. "GOF Nominee" means any member of the Borrower's Board of Directors that was nominated or designated by GOF pursuant to the Shareholders Agreement or otherwise. "Gurantee" has the meaning set forth in Section 3.01. "Guarantee Obligations" has the meaning set forth in Section 3.01. "Guarantor(s)" has the meaning set forth in the first introductory paragraph hereto. "Guarantor Blockage Period" has the meaning set forth in Section 3.08(a). "Guarantor Payment Blockage Notice" has the meaning set forth in Section 3.08(a). "Guarantor Senior Indebtedness" means, with respect to any Guarantor, at any date, (a) all Obligations of such Guarantor under the Credit Agreement; (b) all Hedging Obligations of such Guarantor; (c) all Obligations of such Guarantor under stand-by letters of credit; and (d) all other Indebtedness of such Guarantor for borrowed money, including principal, premium, if any, and interest (including Post-Petition Interest) on such Indebtedness unless the instrument under which such Indebtedness of such Guarantor for money borrowed is Incurred expressly provides that such Indebtedness for money borrowed is not senior or superior in right of payment to such Guarantor's Guarantee of the Senior Subordinated Notes, and all renewals, extensions, modifications, amendments or refinancings thereof. Notwithstanding the foregoing, Guarantor Senior Indebtedness shall not include (a) to the extent that it may constitute Indebtedness, any Obligation for Federal, state, local or other taxes; (b) any Indebtedness among or between such Guarantor and any Subsidiary of such Guarantor or any Affiliate of such Guarantor or any of such Affiliate's Subsidiaries; unless, and for so long as such Indebtedness has been pledged to secure obligations under or in respect of Guarantor Senior Indebtedness; (c) to the extent that it may constitute Indebtedness, any Obligation in respect of any trade payable Incurred for the purchase of goods or materials, or for services obtained, in the ordinary course of business; (d) that portion of any Indebtedness that is Incurred in violation of this Agreement; (e) Indebtedness evidenced by such Guarantor's Guarantee of the Senior Subordinated Notes; (f) Indebtedness of such Guarantor that is expressly subordinate or junior in right of payment to any other Indebtedness of such Guarantor; (g) to the extent that it may constitute Indebtedness, any obligation owing under leases (other than Capital Lease Obligations) or management agreements; (h) any obligation that by operation of law is subordinate to any general unsecured 11 obligations of such Guarantor; and (i) Indebtedness of a Guarantor to the extent such Indebtedness is owed to and held by any Federal, state, local or other governmental authority. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreements" means, with respect to any Person, agreements with respect to all interest rate swap or similar agreements or foreign currency or commodity hedge, exchange or similar agreements of such Person. "Hedging Obligations" means, with respect to any Person, the Obligations of such Person under Hedging Agreements. "HSR Act" has the meaning set forth in Section 4.01(i). "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (including by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the foregoing). Indebtedness of any Acquired Person or any of its Subsidiaries existing at the time such Acquired Person becomes a Restricted Subsidiary (or is merged into or consolidated with the Borrower or any Restricted Subsidiary), whether or not such Indebtedness was Incurred in connection with, as a result of, or in contemplation of, such Acquired Person becoming a Restricted Subsidiary (or being merged into or consolidated with the Borrower or any Restricted Subsidiary), shall be deemed Incurred at the time any such Acquired Person becomes a Restricted Subsidiary or merges into or consolidates with the Borrower or any Restricted Subsidiary. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed; (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable incurred in the ordinary course of business and payable in accordance with industry practices, or other accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith); (e) every Capital Lease Obligation of such Person; (f) every net obligation under Hedging Agreements of such Person; (g) every obligation of the type referred to in clauses (a) through (f) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or 12 indirectly, as obligor, guarantor or otherwise; and (h) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a) through (g) above. Indebtedness (a) shall never be calculated taking into account any cash and cash equivalents held by such Person; (b) shall not include obligations of any Person (x) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business, provided that such obligations are extinguished within two Business Days of their incurrence, (y) resulting from the endorsement of negotiable instruments for collection in the ordinary course of business and consistent with past business practices and (z) under stand-by letters of credit to the extent collateralized by cash or Cash Equivalents; (c) which provides that an amount less than the principal amount thereof shall be due upon any declaration of acceleration thereof shall be deemed to be incurred or outstanding in an amount equal to the accreted value thereof at the date of determination; (d) shall include the liquidation preference and any mandatory redemption payment obligations in respect of any Disqualified Equity Interests of the Borrower or any Restricted Subsidiary; and (e) shall not include obligations under performance bonds, performance guarantees, surety bonds and appeal bonds, letters of credit or similar obligations, incurred in the ordinary course of business. "Indenture" means the Indenture, dated as of the date hereof, among the Borrower, Wilmington Trust Company and the other parties thereto relating to the Junior Subordinated Convertible Notes. "Insolvency or Liquidation Proceeding" means, with respect to any Person, any liquidation, dissolution or winding up of such Person, or any bankruptcy, reorganization, insolvency, receivership or similar proceeding with respect to such Person, whether voluntary or involuntary. "Intercompany Notes" means, collectively, the Bonlam Intercompany Notes (as defined in the Credit Agreement) and the Fabrene Intercompany Notes (as defined in the Credit Agreement). "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Investment" means, with respect to any Person, any direct or indirect loan, advance, guarantee or other extension of credit or capital contribution to (by means of transfers of cash or other property or assets to others or payments for property or services for the account or use of others, or otherwise), or purchase or acquisition of capital stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. For purposes of the "Limitation on Restricted Payments" covenant, the amount of any Investment shall be the original cost of such Investment, plus the cost of all additions thereto, but without any other adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment; reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided, however, that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such 13 amounts would be included in Consolidated Net Income. If the Borrower or any Restricted Subsidiary sells or otherwise disposes of any Voting Equity Interests of any direct or indirect Restricted Subsidiary such that, after giving effect to any such sale or disposition, the Borrower no longer owns, directly or indirectly, greater than 50% of the outstanding Voting Equity Interests of such Restricted Subsidiary, the Borrower shall be deemed to have made an Investment on the date of any such sale or disposition. "Junior Subordinated Convertible Notes" means the 10% convertible subordinated notes due December 2007 to be issued pursuant to the Plan. "Letter of Credit" has the meaning set forth in the third whereas clause. "Lien" means any lien, mortgage, charge, security interest, hypothecation, assignment for security or encumbrance of any kind (including any conditional sale or capital lease or other title retention agreement, any lease in the nature thereof, and agreement to give any security interest). "Limited Originator Recourse" means a reimbursement obligation to the Borrower or a Restricted Subsidiary in connection with a drawing on a letter of credit, revolving loan commitment, cash collateral account or other such credit enhancement issued to support Indebtedness of a Securitization Entity under a facility for the financing of trade receivables; provided that the available amount of any such form of credit enhancement at any time shall not exceed 15.0% of the principal amount of such Indebtedness at such time. "Margin Stock" means "margin stock" within the meaning of Regulations U and X. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, properties or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole, or (b) the ability of the Borrower to perform its material obligations hereunder or under the Senior Subordinated Note or (c) the validity or enforceability of this Agreement or the Senior Subordinated Notes, including the rights or remedies of GOF hereunder or thereunder, other than arising solely as a result of any action or inaction of GOF. "Maturity Date" means December 1, 2007. "Moody's" means Moody's Investors Service, Inc. and its successors. "Multiemployer Plan" means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by the Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA. "Net Cash Proceeds" means the aggregate proceeds in the form of cash or Cash Equivalents received by the Borrower or any Restricted Subsidiary in respect of any Asset Sale, including all cash or Cash Equivalents received upon any sale, liquidation or other exchange of proceeds of Asset Sales received in a form other than cash or Cash Equivalents, net of (a) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and 14 investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof; (b) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements); (c) amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of Directors of the Borrower to be provided as a reserve, in accordance with GAAP, against any liabilities associated with such assets which are the subject of such Asset Sale; including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officer's Certificate delivered to each of the holders of Senior Subordinated Notes (provided that the amount of any such reserves shall be deemed to constitute Net Cash Proceeds at the time such reserves shall have been reversed or are not otherwise required to be retained as a reserve); and (e) with respect to Asset Sales by Restricted Subsidiaries, the portion of such cash payments attributable to Persons holding a minority interest in such Restricted Subsidiary. "New Investment" means the purchase by certain creditors of the Borrower and its Debtor Subsidiaries of Junior Subordinated Convertible Notes for a total purchase price of $50,000,000 pursuant to the terms and conditions of the Plan. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Borrower nor any Restricted Subsidiary (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Senior Subordinated Notes) of the Borrower or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Borrower or any of its Restricted Subsidiaries. "NPL" has the meaning set forth in Section 5.01(m)(iii). "Obligations" means any principal, interest (including, without limitation, Post-Petition Interest), penalties, fees, indemnifications, reimbursement obligations, damages and other liabilities payable under the documentation governing any Indebtedness. "Obligors" has the meaning set forth in the first introductory paragraph hereto. "Officer's Certificate" means a certificate signed by the Borrower's or Guarantor's president, chief executive officer, chief operating officer, or its chief financial officer (or, if no such officer exists, an officer or manager with substantially similar authority) on behalf of the Borrower or a Guarantor, as applicable, stating that (i) the officer signing such certificate has made or has caused to be made such investigations as are necessary in order to permit him to verify the accuracy of the information set forth in such certificate and (ii) to the best of such officer's actual knowledge, after making the investigations required by clause (i), does not 15 misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading. "Operating Divisions" means the Nonwovens, Oriented Polymers and Corporate operating divisions of the Borrower and its Subsidiaries. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to GOF; provided that if GOF shall assign all of its interest in the Senior Subordinated Note, such counsel shall be reasonably acceptable to the holders of a majority of the principal amount outstanding under all Senior Subordinated Notes. The counsel may be an employee of or counsel to the Borrower, GOF or any other holder of a Senior Subordinated Note. "Organizational Documents" means the certificate of incorporation, articles of organization, bylaws, operating agreement, partnership agreement, and/or other organizational and governing documents (including all those that govern or impact the appointment, election, and/or removal of directors, managers, managing partners or persons of equivalent authority), as the case may be, of a Person (other than an individual). "Other Taxes" has the meaning specified in Section 2.05(b). "Payment Blockage Notice" has the meaning set forth in Section 8.02(a). "Payment Blockage Period" has the meaning set forth in Section 8.02(a). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Holder" means MatlinPatterson Global Opportunities Partners L.P. and its Affiliates, The InterTech Group, Inc. and its Affiliates, Golder, Thoma, Cressey Fund III Limited Partnership and its Affiliates, Jerry Zucker and James G. Boyd and members of either of their immediate families and trusts of which such persons are the beneficiaries. "Permitted Indebtedness" has the meaning set forth in Section 6.01(c). "Permitted Investments" means (a) Cash Equivalents; (b) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers' compensation, performance and other similar deposits; (c) Hedging Obligations; (d) bonds, notes, debentures or other securities received as a result of Asset Sales permitted under Section 6.01(d) not to exceed 35% of the total consideration for such Asset Sales; (e) Investments in the Borrower and Investments in a Restricted Subsidiary or a Person that, as a result of or in connection with such Investment, becomes a Restricted Subsidiary or is merged with or into or consolidated with the Borrower or another Restricted Subsidiary; (f) Investments existing as of the Effective Date; and (g) any Investment consisting of a guarantee by a Restricted Subsidiary of Senior Indebtedness or any guarantee of Indebtedness otherwise permitted by this Agreement. "Permitted Junior Securities" means any securities of the Borrower or any other Person that are (i) equity securities without special covenants or (ii) debt securities expressly 16 subordinated in right of payment to the Senior Subordinated Notes and all Senior Indebtedness that may at the time be outstanding, to substantially the same extent as, or to a greater extent than, the Junior Subordinated Convertible Notes are subordinated as provided in the Indenture, in any event pursuant to a court order so providing as to which (a) the rate of interest on such securities shall not exceed the effective rate of interest on the Senior Subordinated Notes on the date of this Agreement, (b) such securities shall not be entitled to the benefits of covenants or defaults materially more beneficial to the holders of such securities than those in effect with respect to the Senior Subordinated Notes on the date of this Agreement and (c) such securities shall not provide for amortization (including sinking fund and mandatory prepayment provisions) commencing prior to the date six months following the final scheduled maturity date of the Senior Subordinated Notes and Senior Indebtedness (as modified by the plan of reorganization pursuant to which such securities are issued). "Permitted Liens" means (a) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Borrower or any Restricted Subsidiary; provided, however, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not secure any property or assets of the Borrower or any Restricted Subsidiary other than the property or assets subject to the Liens prior to such merger or consolidation; (b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens and other similar Liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith and by appropriate proceedings; (c) Liens existing on the Effective Date; (d) Liens securing only the Senior Subordinated Notes, the Guarantees or the Junior Subordinated Convertible Notes or guarantees thereof; (e) Liens in favor of the Borrower or any Restricted Subsidiary (including any such Liens securing Indebtedness, to the extent and for so long as such Indebtedness is pledged to secure Senior Indebtedness); (f) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided, however, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (g) easements, reservation of rights of way, restrictions and other similar easements, licenses, restrictions on the use of properties, or minor imperfections of title that in the aggregate do not in any case materially detract from the properties subject thereto or interfere with the ordinary conduct of the business of the Borrower and the Restricted Subsidiaries; (h) Liens resulting from the deposit of cash or notes in connection with contracts, tenders or expropriation proceedings, or to secure workers' compensation, surety or appeal bonds, costs of litigation when required by law and public and statutory obligations or obligations under franchise arrangements entered into in the ordinary course of business; (i) Liens securing Indebtedness consisting of Capital Lease Obligations, Purchase Money Indebtedness, mortgage financings, industrial revenue bonds or other monetary obligations, in each case incurred solely for the purpose of financing all or any part of the purchase price or cost of construction or installation of assets used in the business of the Borrower or the Restricted Subsidiaries, or repairs, additions or improvements to such assets, provided, however, that (I) such Liens secure Indebtedness in an amount not in excess of the original purchase price or the original cost of any such assets or repair, addition or improvement thereto (plus an amount equal to the reasonable fees and expenses in connection with the incurrence of such Indebtedness), (II) such Liens do not extend to any other assets of the 17 Borrower or the Restricted Subsidiaries (and, in the case of repair, addition or improvements to any such assets, such Lien extends only to the assets (and improvements thereto or thereon) repaired, added to or improved), (III) the Incurrence of such Indebtedness is permitted by Section 6.01(c) and (IV) such Liens attach within 90 days of such purchase, construction, installation, repair, addition or improvement; and (j) Liens to secure any refinancings, renewals, extensions, modifications or replacements (or successive refinancings), in whole or in part, of any Indebtedness secured by Liens referred to in the clauses above so long as such Lien does not extend to any other property (other than improvements thereto). "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, limited liability company, limited liability partnership, trust, unincorporated organization, or a government or any agency or political subdivision thereof. "Plan" has the meaning set forth in the second whereas clause. "Post-Petition Interest" means, with respect to any Indebtedness of any Person, all interest accrued or accruing on such Indebtedness after the commencement of any Insolvency or Liquidation Proceeding against such Person in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing such Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. "Preferred Equity Interest" in any Person, means an Equity Interest of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Equity Interests of any other class in such Person. "Property" means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Purchase Money Indebtedness" means Indebtedness of the Borrower or any Restricted Subsidiary Incurred for the purpose of financing all or any part of the purchase price, or the cost of construction or improvement of any property used in the business of the Borrower; provided, however, that the aggregate principal amount of such Indebtedness does not exceed the lesser of the Fair Market Value of such property or such purchase price or cost, including any refinancing of such Indebtedness that does not increase the aggregate principal amount (or accreted amount, if less) thereof as of the date of refinancing. "Purchase Money Note" means a promissory note of a Securitization Entity evidencing a line of credit, which may be irrevocable, from the Borrower or any Restricted Subsidiary in connection with a Qualified Securitization Transaction, which note shall be repaid from cash available to the Securitization Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owning to such investors and amounts paid in connection with the purchase of newly generated receivables. 18 "Qualified Equity Interest" in any Person means any Equity Interest in such Person other than any Disqualified Equity Interest. "Qualified Securitization Transaction" means any transaction or series of transactions pursuant to which the Borrower or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to (a) a Securitization Entity (in the case of a transfer by the Borrower or any of its Restricted Subsidiaries) and (b) any other Person (in case of a transfer by a Securitization Entity), or may grant a security interest in, any receivables (whether now existing or arising or acquired in the future) of the Borrower or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such receivables, all contracts and contract rights and all guarantees or other obligations in respect of such receivables, proceeds of such receivables and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving receivables (collectively, "Transferred Assets"); provided that in the case of any such transfer by the Borrower or any of its Restricted Subsidiaries, the transferor receives cash or Purchase Money Notes in an amount which (when aggregated with the cash and Purchase Money Notes received by the Borrower and its Restricted Subsidiaries upon all other such transfers of Transferred Assets during the 90 days preceding such transfer) is at least equal to 75% of the aggregate face amount of all receivables so transferred during such day and the 90 preceding days. "Regulations A, D, U and X" means, respectively, Regulations A, D, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified or supplemented and in effect from time to time. "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata. "Replacement Assets" has the meaning set forth in Section 6.01(d). "Restricted Payment" has the meaning set forth in Section 6.01(e). "Restricted Subsidiary" means any Subsidiary of the Borrower that has not been designated by the Board of Directors of the Borrower, by a resolution of the Board of Directors of the Borrower delivered to each of the holders of Senior Subordinated Notes, as an Unrestricted Subsidiary pursuant to Section 6.01(i). Any such designation may be revoked by a resolution of the Board of Directors of the Borrower delivered to each of the holders of Senior Subordinated Notes, subject to the provisions of such covenant. "Revocation" has the meaning set forth in Section 6.01(i). "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies; and its successors. 19 "Securitization Entity" means either a Wholly Owned Restricted Subsidiary of the Borrower (or another Person in which the Borrower or any Restricted Subsidiary makes an Investment and to which the Borrower or any Restricted Subsidiary transfers receivables and related assets) or an Unrestricted Subsidiary that engages in no activities other than in connection with the financing of receivables and that is designated by the Board of the Directors of the Borrower (as provided below) as a Securitization Entity (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Borrower or any Restricted Subsidiary other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse, (ii) is recourse to or obligates the Borrower or any Restricted Subsidiary (other than the Securitization Entity) in any way other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse or (iii) subjects any property or asset of the Borrower or any Restricted Subsidiary (other than the Securitization Entity), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse, (b) with which neither the Borrower nor any Restricted Subsidiary has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Borrower or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Borrower, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity and (c) to which neither the Borrower nor any Restricted Subsidiary of the Borrower has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Borrower shall be evidenced to each of the holders of Senior Subordinated Notes by delivery thereto of a certified copy of the resolution of the Board of Directors of the Borrower giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions. "Senior Indebtedness" means, at any date, (a) all Obligations of the Borrower under the Credit Agreement; (b) all Hedging Obligations of the Borrower; (c) all Obligations of the Borrower under stand-by letters of credit; and (d) all other Indebtedness of the Borrower for borrowed money, including principal, premium, if any, and interest (including Post-Petition Interest) on such Indebtedness, unless the instrument under which such Indebtedness of the Borrower for money borrowed is Incurred expressly provides that such Indebtedness for money borrowed is not senior or superior in right of payment to the Senior Subordinated Notes, and all renewals, extensions, modifications, amendments or refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall not include (a) to the extent that it may constitute Indebtedness, any Obligation for Federal, state, local or other taxes; (b) any Indebtedness among or between the Borrower and any Subsidiary of the Borrower or any Affiliate of the Borrower or any of such Affiliate's Subsidiaries; unless and for so long as such Indebtedness has been pledged to secure obligations under or in respect of Senior Indebtedness; (c) to the extent that it may constitute Indebtedness, any Obligation in respect of any trade payable incurred for the purchase of goods or materials, or for services obtained, in the ordinary course of business; (d) Indebtedness of the Borrower that is pari passu with, or expressly subordinate or junior in right of payment to, the Senior Subordinated Notes; (e) to the extent that it may constitute Indebtedness, any obligation owing under leases (other than Capital Lease Obligations) or management agreements; (f) any obligation that by operation of law is subordinate to any general 20 unsecured obligations of the Borrower; and (g) Indebtedness of the Borrower to the extent such Indebtedness is owed to and held by any Federal, state, local or other governmental authority. "Senior Subordinated Note(s)" has the meaning set forth in Section 2.01. "Shareholders Agreement" means the Shareholders Agreement dated as of March 5, 2003, between the Borrower, GOF and the other parties identified therein. "Shareholder Rights Plan" means the Borrower's shareholder rights plan or "poison pill" embodied in the Rights Agreement, dated as of April 15, 1996, by and among the Borrower and First Union Nation Bank of North Carolina. "Significant Restricted Subsidiary" means, at any date of determination, (a) any Restricted Subsidiary that, together with its Subsidiaries that constitute Restricted Subsidiaries (i) for the most recent fiscal year of the Borrower accounted for more than 20.0% of the consolidated revenues of the Borrower and the Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned more than 20.0% of the consolidated assets of the Borrower and the Restricted Subsidiaries, all as set forth on the consolidated financial statements of the Borrower and the Restricted Subsidiaries for such year prepared in conformity with GAAP and (b) any Restricted Subsidiary which, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Restricted Subsidiaries and as to which any event described in clause (h) of Section 7.01 has occurred, would constitute a Significant Restricted Subsidiary under clause (a) of this definition. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Borrower or any Subsidiary of the Borrower that are reasonably customary in receivables securitization transactions. "Subordinated Indebtedness" means, with respect to the Borrower or any Guarantor, any Indebtedness of the Borrower or such Guarantor, as the case may be, which is pari passu with, or expressly subordinated in right of payment to, the Senior Subordinated Notes or such Guarantor's Guarantee, as the case may be, including without limitation, the Junior Subordinated Convertible Notes. "Subsidiary" means, with respect to any Person, (a) any corporation of which the outstanding Voting Equity Interests having at least a majority of the votes entitled to be cast in the election of directors shall at the time be owned, directly or indirectly, through one or more Persons by such Person, or (b) any other Person of which at least a majority of Voting Equity Interests are at the time, directly or indirectly, owned by such first named Person. "Surviving Person" means, with respect to any Person involved in or that makes any Disposition, the Person formed by or surviving such Disposition or the Person to which such Disposition is made. "Taxes" has the meaning specified in Section 2.05(a). 21 "Termination Date" means the date and time at which each of the following conditions are satisfied: (a) the passage of the dates December 31, 2003, June 30, 2004 and December 31, 2004, regardless of whether the Borrower has timely made the payments due to the Administrative Agent under the Credit Agreement thereon; (b) the payment by the Obligors of all amounts owed to GOF and any other holders of Senior Subordinated Notes hereunder and under the Senior Subordinated Notes (including any and all costs and expenses), to the reasonable satisfaction of GOF, or, if GOF shall have assigned all of its interest in the Senior Subordinated Note, to the reasonable satisfaction of the holders of a majority of the principal amount outstanding under all Senior Subordinated Notes immediately prior to such payment; and (c) the termination of the Letter of Credit. "Transferred Assets" has the meaning set forth in the definition of Qualified Securitization Transaction. "United States" and "U.S." each means United States of America. "Unrestricted Subsidiary" means any Subsidiary of the Borrower designated as such pursuant to Section 6.01(i). Any such designation may be revoked by a resolution of the Board of Directors of the Borrower delivered to each of the holders of Senior Subordinated Notes, subject to Section 6.01(i). "Unutilized Net Cash Proceeds" has the meaning set forth in Section 6.01(d)(iii). "Voting Equity Interests" means Equity Interests in a corporation or other Person with voting power under ordinary circumstances entitling the holders thereof to elect the Board of Directors or other governing body of such corporation or Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payment of principal, including payment of final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding aggregate principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of the outstanding Voting Equity Interests (other than directors' qualifying shares) of which are owned, directly or indirectly, by the Borrower and/or one or more Wholly Owned Restricted Subsidiaries. Section 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". Section 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles ("GAAP"). 22 Section 1.04. References to Credit Agreement. Wherever this Agreement defines a term by reference to the Credit Agreement, such term shall have the definition ascribed to it in the Credit Agreement, and, in the event the Credit Agreement is terminated, or amended, modified or restated to remove the definition of such term, then the term so defined shall have the meaning ascribed thereto in the version of the Credit Agreement existing immediately prior to such termination, amendment, modification or restatement. ARTICLE II AMOUNT AND TERMS OF THE SENIOR SUBORDINATED NOTE Section 2.01. Initial Issuance of Senior Subordinated Note; Aggregate Principal Amount. Simultaneously with the execution and delivery of this Agreement, the Borrower is issuing and delivering to GOF a note in substantially the form of Exhibit E hereto (the "Senior Subordinated Note", and, together with any additional Senior Subordinated Notes issued pursuant to Section 9.06(d), if any, the "Senior Subordinated Notes") with a principal amount of TWENTY FIVE MILLION DOLLARS ($25,000,000.00); provided, however, that in accordance with Section 2.03 and the terms of the Senior Subordinated Note, the Borrower shall only be required to pay such amount thereof as equals the sum of each drawing under the Letter of Credit by the Administrative Agent (each such drawing being referred to herein as a "Borrowing"), plus accrued interest and any other costs and expenses due hereunder or under the Senior Subordinated Notes. Section 2.02. Interest. (a) Interest. The Borrower shall pay to GOF and its assigns interest on the amount of each Borrowing from the date thereof, semi-annually in arrears on January 1 and July 1 of each year, at a rate of 10% per annum, subject to adjustment pursuant to Section 2.02(b). (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the aggregate unpaid principal amount of the Borrowings at the rate per annum set forth in Section 2.02(a) plus 2% on demand. The Borrower shall, to the extent lawful, pay interest on overdue interest at the rate of 12% per annum. (c) Computations. All computations of interest shall be made on the basis of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 2.03. Repayment. (a) Repayment on Maturity. Subject to Article VIII, on the Maturity Date, the Borrower shall be liable to pay to GOF and its assigns in US Dollars an amount equal to the sum of each Borrowing, together with all accrued and unpaid interest and any other amounts then owing to GOF and its assigns in respect thereof (including for costs and expenses). (b) Mandatory Prepayment. Subject to Article VIII and the terms and provisions of the Credit Agreement, within 1 Business Day of the consummation of a Change of 23 Control transaction, the Borrower shall prepay in US Dollars the aggregate principal amount of all Borrowings, together with all accrued and unpaid interest outstanding under the Senior Subordinated Notes, together with all other amounts then owing to GOF and its assigns in respect thereof (including for costs and expenses). (c) Optional Prepayment. Subject to Article VIII and the terms and provisions of the Credit Agreement, the Borrower may, at its option, prepay its obligations under this Agreement and the Senior Subordinated Notes in whole or in part at any time, without penalty, upon 3 Business Days prior notice to the holders of the Senior Subordinated Notes; provided that all accrued and unpaid interest and any costs or expenses owing to GOF and its assigns in respect of the prepaid amount shall be simultaneously paid. Section 2.04. Proceeds of Letter of Credit. The Borrower shall have no direct access to the proceeds of drawings under the Letter of Credit, and such proceeds shall be received directly by the Administrative Agent and applied in accordance with the Credit Agreement. Section 2.05. Taxes. (a) Any and all payments by the Obligors hereunder or under the Senior Subordinated Notes shall be made, or applied in accordance with Section 2.03, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto ("Taxes") excluding Taxes based on the net income of a Person. Notwithstanding the foregoing, if the Obligors shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Senior Subordinated Notes, (i) the sum payable, or applied in accordance with Section 2.03, shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.05), GOF receives or is entitled to receive or have applied under Section 2.03 an amount equal to the sum it would have received had no such deductions been made, (ii) the Obligors shall make such deductions and (iii) the Obligors shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Obligors shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Senior Subordinated Notes or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Senior Subordinated Notes (hereinafter referred to as "Other Taxes"). (c) The Obligors shall indemnify GOF and any other holders of Senior Subordinated Notes for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 2.05) imposed on or paid by GOF and such other holders and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Any indemnification payment shall be made within 30 days from the date GOF or such other holders make written demand therefor. 24 (d) Within 30 days after the date of any payment of Taxes and Other Taxes, the Obligors shall furnish GOF and any other holders of Senior Subordinated Notes the original or a certified copy of a receipt evidencing payment thereof. Section 2.06. Increased Costs. If, due to either (i) the introduction of or any change after the date hereof, in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request introduced after the date hereof, from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to GOF and any other holders of Senior Subordinated Notes of making or keeping the Letter of Credit available or carrying the Senior Subordinated Notes (excluding for purposes of this Section 2.06 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.05 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States), then the Borrower shall from time to time, upon demand by GOF or such other holders, pay to GOF and such other holders additional amounts sufficient to compensate GOF and any such other holders for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower by GOF or any such other holder, shall be conclusive and binding for all purposes, absent manifest error. ARTICLE III GUARANTEE Section 3.01. Unconditional Guarantee. (a) Each Guarantor hereby unconditionally, jointly and severally, guarantees (each, a "Guarantee") to GOF and any other holders of Senior Subordinated Notes that the principal of, interest on and all other amounts owing in respect of the Senior Subordinated Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on the overdue principal and interest on any overdue interest on the Senior Subordinated to the extent lawful, and all other obligations of the Borrower to GOF and its successors and assigns under the Senior Subordinated Notes will be promptly paid in full or performed, all in accordance with the terms hereof and thereof (all of the foregoing being hereinafter called the "Guarantee Obligations"); subject, however, to the limitations set forth in Section 3.04. Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Senior Subordinated Notes or this Agreement, the absence of any action to enforce the same, any waiver or consent by GOF or its successors or assigns with respect to any provisions hereof or thereof, the recovery of any judgment against the Borrower, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Borrower, any right to require a proceeding first against the Borrower, protest, notice and all demands whatsoever and covenants that the Guarantee will not be discharged except by complete performance of the obligations continued in the Senior Subordinated Notes, this Agreement, and this Guarantee. If GOF or its successors or assigns is required by any court or otherwise to return to the Borrower, any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Borrower or any Guarantor, any amount paid by the Borrower or any Guarantor to GOF or 25 such successor or assign, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between each Guarantor, on the one hand, and GOF and its successors and assigns, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article VII for the purpose of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Article VII, such obligations (whether or not due and payable) shall become due and payable by each Guarantor for the purpose of this Guarantee. Each Guarantor further agrees that the Guarantee Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Guarantor and that such Guarantor will remain bound under this Article III notwithstanding any extension or renewal of any Guarantee Obligation. (b) Each Guarantor waives notice of any default under the Senior Subordinated Notes or the Guarantee Obligations. The obligations of each Guarantor hereunder shall not be affected by (i) any extension or renewal of any thereof; (ii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, the Senior Subordinated Notes or any other agreement; (iii) the release of any security held by any holder of Senior Subordinated Notes for the Guarantee Obligations or any of them; (iv) the failure of any holder of Senior Subordinated Notes to exercise any right or remedy against any other guarantor of the Guarantee Obligations; or (v) except as set forth in Section 3.03, any change in ownership of such Guarantor. (c) Each Guarantor further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any holder of Senior Subordinated Notes to any security held for payment of the Guarantee Obligations. (d) The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than payment of the Guarantee Obligations in full), including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guarantee Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any holder of Senior Subordinated Notes to assert any claim or demand or to enforce any remedy under this Agreement, the Senior Subordinated Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guarantee Obligations, or by any other act or thing or omission or delay to do any other act or thing that may or might in any manner or to any extent vary the risk of such Guarantor or would otherwise operate as a discharge of such Guarantor as a matter of law or equity. 26 (e) In furtherance of the foregoing and not in limitation of any other right that any holder of Senior Subordinated Notes has at law or at equity against any Guarantor by virtue hereof, upon the failure of the Borrower to pay the principal of or interest on any Guarantee Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guarantee Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by GOF, forthwith pay, or cause to be paid, in cash, to the holders of Senior Subordinated Notes Holders an amount equal to the sum of (i) the unpaid amount of such Guarantee Obligations, (ii) accrued and unpaid interest on such Guarantee Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Guarantee Obligations of the Borrower to the holders of the Senior Subordinated Notes. Section 3.02. Severability. In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 3.03. Release of a Guarantor. If the Senior Subordinated Notes are defeased in accordance with the terms of this Agreement, or if Section 6.02(b) is complied with, or if, subject to the requirements of Section 6.02(a), all or substantially all of the assets of any Guarantor or all of the Equity Interests of any Guarantor are sold (including by issuance or otherwise) by the Borrower in a transaction constituting an Asset Sale and (x) the Net Cash Proceeds from such Asset Sale are used in accordance with Section 6.01(d) or (y) the Borrower delivers to each holder of Senior Subordinated Notes an Officer's Certificate to the effect that the Net Cash Proceeds from such Asset Sale shall be used in accordance with Section 6.01(d) and within the time limits specified by Section 6.01(d), then each Guarantor (in the case of defeasance) or such Guarantor (in the case of compliance with Section 6.02(b) or in the event of a sale or other disposition of all of the Equity Interests of such Guarantor) or the corporation acquiring such assets (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and discharged from all obligations under this Article III without any further action required on the part of GOF or its successors or assigns. GOF or its successors or assigns shall, at the sole cost and expense of the Borrower and upon receipt at the reasonable request of GOF of an Opinion of Counsel that the provisions of this Section 3.03 have been complied with, deliver an appropriate instrument evidencing such release upon receipt of a request by the Borrower accompanied by an Officer's Certificate certifying as to the compliance with this Section 3.03. Any Guarantor not so released remains liable for the full amount of principal of and interest on the Senior Subordinated Notes and the other obligations of the Borrower hereunder as provided in this Article III. Section 3.04. Limitation of a Guarantor's Liability. Each Guarantor, and by its acceptance hereof GOF, hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of title 11 of the United States Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar U.S. Federal or state or other applicable law. To effectuate the foregoing intention, GOF and each Guarantor hereby irrevocably agree that the obligations of each Guarantor under its Guarantee shall be listed 27 to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including any Senior Indebtedness Incurred after the Effective Date) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 3.05, result in the obligations of such Guarantor under its Guarantee not constituting such a fraudulent transfer or conveyance under Federal or state law. Section 3.05. Contribution. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under the Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount, based on the net assets of each Guarantor (including the Funding Guarantor), determined in accordance with GAAP, subject to Section 3.04, for all payments, damages and expenses incurred by such Funding Guarantor in discharging the Borrower's obligations with respect to the Senior Subordinated Notes or any other Guarantor's obligations with respect to the Guarantee. Section 3.06. Subordination of Subrogation and Other Rights. Each Guarantor hereby agrees that any claim against the Borrower that arises from the payment, performance or enforcement of such Guarantor's obligations under its Guarantee or this Agreement, including, without limitation, any right of subrogation, shall be subject and subordinate to, and no payment with respect to any such claim of such Guarantor shall be made before, the payment in full in cash of the outstanding Senior Subordinated Notes in accordance with the provisions provided therefor in this Agreement. Section 3.07. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness. Each Guarantor covenants and agrees, and GOF by his acceptance thereof likewise covenants and agrees, that the Guarantee of such Guarantor shall be issued subject to the provisions of this Article III; and each person holding any Senior Subordinated Note, whether GOF upon original issue to or upon transfer, assignment or exchange thereof, accepts and agrees that all payments of the principal of and interest on the Senior Subordinated Notes, and all other amounts payable under this Agreement, pursuant to the Guarantee made by or on behalf of any Guarantor shall, to the extent and in the manner set forth in this Article III, be subordinated and junior in right of payment to the prior payment in full in cash of all amounts payable under Guarantor Senior Indebtedness of such Guarantor. Section 3.08. No Payment on Guarantees in Certain Circumstances. (a) No direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities but including any payment constituting any distribution in respect of any other Indebtedness that is subordinated to the Guarantees) by or on behalf of any Guarantor of principal of or interest on the Senior Subordinated Notes pursuant to such Guarantor's Guarantee, whether pursuant to the terms of the Senior Subordinated Note, upon acceleration or otherwise, shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any Designated Guarantor Senior Indebtedness of such Guarantor, whether at maturity, on account of mandatory redemption or prepayment, acceleration 28 or otherwise, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Designated Guarantor Senior Indebtedness. In addition, during the continuance of any nonpayment event of default with respect to any Designated Guarantor Senior Indebtedness pursuant to which the maturity thereof may be immediately accelerated, and upon receipt by the Trustee of written notice (the "Guarantor Payment Blockage Notice") from the holder or holders of such Designated Guarantor Senior Indebtedness or the trustee or agent acting on behalf of such Designated Guarantor Senior Indebtedness, then, unless and until such nonpayment event of default has been cured or waived or has ceased to exist or such Designated Guarantor Senior Indebtedness has been discharged or paid in full in cash or the benefits of these provisions have been waived by the holders of such Designated Guarantor Senior Indebtedness, no direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities) shall be made by or on behalf of such Guarantor of principal or interest on the Senior Subordinated Notes during a period (a "Guarantor Blockage Period") commencing on the date of receipt of such notice by GOF and its successors and assigns and ending 179 days thereafter; provided however, that so long as any Indebtedness remains outstanding under the Credit Agreement or any replacement, renewal, refinancing or extension thereof, no Guarantor Payment Blockage Notice may be initiated to block payment of principal or interest on the Senior Subordinated Notes pursuant to the terms of this Section 3.08(a) except by the Administrative Agent (or similar authorized party) under the Credit Agreement or any replacement, renewal, refinancing or extension thereof. (b) Notwithstanding anything herein or in the Senior Subordinated Notes to the contrary, (x) in no event shall a Guarantor Blockage Period extend beyond 179 days from the date the Guarantor Payment Blockage Notice in respect thereof was given, (y) there shall be a period of at least 181 consecutive days in each 360 day period when no Guarantor Blockage Period is in effect and (z) not more than one Guarantor Blockage Period may be commenced with respect to any Guarantor during any period of 360 consecutive days. No nonpayment event of default that existed or was continuing on the date of commencement of any Guarantor Blockage Period with respect to the Designated Guarantor Senior Indebtedness initiating such Guarantor Blockage Period (to the extent the holder of Designated Guarantor Senior Indebtedness, or trustee or agent, giving notice commencing such Guarantor Blockage Period had knowledge of such existing or continuing event of default) may be, or be made, the basis for the commencement of any other Guarantor Blockage Period by the holder or holders of such Designated Guarantor Senior Indebtedness or the trustee or agent acting on behalf of such Designated Guarantor Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such nonpayment event of default has been cured or waived for a period of not less than 90 consecutive days. (c) In the event that, notwithstanding the foregoing, any payment shall be made directly to the holders of Senior Subordinated Notes when such payment is prohibited by Section 3.08(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered by the recipient thereof (if notice of the conditions prohibiting such payment under Section 3.08(a) has been received by the holders of Senior Subordinated Notes) to the holders of such Designated Guarantor Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Designated Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, but only to 29 the extent that, upon notice from the holders of Senior Subordinated Notes to the holders of such Designated Guarantor Senior Indebtedness that such prohibited payment has been made, the holders of such Designated Guarantor Senior Indebtedness (or their representative or representatives or a trustee or trustees) notify the holders of Senior Subordinated Notes in writing of the amounts then due and owing on such Designated Guarantor Senior Indebtedness, if any, and only the amounts specified in such notice to the holders of Senior Subordinated Notes shall be paid to the holders of such Designated Guarantor Senior Indebtedness. Section 3.09 Payment Over Proceeds upon Dissolution, Etc. (a) Upon any payment or distribution of assets or securities of any Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), upon any dissolution or winding up or total liquidation or reorganization of such Guarantor, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Guarantor Senior Indebtedness of such Guarantor shall first be paid in full in cash before the holders of Senior Subordinated Notes shall be entitled to receive any payment by such Guarantor of the principal of or interest on the Senior Subordinated Notes pursuant to such Guarantor's Guarantee, or any payment to acquire any of the Senior Subordinated Notes for cash, property or securities, or any distribution with respect to the Senior Subordinated Notes of any cash, property or securities (excluding any payment or distribution of Permitted Junior Securities). Before any payment may be made by, or on behalf of, any Guarantor of the principal of or interest on the Senior Subordinated Notes upon any such dissolution or winding up or total liquidation or reorganization, any payment or distribution of assets or securities of such Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), to which GOF or its successors or assigns would be entitled in respect of the Senior Subordinated Notes, but for the subordination provisions of this Agreement, shall be made by such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, directly to the holders of the Guarantor Senior Indebtedness of such Guarantor (pro rata to such holders on the basis of the respective amounts of such Guarantor Senior Indebtedness held by such holders) or their representatives or to the trustee or trustees or agent or agents under any agreement or indenture pursuant to which any of such Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Guarantor Senior Indebtedness in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Indebtedness. (b) In the event that, notwithstanding the foregoing provision prohibiting such payment or distribution, any payment or distribution of assets or securities of any Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), shall be made directly to holders of the Senior Subordinated Notes at a time when such payment or distribution is prohibited by Section 3.09(a) and before all obligations in respect of the Guarantor Senior Indebtedness of such Guarantor are paid in full in cash, such payment or distribution shall be received and held in trust for the benefit of, and shall be paid over or delivered by the recipient thereof (if notice of the conditions 30 prohibiting such payment under Section 3.09(a) has been received thereby) to, the holders of such Guarantor Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of such Guarantor Senior Indebtedness held by such holders) or their respective representatives, or to the trustee or trustees or agent or agents under any indenture pursuant to which any of such Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of such Guarantor Senior Indebtedness remaining unpaid until all such Guarantor Senior Indebtedness has been paid in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Indebtedness. (c) The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of any Guarantor following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Section 6.02 shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this Section 3.09 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Section 6.02. Section 3.10 Subrogation. (a) Upon the payment in full in cash of all Guarantor Senior Indebtedness of a Guarantor, or provision for payment, GOF and its successors or assigns shall be subrogated to the rights of the holders of such Guarantor Senior Indebtedness to receive payments or distributions of cash, property or securities of such Guarantor made on such Guarantor Senior Indebtedness until the principal of and interest on the Senior Subordinated Notes shall be paid in full in cash; and, for the purposes of such subrogation, no payments or distributions to the holders of such Guarantor Senior Indebtedness of any cash, property or securities to which GOF and its successors and assigns would be entitled except for the provisions of this Article III, and no payment over pursuant to the provisions of this Article III to the holders of such Guarantor Senior Indebtedness by GOF and its successors and assigns, as between such Guarantor, its creditors other than holders of such Guarantor Senior Indebtedness, and GOF and its successors and assigns, be deemed to be a payment by such Guarantor to or on account of such Guarantor Senior Indebtedness. It is understood that the provisions of this Article III are and are intended solely for the purpose of defining the relative rights of the holders of the Senior Subordinated Notes solely in their capacity as such, on the one hand, and the holders of Guarantor Senior Indebtedness of each Guarantor, on the other hand. (b) If any payment or distribution to which the GOF or its successors or assigns would otherwise have been entitled but for the provisions of this Article III shall have been applied, pursuant to the provisions of this Article III, to the payment of all amounts payable under Guarantor Senior Indebtedness, then and in such case, GOF and it successors or assigns shall be entitled to receive from the holders of such Guarantor Senior Indebtedness any payments or distributions received by such holders of Guarantor Senior Indebtedness in excess of the amount required to make payment in full in cash of such Guarantor Senior Indebtedness. Section 3.11 Obligations of Guarantors Unconditional. 31 (a) Nothing contained in this Article III or elsewhere in this Agreement or in the Senior Subordinated Notes or the Guarantees is intended to or shall impair, as among each of the Guarantors and GOF or its successors and assigns, the obligation of each Guarantor, which is absolute and unconditional, to pay to GOF and/or its successors and assigns the principal of, interest on the Senior Subordinated Notes as and when the same shall become due and payable in accordance with the terms of the Guarantee of such Guarantor, or is intended to or shall affect the relative rights of GOF and/or its successors and assigns and creditors of any Guarantor other than the holders of Guarantor Senior Indebtedness of such Guarantor, nor shall anything herein or therein prevent GOF and/or its successors and assigns from exercising all remedies otherwise permitted by applicable law upon default under this Agreement, subject to the rights, if any, under this Article III of the holders of Guarantor Senior Indebtedness in respect of cash, property or securities of any Guarantor received upon the exercise of any such remedy. (b) Without limiting the generality of the foregoing, nothing contained in this Article III shall restrict the right of GOF or its successors or assigns to take any action to declare the Senior Subordinated Notes to be due and payable prior to its stated maturity pursuant to Sections 7.01 and 7.02 or to pursue any rights or remedies hereunder; provided, however, that all Guarantor Senior Indebtedness of any Guarantor then due and payable shall first be paid in full before GOF and/or its successors and assigns are entitled to receive any direct or indirect payment from such Guarantor of principal of, interest on the Senior Subordinated Notes pursuant to such Guarantor's Guarantee. Section 3.12 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets or securities of a Guarantor referred to in this Article III, GOF and/or its successors or assigns shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding up, liquidation or reorganization proceedings are pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to GOF and/or its successors or assigns for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Guarantor Senior Indebtedness of such Guarantor and other indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article III. Section 3.13 Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantee Senior Indebtedness. No right of any present or future holders of any Guarantor Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by any Guarantor with the terms of this Agreement, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. The provisions of this Article III are intended to be for the benefit of, and shall be enforceable directly by, the holders of Guarantor Senior Indebtedness. 32 Section 3.14 This Article Not to Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Senior Subordinated Notes by reason of any provision of this Article III shall not be construed as preventing the occurrence of an Event of Default specified in clauses (a), (b) or (c) of Section 7.01. Section 3.15 No Waiver of Guarantee Subordination Provisions. Without in any way limiting the generality of Section 3.13, the holders of Guarantor Senior Indebtedness may, at any time and from time to time, without the consent of or notice to GOF and/or its successors or assigns, without incurring responsibility to GOF and/or its successors or assigns and without impairing or releasing the subordination provided in this Article III or the obligations hereunder of GOF and/or its successors and assigns to the holders of Guarantor Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Guarantor Senior Indebtedness or any instrument evidencing the same or any agreement under which Guarantor Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Indebtedness; (c) release any Person liable in any manner for the collection of Guarantor Senior Indebtedness; and (d) exercise or refrain from exercising any rights against any Guarantor and any other Person. Section 3.16 Payments May be Paid Prior to Dissolution. Nothing contained in this Article III or elsewhere in this Agreement shall prevent a Guarantor, except under the conditions described in Section 3.08, from making payments of principal of and interest on the Senior Subordinated Notes unless at least two Business Days prior to the date upon which such payment becomes due and payable, the Borrower and such Guarantor shall have received the written notice provided for in Section 3.08(b). The Guarantors shall give prompt written notice to GOF and/or its successors and assigns of any dissolution, winding up, liquidation or reorganization of such Guarantor. ARTICLE IV CONDITIONS PRECEDENT Section 4.01. Conditions Precedent. The obligation of GOF to cause the Letter of Credit to be issued is subject to the satisfaction of the following conditions precedent, each to the reasonable satisfaction of GOF, or the waiver thereof by GOF in its sole discretion: (a) Borrower's Certificate of Incorporation. The Certificate Incorporation shall have been filed with the Secretary of State of the State of Delaware and, in any event, shall have been amended to satisfy the requirements of the Plan and the Bankruptcy Code, including, without limitation, to contain the following terms and provisions, each to the reasonable satisfaction of GOF: (i) The Borrower's authorized Capital Stock, and the designated shares in each class or series of Capital Stock, shall be limited to such number of shares as is necessary for the issuances contemplated by the Plan, including conversion or exercise of all 33 convertible or exercisable securities to be issued thereunder, including applicable anti-dilution protection; (ii) The stockholders of the Borrower shall be authorized to take action by written consent in lieu of a meeting thereof; (iii)The Borrower's Board of Directors shall not be classified; (iv) The provisions of the Borrower's certificate of incorporation as of May 11, 2002 that require an affirmative vote of 80% of the voting Capital Stock for the taking of certain actions shall be amended to provide that such actions may be taken with the affirmative vote of 50% of the voting Capital Stock; and (v) The issuance of non-voting capital equity securities shall be prohibited, but only to the extent required by Section 1123(a)(6) of the Bankruptcy Code. (b) Borrower's Bylaws. The Bylaws shall have been adopted by the Borrower, and, in any event, shall have been amended to satisfy the requirements of the Plan and the Bankruptcy Code, including, without limitation, to contain the following terms and provisions, each to the reasonable satisfaction of GOF: (i) Shareholders holding a minimum of 25% of the Borrower's Common Stock shall be authorized to call special meetings of the shareholders; (ii) The notice requirements for shareholders to place matters on the ballot for consideration at annual and special meetings shall not be unduly prohibitive and, in any event, shall be to GOF's reasonable satisfaction; (iii) Shareholders shall be authorized to take action by written consent in lieu of a meeting thereof; and (iv) The Borrower's officers shall be prohibited from exercising voting rights of any securities held by the Borrower without express authorization from the Borrower's Board of Directors. (c) Organizational Documents of Debtor Subsidiaries. The certificate or articles of incorporation and by-laws of each Debtor Subsidiary shall be amended as necessary to satisfy the provisions of the Plan and the Bankruptcy Code, and shall include, among other things, pursuant to Section 1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of non-voting equity securities, but only to the extent required by Section 1123(a)(6) of the Bankruptcy Code. 34 (d) Organization Documents of Subsidiaries and Certain Affiliates. In addition to the requirements of Section 4.01(c) above, the Organizational Documents of the Borrower's Subsidiaries and Affiliates (excluding GOF) shall, to the reasonable satisfaction of GOF: (i) prohibit their respective officers from exercising voting rights of any securities by such Subsidiaries and Affiliates without express authorization from such Subsidiary's or Affiliate's Board of Directors or other applicable governing body; and (ii) provide that the shareholders, members, partners or other equity holders, as the case may be, of such Subsidiary or Affiliate shall be permitted to remove as of the Effective Date, at any time and from time to time thereafter, any director, manager, managing partner or person of equivalent authority, with or without cause at any time, through action by a majority in interest of such shareholders, members, partners or other equity holders (which action may, at the option thereof and to the extent permissible by law, be taken in writing or pursuant to a meeting thereof). (e) Shareholder Rights Plan. The Shareholder Rights Plan shall have been rejected by the Bankruptcy Court and terminated. (f) Shareholders Agreement. The Shareholders Agreement shall have been executed and delivered by each of the parties thereto. (g) Documents to be Delivered. GOF shall have received the following documents, each dated the Effective Date (unless otherwise provided herein or unless previously provided in accordance with this Section 4.01), in form and substance satisfactory to GOF: (i) The Senior Subordinated Note to the order of GOF in the amount of $25,000,000.00, subject to the terms hereof and thereof; (ii) Certified copies of all documents and instruments, including all authorizations, consents and approvals of, evidence of all other actions by, and notices and filings with, all governmental authorities and regulatory bodies or other Persons to whom the Obligors have contractual obligations as shall be required for the execution, delivery and performance of this Agreement by the Obligors, including those consents and approvals required by Section 4.01(i); (iii)An Officer's Certificate (the statements made in which certificate shall be true on and as of the Effective Date), of each Obligor certifying as to: (A) the truth of the representations and warranties made by such Obligor in this 35 Agreement immediately before and immediately after giving effect to the execution and delivery hereof and the issuance of the Senior Subordinated Note; and (B) the satisfaction, as of the Effective Date, of all conditions precedent set forth in this Section 4.01 that are to be performed or satisfied by such Obligor; provided that the Borrower's Officer's Certificate shall certify the satisfaction of all conditions precedent set forth in this Section 4.01; (iv) A signed copy of a certificate of the Secretary or an Assistant Secretary or other appropriate officer of the Borrower certifying (A) as to true and complete copies of the Certificate of Incorporation and Bylaws and the Organizational Documents of each of the Borrower's Subsidiaries as in effect on the Effective Date and the absence of any amendments to the charter or by-laws since such dates; and (B) the names and true signatures of the officers of the Borrower authorized to sign this Agreement, and the other documents to be delivered hereunder; and (v) A signed copy of a certificate of the Secretary or an Assistant Secretary or other appropriate officer or manager of each Obligor (other than the Borrower) certifying (A) as to true and complete copies of the Organizational Documents of such Obligor as in effect on the Effective Date and the absence of any amendments to the charter or by-laws since such dates; and (B) the names and true signatures of the officers of such Obligor authorized to sign this Agreement, and the other documents to be delivered hereunder. (h) Environmental Due Diligence. GOF shall not have given the Borrower written notice that GOF, in its sole discretion, has determined that the results of its environmental diligence review were not reasonably satisfactory. (i) Consents and Approvals. The Borrower, its Debtor Subsidiaries and the other Obligors, if any, shall have obtained all governmental consents and made all governmental filings required or reasonably advisable in connection with the transactions contemplated by the Plan (including without limitation, any consents and filings required or reasonably advisable pursuant to the Hart-Scott-Rodino Antitrust Act (the "HSR Act"), any applicable foreign antitrust law or regulation, and the New Jersey Industrial Site Recovery Act) prior to the applicable deadlines, filing periods or other timeframes associated with such consents and filings, and the applicable waiting period under the HSR Act or any applicable foreign antitrust law or regulation, if any, shall have expired or been terminated. 36 (j) Credit Agreement. The closing of the Credit Agreement shall have occurred, or shall occur substantially simultaneously with the execution and delivery hereof. (k) New Investment. The closing of the New Investment shall have occurred, or shall occur substantially simultaneously with the execution and delivery hereof. (l) Management Letters. On or before the Confirmation Date, Jerry Zucker and James Boyd shall have executed and delivered a letter in the form of Exhibit L and Exhibit M, respectively, to the Disclosure Statement, unless this condition is waived in writing by GOF. (m) Compliance with Plan. The Borrower and its Debtor Subsidiaries shall be in compliance with the material terms and provisions of the Plan immediately prior to the execution and delivery of this Agreement. (n) Additional Information and Documents. Each Obligor shall have provided GOF with such additional information and shall have executed and delivered such additional documents as may be reasonably requested by GOF. ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.01. Representations and Warranties of the Borrower. The Borrower and each Obligor hereby jointly and severally represents and warrants to GOF as of the Effective Date as follows: (a) Corporate Existence. The Borrower and each of its Subsidiaries (a) is a corporation, partnership, limited liability company, or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite corporate or other power and authority, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business and is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify could have a Material Adverse Effect. (b) Financial Condition. The Borrower has heretofore furnished to GOF the following financial statements: (i) the audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries and the related audited consolidated statements of operations, shareholders' equity (deficit) and cash flows of the Borrower and its consolidated Subsidiaries for the fiscal year ended December 29, 2001, reported on by Ernst & Young LLP; (ii) the unaudited consolidated balance sheets of the Borrower and its consolidated Subsidiaries and the related unaudited consolidated statements of operations, shareholders' equity (deficit) and cash flows of the Borrower and its consolidated Subsidiaries for the nine-month period ended September 28, 2002; and (iii) pro forma consolidated balance sheets of the Borrower and its consolidated 37 Subsidiaries, and related consolidated statements of shareholders' equity (deficit) as at December 28, 2002, which balance sheets and statements reflect the consummation of the Plan as if the same had been consummated on said date. All such financial statements fairly present the respective actual or pro forma financial condition, as applicable, of the Borrower and its consolidated Subsidiaries as at the respective dates, and the respective actual results of operations for the respective periods ended on said respective dates, all in accordance with GAAP and practices applied on a consistent basis; provided that, as to projections, the Borrower and its consolidated Subsidiaries represent only that such projections have been prepared in good faith based on estimates and assumptions believed by the Borrower and its consolidated subsidiaries to be reasonable as of the date such projections were prepared. None of the Borrower or any of its Subsidiaries has on the date hereof any material contingent liabilities, material liabilities for Taxes, material unusual forward or long-term commitments or material unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said respective balance sheets as at said respective dates. Since September 28, 2002, there has been no material adverse change in the financial condition, operation, business or prospects of the Borrower and its consolidated Subsidiaries taken as a whole from that set forth in the respective financial statements as at such date. (c) Litigation. Except as set forth in Schedule 5.01(c) hereto, there are no legal or arbitral proceedings, or any proceedings by or before any governmental or regulatory authority or agency, now pending or (to the knowledge of any Obligor) threatened against the Borrower or any of the Borrower's Subsidiaries which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. (d) No Breach. None of the execution and delivery of this Agreement and the Senior Subordinated Note, the consummation of the transactions herein and therein contemplated or compliance with the terms and provisions hereof and thereof will conflict with or result in a breach of, or require any consent under, the Organizational Documents of the Borrower, any other Obligor or any of the Borrower's other Subsidiaries, if any, or any applicable law or regulation, or any order, writ, injunction or decree of any court or Governmental Authority, or any agreement or instrument to which the Borrower, any other Obligor or any of the Borrower's other Subsidiaries, if any, is a party or by which any of them or any of their Property is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any Property of the Borrower, any other Obligor, or any of the Borrower's other Subsidiaries, if any, pursuant to the terms of any such agreement or instrument. (e) Action. Each Obligor has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under this Agreement and the Senior Subordinated Note, as the case may be; the execution, delivery and performance by each Obligor of this Agreement and the Senior Subordinated Note, as the case may be, has been duly authorized by all necessary corporate or other action on the part of each Obligor (including, without limitation, any required shareholder approvals); and this Agreement has been duly and 38 validly executed and delivered by each Obligor and constitutes, and the Senior Subordinated Note, as the case may be, constitutes, its legal, valid and binding obligation, enforceable against each Obligor in accordance with the terms hereof and thereof, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (f) Approvals. No authorizations, approvals (other than the approval of the Bankruptcy Court, which has previously been obtained) or consents of (including any exchange control approval), and no filings or registrations with, any governmental or regulatory authority or agency, or any securities exchange, are necessary for the execution, delivery or performance by each Obligor of this Agreement or by the Borrower of the Senior Subordinated Note or for the legality, validity or enforceability hereof or thereof. (g) Use of Credit. None of the Obligors is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock in violation of the applicable provisions of Regulations U and X. (h) ERISA. Each ERISA Plan, and, to the knowledge of each Obligor, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Internal Revenue Code and any other Federal or state law, and no event or condition has occurred and is continuing as to which any Obligor would be under an obligation to furnish a report to GOF under Section 6.01(a) hereof. (i) Taxes. The Borrower and its Subsidiaries (other than their respective Foreign Subsidiaries) are members of an affiliated group of corporations filing consolidated returns for Federal income tax purposes, of which the Borrower is the "common parent" (within the meaning of Section 1504 of the Internal Revenue Code) of such group. There is no tax sharing, tax allocation or similar agreement currently in effect providing for the manner in which tax payments owing by the members of such affiliated group (whether in respect of Federal, state or foreign income or other Taxes) are allocated among the members of the group. The Borrower and its Subsidiaries have filed (either directly, or indirectly through the Borrower) all United States Federal, and all foreign, income tax returns and all other material tax returns that are required to be filed by them and have paid (either directly, or indirectly through the Borrower) all Taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries. The charges, accruals and reserves on the books of the Borrower and the Borrower's Subsidiaries in respect of Taxes and other governmental charges are, in the opinion of the Borrower, adequate. 39 (j) Investment Company Act. Neither the Borrower nor any of its Subsidiaries is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. (k) Public Utility Holding Company Act. Neither the Borrower nor any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. (l) Material Agreements and Liens. (i) Indebtedness. Part A of Schedule 4.01(l) hereto is a complete and correct list, as of the date of this Agreement (and after giving effect to the transactions contemplated to occur on the Effective Date), of each credit agreement, loan agreement, indenture, purchase agreement, lease, guarantee, letter of credit or other arrangement (excluding this Agreement) providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Borrower and its Subsidiaries, the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) U.S. $100,000, and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Part A of said Schedule 4.01(l). (ii) Liens. Part B of Schedule 4.01(l) hereto is a complete and correct list, as of the date of this Agreement (and after giving effect to the transactions contemplated to occur on the Effective Date), of each Lien securing Indebtedness of any Person the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) U.S. $100,000 and covering any Property of the Borrower or its Subsidiaries, and the aggregate Indebtedness secured (or which may be secured) by each such Lien and the Property covered by each such Lien is correctly described in Part B of said Schedule 4.01(l). (m) Environmental Matters. The Borrower and each of its Subsidiaries has obtained all environmental, health and safety permits, licenses and other authorizations required under all Environmental Laws to carry on its business as now being or as proposed to be conducted, except to the extent failure to have any such permit, license or authorization would not have a Material Adverse Effect. Each of such permits, licenses and authorizations is in full force and effect and the Borrower and each of its Subsidiaries is in compliance with the terms and conditions thereof, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any regulation, code, plan, order, decree, judgment, 40 injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply therewith would not have a Material Adverse Effect. In addition, except as set forth in Schedule 4.01(m) hereto: (i) No Pending Environmental Matters. No notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or threatened by any governmental or other entity with respect to any alleged failure by the Borrower or any of its Subsidiaries to have any environmental, health or safety permit, license or other authorization required under any Environmental Law in connection with the conduct of the business of the Borrower or any of its Subsidiaries or with respect to any generation, treatment, storage, recycling, transportation, discharge or disposal, or any Release of any Hazardous Materials generated by the Borrower or any of its Subsidiaries which alleged failure, generation, treatment, storage, recycling, transportation, discharge or disposal or Release would have a Material Adverse Effect. (ii) No Treatment Facilities or Releases. Except to the extent the same could not reasonably be expected to have a Material Adverse Effect: (A) neither the Borrower nor any of its Subsidiaries owns, operates or leases a treatment, storage or disposal facility requiring a permit under the Resource Conservation and Recovery Act of 1976, as amended, or under any comparable state or local statute; (B) no polychlorinated biphenyls (PCB's) is or has been present at any site or facility now or previously owned, operated or leased by the Borrower or any of its Subsidiaries; (C) no asbestos or asbestos-containing materials is or has been present at any site or facility now or previously owned, operated or leased by the Borrower or any of its Subsidiaries; (D) there are no underground storage tanks or surface impoundments for Hazardous Materials, active or abandoned, at any site or facility now or previously owned, operated or leased by the Borrower or any of its Subsidiaries; (E) no Hazardous Materials have been Released at, on or under any site or facility now or previously owned, operated or leased by the Borrower or any of its Subsidiaries in a reportable quantity established by statute, ordinance, rule, regulation or order; and (F) no Hazardous Materials have been otherwise Released at, on or under any site or facility now or previously owned, operated or leased by the Borrower or any of its Subsidiaries. 41 (iii)No Hazardous Material Transported to NPL Sites. Neither the Borrower nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Material to any location that is listed on the National Priorities List ("NPL") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by the Environmental Protection Agency in the Comprehensive Environmental Response and Liability Information System, as provided for by 40 C.F.R. ss. 300.5 ("CERCLIS"), or on any similar state, local or foreign list or that is the subject of Federal, state, local or foreign enforcement actions or other investigations that may lead to Environmental Claims against the Borrower or any of its Subsidiaries, in each case to the extent such Environmental Claims could reasonably be expected to have a Material Adverse Effect. (iv) No Notifications or Listings. No oral or written notification of a Release of a Hazardous Material has been filed by or on behalf of the Borrower or any of its Subsidiaries and no site or facility now or previously owned, operated or leased by the Borrower or any of its Subsidiaries is listed or proposed for listing on the NPL, CERCLIS or any similar state or foreign list of sites requiring investigation or clean-up. (v) No Liens or Restrictions. No Liens have arisen under or pursuant to any Environmental Laws on any site or facility owned, operated or leased by the Borrower or any of its Subsidiaries, and neither the Borrower nor any of its Subsidiaries has received any notification (or otherwise has any knowledge) of any government action that has been taken or is in process that could subject any such site or facility to such Liens, and neither the Borrower nor any of its Subsidiaries would be required to place any notice or restriction relating to the presence of Hazardous Materials at any site or facility owned by it in any deed to the real property on which such site or facility is located. (vi) Full Disclosure. There have been no so-called "Phase I" or "Phase II" environmental investigations or other analyses conducted by or that are in the possession of the Borrower or any of its Subsidiaries in relation to any site or facility now or previously owned, operated or leased by the Borrower or any of its Subsidiaries which have not been made available to GOF. 42 (n) Capitalization. (i) Outstanding Equity. The authorized Capital Stock of the Borrower and each of the Subsidiaries will consist as of the Effective Date, after giving effect to the transactions contemplated to occur on or before the Effective Date, of the aggregate number of shares of common and preferred stock, having the respective par values and series, in each case as listed in Schedule 4.01(n) hereto. On the Effective Date, after giving effect to the transactions contemplated to occur on or before the Effective Date, the number of shares of common stock and each series of preferred stock of the Borrower and each of its Subsidiaries will be duly and validly issued and outstanding as listed in said Schedule 4.01(n) and will be owned beneficially and of record by the Persons as listed in said Schedule 4.01(n). (ii) Outstanding Equity Rights. As of the Effective Date, after giving effect to the transactions contemplated to occur on or before the Effective Date, except as set forth in Schedule 4.01(n) hereto, (A) there will be no outstanding Equity Rights with respect to the Borrower or any of its Subsidiaries and (B) there will be no outstanding obligations of the Borrower or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of Capital Stock of the Borrower or any of its Subsidiaries nor will there be any outstanding obligations of the Borrower any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of the Borrower or any of its Subsidiaries. (o) Subsidiaries and Investments. (i) Subsidiaries. Set forth in Part A of Schedule 4.01(o) hereto is a complete and correct list of all of the Borrower's Subsidiaries as of the Effective Date after giving effect to the transactions contemplated to occur on or before the Effective Date, together with, for each such Subsidiary, (A) the jurisdiction of organization of such Subsidiary, (B) each Person holding ownership interests in such Subsidiary and (C) the nature of the ownership interests held by each such Person and the percentage of ownership of such Subsidiary represented by such ownership interests. Except as disclosed in Part A of Schedule 4.01(o) hereto, (x) the Borrower and its Subsidiaries own, or will own on the Effective Date, free and clear of Liens, and have the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by 43 them in Part A of Schedule 4.01(o) hereto, (y) all of the issued and outstanding Capital Stock of each such Person organized as a corporation is validly issued, fully paid and nonassessable and (z) (except as disclosed in Schedule 4.01) there are no outstanding Equity Rights with respect to such Person. (ii) Investments. Set forth in Part B of Schedule 4.01(o) hereto is a complete and correct list of all Investments (other than Investments disclosed in Part A of said Schedule 4.01(o) hereto and Permitted Investments) held by the Borrower and its Subsidiaries in any Person on the date hereof, or that will be held on the Effective Date after giving effect to the transactions contemplated to occur on or before the Effective Date, and, for each such Investment, (x) the identity of the Person or Persons holding such Investment and (y) the nature of such Investment. Except as disclosed in Part B of Schedule 4.01 hereto, the Borrower and each of its Subsidiaries owns, or will own, free and clear of all Liens, all such Investments. (iii) Absence of Certain Restrictions. Except as provided for in the Intercompany Notes Agreements (as defined in the Credit Agreement), neither the Borrower nor any of its Subsidiaries is, on the date hereof, subject to any indenture, agreement, instrument or other arrangement of the type described in Section 9.16(e) of the Credit Agreement. (p) Title to Assets. The Borrower and each of its Subsidiaries on the Effective Date will own and have good and marketable title (subject only to Permitted Liens) to the material Properties shown to be owned in the most recent financial statements referred to in Section 5.01(b)(iii) hereof (other than Properties disposed of in the ordinary course of business or otherwise permitted to be disposed of pursuant to Section 6.01(d) hereof or in accordance with the Plan). The Borrower and each of its Subsidiaries on the Effective Date will own (or have available for use under lease, license or other arrangements entered into with any other Person) good and marketable title to, and enjoy on the Effective Date, peaceful and undisturbed possession of, all Properties (subject only to Permitted Liens) that are necessary for the operation and conduct of their businesses. (q) True and Complete Disclosure. All written information furnished after the date hereof by the Obligors to GOF, in its capacity as a holder of the Senior Subordinated Note, in connection with this Agreement and the Senior Subordinated Note and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. (s) Real Property. Set forth on Schedule 4.01(s) attached hereto is a list of all of the real property interests of the Borrower and its Subsidiaries on the Effective Date, after 44 giving effect to the transactions contemplated to occur on or before the Effective Date, indicating in each case whether the respective Property is owned or leased, the identity of the owner or lessee and the location of the respective Property. All such leases necessary for the conduct of the business of the Borrower or its Subsidiaries are valid and subsisting and are in full force and effect, except for such failures to be valid, subsisting and in full force and effect as would not, individually or in the aggregate, have a Material Adverse Effect. Each of the Borrower and its Subsidiaries enjoys peaceful and undisturbed possession under all such leases, and each of the Borrower and its Subsidiaries has complied with all material obligations under all leases to which it is a party, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Section 5.02. Representations and Warranties of GOF. GOF hereby represents and warrants as of the Effective Date as follows: (a) Due Organization, Etc. GOF is a limited partnership duly organized and validly existing under the laws of the State of Delaware. (b) Corporate Power, Etc. GOF has full power and authority to enter into, deliver and perform its obligations under this Agreement and the Senior Subordinated Note and to consummate each of the transactions contemplated hereby and thereby, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement. (c) No Conflict. Neither the execution and delivery of this Agreement, nor the performance by GOF of its obligations hereunder, will conflict in any material respect with or result in a material breach of, or constitute a material default under, any applicable laws or any indenture, mortgage, deed of trust or other material instrument or agreement to which GOF is a party or is bound. (d) Approvals, Etc. No order, license, consent, authorization or approval of, or exemption by, or notice to or registration with, any Governmental Authority or regulatory body, and no filing, recording, publication or registration in any public office or any other place, is required in connection with the execution, delivery and performance by GOF of any this Agreement, or for the legality, validity, binding effect or enforceability hereof, except such orders, licenses, consents, authorizations and approvals as have been duly obtained or made and are in full force and effect, or will be obtained and made after the date hereof, as permitted by the applicable Governmental Authority or regulatory body. ARTICLE VI COVENANTS Section 6.01. General Covenants. The Borrower and the other Obligors, as the case may be, covenant and agree as follows: (a) Delivery of Information. The Obligors shall deliver to GOF (provided, however, that GOF may suspend delivery of any of the information set forth in the following 45 clauses (i) through (xii), or any subset of such information, by delivering written notice to the Borrower, with such suspension to continue until GOF delivers written notice to the Borrower directing the resumption of the delivery thereof): (i) as soon as available and in any event within (x) 45 days after the end of each monthly accounting period for the fiscal year of the Borrower ending January 3, 2004 and (y) 30 days after the end of each monthly accounting period of each fiscal of the Borrower commencing with the fiscal year ending January 1, 2005 (unless such monthly accounting period ends on the end of a fiscal quarter or fiscal year, in which case the provisions of paragraph (ii) and (iii) below shall apply), consolidated statements of income, retained earnings and cash flows of the Borrower and its Restricted Subsidiaries (and, separately stated, of the Borrower and its Restricted Subsidiaries, and, with respect to statements of income, Operating Divisions) for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheets of the Borrower and its Restricted Subsidiaries as at the end of such period (and, separately stated, of the Borrower and its Restricted Subsidiaries, and, with respect to statements of income, Operating Divisions), setting forth in each case in comparative form the corresponding consolidated figures for the corresponding period in the preceding fiscal year, accompanied by a certificate of a senior financial officer of the Borrower, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Restricted Subsidiaries (or of the Borrower and its Restricted Subsidiaries and Operating Divisions, as the case may be), in each case in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to the absence of footnote disclosures and to normal year-end audit adjustments); (ii) as soon as available and in any event within (x) 60 days after the end of each quarterly fiscal period for the fiscal year ending January 3, 2004 and (y) 45 days after the end of each quarterly fiscal period of each fiscal year of the Borrower commencing with the fiscal year ending January 1, 2005 (unless such quarterly fiscal period ends on the end of a fiscal year, in which case the provisions of paragraph (iii) below shall apply), consolidated statements of income, retained earnings and cash flows of the Borrower and its Restricted Subsidiaries (and, separately stated, of the Borrower and its Restricted Subsidiaries, and, with respect to statements of income, Operating Divisions) for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheets of the Borrower and its Restricted Subsidiaries as at the end of such period (and, separately stated, of the Borrower and its Restricted Subsidiaries, and, with respect to statements of in come, Operating Divisions), setting forth in each case in comparative form the corresponding consolidated figures for the corresponding period in the preceding fiscal year, accompanied by a certificate of a senior financial officer of the Borrower, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Restricted Subsidiaries (or of the Borrower, its Restricted Subsidiaries and Operating Divisions, as the case may be), in each case in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to the absence of footnote disclosures and to normal year-end audit adjustments); 46 (iii)as soon as available and in any event within (x) 120 days after the end of the fiscal year of the Borrower ending January 3, 2004 and (y) 90 days after the end of each fiscal year of the Borrower commencing with the fiscal year ending January 1, 2005, consolidated statements of income, retained earnings and cash flows of the Borrower and its Restricted Subsidiaries (and, separately stated, of the Borrower and its Restricted Subsidiaries and Operating Divisions) for such fiscal year and the related consolidated balance sheets of the Borrower and its Restricted Subsidiaries (and, separately stated, of the Borrower and its Restricted Subsidiaries and Operating Divisions) as at the end of such fiscal year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Restricted Subsidiaries (or of the Borrower and its Restricted Subsidiaries and Operating Divisions, as the case may be) as at the end of, and for, such fiscal year in accordance with GAAP, consistently applied; (iv) promptly upon their becoming available, copies of all registration statements and regular periodic reports, if any, which any of the Borrower or its Subsidiaries shall have filed with the Securities and Exchange Commission (or any governmental agency substituted therefor) or any national securities exchange; (v) promptly upon the mailing thereof to the holders of any publicly-traded debt or equity securities of any of the Borrower or its Subsidiaries, copies of all financial statements, certificates, reports, proxy statements and other notices or information so mailed; (vi) as soon as possible, and in any event within 10 days after any Obligor knows or has reason to believe that any of the events or conditions specified below with respect to any ERISA Plan or Multiemployer Plan has occurred or exists, a statement signed by a senior financial officer of such Obligor or its Subsidiary setting forth details respecting such event or condition and the action, if any, that the Obligors and their ERISA Affiliates propose to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by the Borrower or an ERISA Affiliate with respect to such event or condition): (A) any reportable event, as defined in Section 4043(c) of ERISA and the regulations issued thereunder, with respect to an ERISA Plan, as to which the PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Internal Revenue Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Internal Revenue Code); and any request for a waiver under Section 412(d) of the Internal Revenue Code for any ERISA Plan; (B) the distribution under Section 4041 of ERISA of a notice of intent to terminate any ERISA Plan or any action taken by the Borrower or an ERISA Affiliate to terminate any ERISA Plan; (C) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan, or the receipt by 47 the Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; (D) the complete or partial withdrawal from a Multiemployer Plan by the Borrower or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by the Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (E) the institution of a proceeding by a fiduciary of any Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and (F) the adoption of an amendment to any ERISA Plan that, pursuant to Section 401(a)(29) of the Internal Revenue Code or Section 307 of ERISA, would require security to be provided to the ERISA Plan in accordance with the provisions of said Sections; (vii)as soon as available and in any event within 30 days after the beginning of each fiscal year of the Borrower, (A) a projection (setting forth an itemization of the principal assumptions relating thereto) for such fiscal year of the Borrower of the anticipated income statement, cash flow statement and changes in financial position of the Borrower, and the related balance sheets and (B) promptly after any material change in such projections (either positive or negative) becomes known, notice of such change; (viii) promptly after any Obligor has reason to believe that any Default has occurred under this Agreement or the Senior Subordinated Notes, a notice of such Default describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that such Obligor has taken or proposes to take with respect thereto; (ix) promptly after the Borrower has reason to believe that any default has occurred under the Credit Agreement, and in any event no later than notice thereof is delivered to the Administrative Agent, a notice of such default describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that the Borrower has taken or proposes to take with respect thereto; (x) immediately after the Borrower or any of its Subsidiaries has reason to believe that it may not timely make any of the payments due under the Credit Agreement from the Borrower to the Administrative Agent on December 31, 2003, June 30, 2004 and December 31, 2004, a notice of such fact, describing the reason for such determination in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that the Borrower has taken or proposes to take to remedy such situation; (xi) immediately upon the addition of any guarantor under the Credit Agreement pursuant to Section 9.16(b) thereof or otherwise, notice of such addition, copies of the Guaranty Agreement executed by such additional guarantor and a statement of the basis for such addition; 48 (xii) from time to time such other information regarding the financial condition, operations, business or prospects of the Borrower or any of its Subsidiaries (including, without limitation, any ERISA Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as GOF may reasonably request; and (xiii) the Borrower shall deliver to GOF, within 120 days after the close of each fiscal year a certificate signed by the principal executive officer, principal financial officer or principal accounting officer stating that a review of the activities of the Borrower has been made under the supervision of the signing officers with a view to determining whether a Default or Event of Default has occurred and whether or not the signers know of any Default or Event of Default by the Borrower that occurred during such fiscal year. If they do know of such a Default or Event of Default, the certificate shall describe all such Defaults or Events of Default, their status and the action the Borrower is taking or proposes to take with respect thereto. The first certificate to be delivered by the Borrower pursuant to this Section 6.01(a) shall be for the fiscal year ending January 3, 2004. (b) Transactions with Affiliates. The Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into any transaction (or series of related transactions) with or for the benefit of any of their respective Affiliates or any officer, director or employee of the Borrower or any Restricted Subsidiary (each an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms which are no less favorable to the Borrower or such Restricted Subsidiary, as the case may be, than would be available in a comparable transaction with an unaffiliated third party and (ii) (A) if such Affiliate Transaction (or series of related Affiliate Transactions) involves aggregate payments or the transfer of other consideration between the Borrower and an Affiliate of the Borrower having a Fair Market Value in excess of $25,000,000, such Affiliate Transaction is in writing and the Borrower delivers an Officer's Certificate to each holder of Senior Subordinated Notes certifying that such Affiliate Transaction (or series of Affiliate Transactions) complies with the foregoing provisions, (B) if such Affiliate Transaction (or series of related Affiliate Transactions) involves aggregate payments or the transfer of other consideration between the Borrower and an Affiliate of the Borrower having a Fair Market Value in excess of $25,000,000, such Affiliate Transaction is in writing and a majority of the disinterested members of the Board of Directors of the Borrower shall have approved such Affiliate Transaction and determined that such Affiliate Transaction complies with the foregoing provisions. Notwithstanding the foregoing, the restrictions set forth in this covenant shall not apply to (i) transactions with or among the Borrower and any Wholly Owned Restricted Subsidiary or between or among Wholly Owned Restricted Subsidiaries; (ii) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees, consultants or agents of the Borrower or any Subsidiary as determined in good faith by the Borrower's Board of Directors; (iii) any transactions undertaken pursuant to any contractual obligations or rights in existence on the Effective Date (as in effect on the Effective Date), including without limitation redemption features in any outstanding securities or the issuance of, or the payment of the principal, interest or any other amounts due on, the Junior Subordinated Convertible Notes; (iv) any Restricted Payments made in compliance with Section 6.01(e); (v) 49 loans and advances to officers, directors and employees of the Borrower or any Restricted Subsidiary for travel, entertainment, moving and other relocation expenses, in each case made in the ordinary course of business for bona fide business purposes of the Borrower or a Restricted Subsidiary; (v) entering into by the Borrower and any of its consolidated Restricted Subsidiaries of a tax sharing or similar arrangement; and (vii) entering into by the Borrower and any Restricted Subsidiary a Qualified Securitization Transaction. (c) Limitation on Indebtedness. The Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness), except for Permitted Indebtedness; provided, however, that the Borrower and any Restricted Subsidiary may Incur Indebtedness if, at the time of and immediately after giving pro forma effect to such Incurrence of Indebtedness and the application of the proceeds therefrom, the Consolidated Coverage Ratio would be greater than 1.0 to 1.0. The foregoing limitations will not apply to the Incurrence by the Borrower or any Restricted Subsidiary of any of the following (collectively, "Permitted Indebtedness"), each of which shall be given independent effect: (A) Indebtedness under the Senior Subordinated Notes, the Junior Subordinated Convertible Notes and other indebtedness outstanding on the Effective Date; (B) Indebtedness Incurred pursuant to (i) the Credit Agreement and/or (ii) any other agreements or indentures governing Senior Indebtedness if at the time of and immediately after giving effect thereto, the aggregate consolidated Indebtedness Incurred under both clauses (i) and (ii) would not exceed $800,000,000 at any one time outstanding; provided, however, that such $800,000,000 shall be reduced (without duplication) by the amount of any repayment of Indebtedness under the Credit Agreement pursuant to Section 5.01(g) and any drawing under the Letter of Credit; (C) Indebtedness of any Subsidiary of the Borrower owed to and held by the Borrower or any Guarantor, other Indebtedness of the Borrower owed to and held by any Guarantor which is unsecured and subordinated in right of payment to the payment and performance of the Borrower's obligations under any Senior Indebtedness and the Senior Subordinated Notes and Indebtedness of a Foreign Restricted Subsidiary that is not a Guarantor owed to and held by any other Restricted Subsidiary that is not a Guarantor; provided, however, that an Incurrence of Indebtedness that is not permitted by this clause (C) shall be deemed to have occurred upon (i) any sale or other disposition of any Indebtedness of the Borrower or any Restricted Subsidiary referred to in this clause (C) to a Person (other than the Borrower or a Guarantor), (ii) any sale or other disposition of Equity Interests of any Guarantor which holds Indebtedness of the Borrower or another Subsidiary of the Borrower such that such Guarantor ceases to be a Guarantor, and (iii) the designation of a Restricted Subsidiary that is a Guarantor and which holds Indebtedness of the Borrower or any other Restricted Subsidiary as an Unrestricted Subsidiary; (D) the Guarantees and guarantees by any Guarantor of Indebtedness of the Borrower permitted under this Section 6.01(c); provided, however, that if such guarantee is of Subordinated Indebtedness, then the Guarantee of such Guarantor shall be senior to such Guarantor's guarantee of Subordinated Indebtedness; (E) Hedging Obligations of the Borrower or any Guarantor entered into in the ordinary course of business; (F) Purchase Money Indebtedness and Capital Lease Obligations which do not exceed $50,000,000 in the aggregate at any one time outstanding; (G) Indebtedness to the extent representing a replacement, renewal, refinancing or extension (collectively for purposes of this Section 6.01(c), a "refinancing") of outstanding Indebtedness Incurred in compliance with the Consolidated Coverage Ratio of the 50 first paragraph of this Section 6.01(c) or clause (B) of this paragraph of this Section 6.01(c); provided, however, that (i) any such refinancing shall not exceed the sum of the principal amount (or accreted amount (determined in accordance with GAAP), if less) of the Indebtedness being refinanced, plus the amount of accrued interest thereon, plus the amount of any reasonably determined prepayment premium necessary to accomplish such refinancing and such reasonable fees and expenses Incurred in connection therewith, (ii) Indebtedness representing a refinancing of Indebtedness other than Senior Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced, (iii) Indebtedness that is pari passu with the Senior Subordinated Notes may only be refinanced with Indebtedness that is made pari passu with or subordinate in right of payment to the Senior Subordinated Notes and Subordinated Indebtedness may only be refinanced with Subordinated Indebtedness, (iv) no Restricted Subsidiary that is not a Guarantor may Incur Indebtedness to refinance Indebtedness of the Borrower or any Guarantor and (v) Indebtedness of the Borrower may only be refinanced by Indebtedness of the Borrower and Indebtedness of a Restricted Subsidiary may only be refinanced by Indebtedness of such Restricted Subsidiary or by the Borrower; (H) in addition to the items referred to in clauses (A) through (G) above, Indebtedness of the Borrower (including any Indebtedness under the Credit Agreement that utilizes this subparagraph (H)) having an aggregate principal amount not to exceed $200,000,000 at any one time outstanding; and (I) Indebtedness of a Securitization Entity in a Qualified Securitization Transaction that is Non-Recourse Debt with respect to the Borrower and its other Restricted Subsidiaries (except for Standard Securitization Undertakings and Limited Originator Recourse). (d) Disposition of Proceeds of Asset Sales. (i) The Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, make any Asset Sale, unless (A) the Borrower or such Restricted Subsidiary, as the case may be, receives consideration for such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of and (B) at least 65% of such consideration consists of (I) cash or Cash Equivalents, or (II) properties, capital assets and interests in joint ventures (however structured) that replace the properties and assets that were the subject of such Asset Sale or in properties and capital assets that will be used in the business of the Borrower and its Restricted Subsidiaries as existing at such time or in businesses reasonably related thereto (as determined in good faith by the Borrower's Board of Directors) ("Replacement Assets"). The amount of any Indebtedness (other than any Subordinated Indebtedness) of the Borrower or any Restricted Subsidiary that is actually assumed by the transferee in such Asset Sale and from which the Borrower and the Restricted Subsidiaries are fully and unconditionally released shall be deemed to be cash for purposes of determining the percentage of cash consideration received by the Borrower or the Restricted Subsidiaries. (ii) The Borrower or such Restricted Subsidiary, as the case may be, may (A) apply the Net Cash Proceeds of any Asset Sale to repay Senior Indebtedness and permanently reduce any related commitment, or (B) make an Investment in Replacement Assets, in each case, within 270 days of receipt thereof. 51 (iii) To the extent all or part of the Net Cash Proceeds of any Asset Sale are not applied within 270 days of such Asset Sale as described in clause (A) or (B) of the immediately preceding paragraph (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the Borrower shall, within 45 days after such 270th day, prepay the Senior Subordinated Notes up to a maximum principal amount equal to the amount of such Unutilized Net Cash Proceeds in accordance with Section 2.02(c) irrespective of whether or not an Event of Default has occurred and is continuing. (iv) In the event GOF has assigned any portion of the Senior Subordinated Note in accordance with the provisions hereof, any prepayment effected pursuant to this covenant, to the extent the aggregate principal amount outstanding under the Senior Subordinated Notes and accrued and unpaid interest and other amounts owing in respect thereof exceeds the Unutilized Net Cash Proceeds to be applied to the prepayment thereof, the prepayment shall be made pro rata based on the aggregate principal amount of the Senior Subordinated Notes held by GOF and any assignees. To the extent the Unutilized Net Cash Proceeds exceed the aggregate principal amount outstanding under the Senior Subordinated Notes and accrued and unpaid interest and other amounts owing in respect thereof, the Borrower may retain and utilize any portion of the Unutilized Net Cash Proceeds not applied to prepay Senior Subordinated Notes for any purpose consistent with the other terms hereof. (e) Limitation on Restricted Payments. The Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, to: (i) declare or pay any dividend or any other distribution on any Equity Interests of the Borrower or any Restricted Subsidiary or make any payment or distribution to the direct or indirect holders (in their capacities as such) of Equity Interests of the Borrower or any Restricted Subsidiary (other than Class C Dividends and any dividends, distributions and payments made to the Borrower or any Restricted Subsidiary and dividends or distributions payable to any Person solely in Qualified Equity Interests of the Borrower or in options, warrants or other rights to purchase Qualified Equity Interests of the Borrower); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Borrower or any Restricted Subsidiary (other than the Senior Subordinated Notes, Junior Subordinated Convertible Notes and any Equity Interests owned by the Borrower or any Restricted Subsidiary); (iii) purchase, redeem, defease or retire for value, or make any principal payment on, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Indebtedness; or (iv) make any Investment in any Person (other than Permitted Investments) (any such payment or any other action (other than any exception thereto) described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless: 52 (i) no Default or Event of Default shall have occurred and be continuing at the time or immediately after giving effect to such Restricted Payment; (ii) immediately after giving effect to such Restricted Payment, the Borrower would be able to Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of Section 6.01(c); and (iii) immediately after giving effect to such Restricted Payment, the aggregate amount of all Restricted Payments declared or made on or after the Effective Date does not exceed an amount equal to the sum of (A) 50% of cumulative Consolidated Net Income determined for the period (taken as one period) from the Effective Date and ending on the last day of the most recent fiscal quarter immediately preceding the date of such Restricted Payment for which consolidated financial information of the Borrower is available (or if such cumulative Consolidated Net Income shall be a loss, minus 100% of such loss), plus (B) the aggregate net cash proceeds received by the Borrower either (x) as capital contributions to the Borrower after the Effective Date or (y) from the issue and sale (other than to a Restricted Subsidiary) of its Qualified Equity Interests after the Effective Date (excluding the net proceeds from any issuance and sale of Qualified Equity Interests financed, directly or indirectly, using funds borrowed from the Borrower or any Restricted Subsidiary until and to the extent such borrowing is repaid), plus (C) the principal amount (or accreted amount (determined in accordance with GAAP), if less) of any Indebtedness of the Borrower or any Restricted Subsidiary Incurred after the Effective Date which has been converted into or exchanged for Qualified Equity Interests of the Borrower, plus (D) without duplication of any amounts included in clause (i) above, in the case of the disposition or repayment of, or the receipt by the Borrower or any Restricted Subsidiary of any dividends or distributions from, any Investment constituting a Restricted Payment made after the Effective Date, an amount equal to the lesser of the amount of such Investment and the amount received by the Borrower or any Restricted Subsidiary upon such disposition, repayment, dividend or distribution, plus (E) in the event the Borrower or any Restricted Subsidiary makes any Investment in a Person that, as a result of or in connection with such Investment, becomes a Restricted Subsidiary, an amount equal to the Borrower's or any Restricted Subsidiary's existing Investment in such Person that was previously treated as a Restricted Payment, plus (F) $100,000,000. The foregoing provisions will not prevent (i) the payment of any dividend or distribution on, or redemption of, Equity Interests within 60 days after the date of declaration of such dividend or distribution or the giving of formal notice of such redemption, if at the date of such declaration or giving of such formal notice such payment or redemption would comply with the provisions hereof; (ii) the purchase, redemption, retirement or other acquisition of any Equity Interests of the Borrower in exchange for, or out of the net cash proceeds of the substantially concurrent issue and sale (other than to a Restricted Subsidiary) of, Qualified Equity Interests of the Borrower; provided, however, that any such net cash proceeds and the value of any Qualified Equity Interests issued in exchange for such retired Equity Interests are excluded from clause (iii)(B) of the preceding paragraph (and were not included therein at any time) and are not used to prepay the Senior Subordinated Notes; (iii) the purchase, redemption, retirement, defeasance or 53 other acquisition of Subordinated Indebtedness, or any other payment thereon, made in exchange for, or out of the net cash proceeds of, a substantially concurrent issue and sale (other than to a Restricted Subsidiary) of (x) Qualified Equity Interests of the Borrower; provided, however, that any such net cash proceeds and the value of any Qualified Equity Interests issued in exchange for Subordinated Indebtedness are excluded from clauses (iii)(B) and (iii)(C) of the preceding paragraph (and were not included therein at any time) and are not used to prepay the Senior Subordinated Notes or (y) Subordinated Indebtedness permitted to be Incurred pursuant to clause (G) of the second paragraph of Section 6.01(c); (iv) the making of loans or advances to officers and directors of the Borrower or any Restricted Subsidiary entered into in the ordinary course of business in an amount not to exceed $5,000,000 at any one time outstanding; (v) the repurchase, redemption, defeasance, retirement, refinancing or acquisition for value or payment of principal of Subordinated Indebtedness at a purchase price not greater than 110% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control; and (vi) Investments in joint ventures (however structured) not to exceed $100.0 million at any one time outstanding; provided, however, that in the case of each of clauses (ii), (iii), (v) and (vi) no Default or Event of Default shall have occurred and be continuing or would arise therefrom. In determining the amount of Restricted Payments permissible under this Section 6.01(e), amounts expended pursuant to clauses (i) and (iv) of the immediately preceding paragraph shall be included as Restricted Payments. The amount of any noncash Restricted Payment shall be deemed to be equal to the Fair Market Value thereof at the date of the making of such Restricted Payment. (f) Corporate Existence. Subject to Section 6.02, the Borrower shall do or shall cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Restricted Subsidiary in accordance with the respective organizational documents of each such Restricted Subsidiary and the rights (charter and statutory) and material franchises of the Borrower and the Restricted Subsidiary, provided, however, that the Borrower shall not be required to preserve any such right or franchise, or the corporate existence of any Restricted Subsidiary, if the Board of Directors of the Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower and the Restricted Subsidiaries, taken as a whole and the loss thereof is not materially adverse to the Borrower and the Restricted Subsidiaries, taken as a whole; provided, further, however, that a determination of the Board of Directors of the Borrower shall not be required in the event of a merger of one or more Wholly Owned Restricted Subsidiaries with or into another Wholly Owned Restricted Subsidiary or another Person, if the surviving Person is a Wholly Owned Restricted Subsidiary organized under the laws of the United States or a State thereof or of the District of Columbia or, in the case of a Foreign Restricted Subsidiary, the jurisdiction of incorporation or organization of such Foreign Restricted Subsidiary. This Section 6.01(f) shall not prohibit the Borrower from taking any other action otherwise permitted by, and made in accordance with, the provisions hereof. (g) Limitation on Liens. The Borrower shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Liens of any kind against or upon any of their respective properties or assets now owned or hereafter acquired, or any proceeds therefrom or any income or profits therefrom, to secure any Indebtedness unless 54 contemporaneously therewith effective provision is made, (i) in the case of the Borrower, to secure the Senior Subordinated Notes and all other amounts due hereunder, and (ii) in the case of a Restricted Subsidiary which is a Guarantor, to secure such Restricted Subsidiary's Guarantee of the Senior Subordinated Notes and all other amounts due under hereunder, in each case, equally and ratably with such Indebtedness (or, in the event that such Indebtedness is subordinated in right of payment to the Senior Subordinated Notes or such Restricted Subsidiary's Guarantee, prior to such Indebtedness) with a Lien on the same properties and assets securing such Indebtedness for so long as such Indebtedness is secured by such Lien, except for (A) Liens securing Senior Indebtedness (including, without limitation, Indebtedness incurred under the Credit Agreement); (ii) Liens securing Indebtedness Incurred in a Qualified Securitization Transaction by the Borrower and its Restricted Subsidiaries; (iii) Permitted Liens and (iv) Liens under Hedging Agreements. (h) Future Domestic Restricted Subsidiary Guarantors. In the event that the Borrower causes or permits any Domestic Restricted Subsidiary that is not a Guarantor to, directly or indirectly, guarantee the payment of any Indebtedness of the Borrower under the Credit Agreement then the Borrower shall cause such Domestic Restricted Subsidiary to simultaneously execute and deliver a guarantee, substantially in form and substance as the guarantee executed thereby with respect to its guarantee of indebtedness under the Credit Agreement, pursuant to which it will become a Guarantor under this Agreement. (i) Designation of Unrestricted Subsidiaries. (i) The Borrower may designate after the Effective Date any Subsidiary of the Borrower as an Unrestricted Subsidiary under this Agreement (a "Designation") only if: (A) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (B) at the time of and after giving effect to such Designation, the Borrower could Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of Section 6.01(c); and (C) the Borrower would be permitted to make an Investment (other than a Permitted Investment) at the time of Designation (assuming the effectiveness of such Designation) pursuant to the first paragraph of Section 6.01(e) in an amount (the "Designation Amount") equal to the amount of the Borrower's Investment in such Subsidiary on such date. (ii) Neither the Borrower nor any Restricted Subsidiary shall at any time (x) provide credit support for, subject any of its property or assets (other than the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary, or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary, except for any nonrecourse guarantee given solely to support the pledge by the Borrower or any Restricted Subsidiary of the capital stock of any Unrestricted Subsidiary. For purposes of the 55 foregoing, the Designation of a Subsidiary of the Borrower as an Unrestricted Subsidiary shall be deemed to include the Designation of all of the Subsidiaries of such Subsidiary. (iii) The Borrower may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") only if: (A) no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and (B) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if Incurred at such time, have been permitted to be Incurred for all purposes of this Agreement. (iv) All Designations and Revocations must be evidenced by Board Resolutions of the Borrower, delivered to each holder of Senior Subordinated Notes, certifying compliance with the foregoing provisions. Section 6.02 Mergers; Successor Corporation. (a) Mergers, Sale of Assets, etc. The Borrower shall not consolidate with or merge with or into any other entity and the Borrower shall not and shall not cause or permit any Restricted Subsidiary to, sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of the Borrower's and the Restricted Subsidiaries properties and assets (determined on a consolidated basis for the Borrower and the Restricted Subsidiaries) to any entity in a single transaction or series of related transactions, unless: either (i) the Borrower shall be the Surviving Person or (ii) the Surviving Person (if other than the Borrower) shall be a corporation organized and validly existing under the laws of the United States of America or any State thereof or the District of Columbia or, if any such Restricted Subsidiary was a Foreign Restricted Subsidiary, under the laws of the United States of America or any state thereof or the District of Columbia or the jurisdiction under which such Foreign Restricted Subsidiary was organized, and shall, in any such case, expressly assume by supplemental agreement, the due and punctual payment of the principal of and interest on the Senior Subordinated Notes and the performance and observance of every covenant in this Agreement to be performed or observed on the part of the Borrower; provided, however, that if such transaction results in a Change of Control, the Senior Subordinated Notes shall be prepaid if required pursuant to Section 2.02(b). For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all the properties and assets of one or more Restricted Subsidiaries the Equity Interests of which constitutes all or substantially all the properties and assets of the Borrower shall be deemed to be the transfer of all or substantially all the properties and assets of the Borrower. (b) Guarantors. No Guarantor (other than a Guarantor whose Guarantee is to be released in accordance with the terms of Section 3.03) shall consolidate with or merge with or into another Person, whether or not such Person is affiliated with such Guarantor and whether or not such Guarantor is the Surviving Person, unless (i) the Surviving Person (if other than such Guarantor) is a corporation organized and validly existing under the laws of the United States, any State thereof or the District of Columbia or, if any such Guarantor was a Foreign Restricted Subsidiary, under the laws of the United States of America or any state thereof or the District of 56 Columbia or the jurisdiction under which the Foreign Restricted Subsidiary was organized; (ii) the Surviving Person (if other than such Guarantor) expressly assumes by supplemental indenture all the obligations of such Guarantor under its Guarantees of the Senior Subordinated Notes and the performance and observance of every covenant of the Indenture to be performed or observed by such Guarantor; (iii) at the time of and immediately after such Disposition, no Default or Event of Default shall have occurred and be continuing; and (iv) immediately after giving effect to any such transaction involving the Incurrence by such Guarantor, directly or indirectly, of additional Indebtedness (and treating any Indebtedness not previously an obligation of such Guarantor in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Borrower could Incur, on a pro forma basis after giving effect to such transaction as if it had occurred at the beginning the latest fiscal quarter for which consolidated financial statements of the Borrower are available, at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of Section 6.01(c); provided, however, that this paragraph shall not be a condition to a merger or consolidation of a Guarantor if such merger or consolidation only involves the Borrower and/or one or more other Guarantors. Notwithstanding the foregoing, nothing in this covenant shall prohibit the consolidation or merger with or into or the sale of all or substantially all of the assets or properties of a Guarantor to any other Restricted Subsidiary that is a Guarantor. (c) Successor Corporation Substituted. In the event of any transaction (other than a lease) described in and complying with the conditions listed in Section 6.02(a) and (b) in which the Borrower or a Guarantor, as the case may be, is not the Surviving Person and the Surviving Person is to assume all the Obligations of the Borrower under the Senior Subordinated Notes, this Agreement or of such Guarantor under its Guarantee and this Agreement, as the case may be, pursuant to supplemental agreements, such Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Borrower or such Guarantor, as the case may be, and the Borrower shall be discharged from its Obligations under this Agreement and the Senior Subordinated Notes or such Guarantor shall be discharged from its Obligations under this Agreement and its Guarantee, as the case may be. Section 6.03. Termination of Covenants. The covenants set forth in this Article VI shall terminate and be of not further force or effect upon the Termination Date. ARTICLE VII EVENTS OF DEFAULT Section 7.01. Events of Default. Each of the following shall be an "Event of Default" for purposes of this Indenture: (a) failure to pay principal of the Senior Subordinated Notes when due (whether or not prohibited by the provisions of Article VIII); (b) failure to pay any interest on any Senior Subordinated Notes when due, continued for 30 days or more (whether or not prohibited by the provisions of Article VIII); 57 (c) default in the payment of principal of, or interest on, any Senior Subordinated Notes required to be prepaid by this Agreement (whether or not prohibited by the provisions of Article VIII); (d) failure to perform or comply with any of the provisions of Section 6.02; (e) failure to perform any other covenant or agreement of the Borrower under this Agreement or in the Senior Subordinated Note or of the Guarantors under this Agreement for 30 days or more after written notice to the Borrower by GOF; (f) Default or defaults under the terms of one or more instruments evidencing or securing Indebtedness of the Borrower or any of its Restricted Subsidiaries having an outstanding principal amount of $50,000,00 or more individually or in the aggregate that has resulted in the acceleration of the payment of such Indebtedness or failure by the Borrower or any of its Restricted Subsidiaries to pay principal of at least $50,000,000 when due at the stated maturity of any such Indebtedness and such default or defaults shall have continued after any applicable grace period and shall not have been cured or waived within 10 days after the occurrence thereof; (g) the rendering of a final judgment or judgments (not subject to appeal) against the Borrower or any of its Restricted Subsidiaries in an amount of $50,000,000 or more (net of any amounts covered by reputable and creditworthy insurance companies) which remains undischarged or unstayed for a period of 60 days after the date on which the right to appeal has expired; (h) the Borrower or any Significant Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) admits in writing its inability to pay its debts generally as they become due; (ii) commences a voluntary case or proceeding; (iii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iv) consents or acquiesces in the institution of a bankruptcy or insolvency proceeding against it; (v) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (vi) makes a general assignment for the benefit of its creditors, or takes any action to authorize or effect any of the foregoing; (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Borrower or any Significant Restricted Subsidiary in an involuntary case or proceeding or (ii) appoints a Custodian of the Borrower or any Significant Restricted Subsidiary of the Borrower for all or substantially all of its properties, or orders the liquidation of the Borrower or any Significant Restricted Subsidiary, and, in each case the order or decree remains unstayed and in effect for 60 days; or (j) other than as provided in or pursuant to any Guarantee or this Agreement, the Guarantee of any Guarantor that constitutes a Significant Restricted Subsidiary ceases to be in full force and effect or is declared null and void and unenforceable or found to be invalid or any Guarantor that is a Significant Restricted Subsidiary denies its liability under its Guarantee 58 (other than by reason of a release of such Guarantor from its Guarantee in accordance with the terms of the Indenture and such Guarantee). Section 7.02 Acceleration. If an Event of Default with respect to the Senior Subordinated Notes (other than an Event of Default with respect to the Borrower described in clause (h) of Section 7.01) occurs and is continuing, GOF by notice in writing to the Borrower may declare the unpaid principal of, accrued interest to the date of acceleration on all outstanding Senior Subordinated Notes to be due and payable immediately and, upon any such declaration, such principal amount, accrued interest, notwithstanding anything contained in this Agreement or the Senior Subordinated Notes to the contrary, shall become immediately due and payable; provided, however, that so long as the Credit Agreement shall be in full force and effect, if an Event of Default shall have occurred and be continuing (other than an Event of Default with respect to the Borrower described in clause (h) of Section 7.01), the Senior Subordinated Notes shall not become due and payable until the earlier to occur of (x) five Business Days following delivery of a written notice of such acceleration of the Senior Subordinated Notes to the agent under the Credit Agreement and (y) the acceleration (ipso facto or otherwise) of any Indebtedness under the Credit Agreement. If an Event of Default specified in clause (h) of Section 7.01 with respect to the Borrower occurs, the Senior Subordinated Notes will ipso facto become immediately due and payable without any declaration or other act on the part of GOF. After a declaration of acceleration, but before a judgment or decree of the money due in respect of the Senior Subordinated Notes has been obtained, GOF by written notice to the Borrower may rescind an acceleration and its consequences if all existing Events of Default (other than the, nonpayment of principal of and interest on the Senior Subordinated Notes which has become due solely by virtue of such acceleration) have been cured or waived and if the rescission would not conflict with any judgment or decree. No such rescission shall affect any subsequent Default or impair any right consequent thereto. Section 7.03 Other Remedies. If an Event of Default occurs and is continuing, GOF may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Senior Subordinated Notes or to enforce the performance of any provision of the Senior Subordinated Notes or this Agreement. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. Section 7.04 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 7.04 shall not apply to a suit instituted by GOF for the enforcement or the payment of the principal or interest on any Senior Subordinated Notes on or after the respective due dates expressed in the Senior Subordinated Note. 59 ARTICLE VIII SUBORDINATION Section 8.01 Senior Subordinated Notes Subordinated to Senior Indebtedness. The Borrower covenants and agrees, and GOF by its acceptance thereof likewise covenants and agrees, that the Senior Subordinated Notes shall be issued subject to the provisions of this Article VIII; and each person holding any Senior Subordinated Notes, whether GOF upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that all payments of the principal of and interest on the Senior Subordinated Notes, and all other amounts payable under this Agreement, by the Borrower shall, to the extent and in the manner set forth in this Article VIII, be subordinated and junior in right of payment to the prior payment in full in cash of all amounts payable under Senior Indebtedness. Section 8.02 No Payment on Senior Subordinated Notes in Certain Circumstances. (a) No direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities but including any payment constituting any distribution in respect of any other Indebtedness that is subordinated to the Senior Subordinated Notes) by or on behalf of the Borrower of principal of or interest on the Senior Subordinated Notes, whether pursuant to the terms of the Senior Subordinated Notes, upon acceleration, pursuant to an obligation under Article II to prepay or otherwise, shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any Designated Senior Indebtedness, whether at maturity, on account of mandatory redemption or prepayment, acceleration or otherwise, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Designated Senior Indebtedness. In addition, during the continuance of any non-payment event of default with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be immediately accelerated, and upon receipt by the holders of Senior Subordinated Notes of written notice (a "Payment Blockage Notice") from the holder or holders of such Designated Senior Indebtedness or the trustee or agent acting on behalf of such Designated Senior Indebtedness, then, unless and until such event of default has been cured or waived or has ceased to exist or such Designated Senior Indebtedness has been discharged or repaid in full in cash or the benefits of these provisions have been waived by the holders of such Designated Senior Indebtedness, no direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities) shall be made by or on behalf of the Borrower of principal of or interest on the Senior Subordinated Notes during a period (a "Payment Blockage Period") commencing on the date of receipt of such notice by the holders of Senior Subordinated Notes and ending 179 days thereafter; provided however, that so long as any Indebtedness remains outstanding under the Credit Agreement or any replacement, renewal, refinancing or extension thereof, no Payment Blockage Notice may be initiated to block payment of principal or interest on the Senior Subordinated Notes pursuant to the terms of this Section 8.02(a) except by the Administrative Agent (or similar authorized party) under the Credit Agreement or any replacement, renewal, refinancing or extension thereof. 60 (b) Notwithstanding anything herein or in the Senior Subordinated Notes to the contrary, (x) in no event shall a Payment Blockage Period extend beyond 179 days from the date the Payment Blockage Notice in respect thereof was given, (y) there shall be a period of at least 181 consecutive days in each 360-day period when no Payment Blockage Period is in effect and (z) not more than one Payment Blockage Period may be commenced with respect to the Senior Subordinated Notes during any period of 360 consecutive days. No event of default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period (to the extent the holder of Designated Senior Indebtedness, or trustee or agent, giving notice commencing such Payment Blockage Period had knowledge of such existing or continuing event of default) may be, or be made, the basis for the commencement of any other Payment Blockage Period by the holder or holders of such Designated Senior Indebtedness or the trustee or agent acting on behalf of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such event of default has been cured or waived for a period of not less than 90 consecutive days. (c) In the event that, notwithstanding the foregoing, the Borrower shall have made payment to the holders of Senior Subordinated Notes when such payment is prohibited by Section 8.02(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered by the recipient of such payment (if notice of the conditions prohibiting such payment under Section 8.02(a) has been received by the holders of Senior Subordinated Notes) to, the holders of Designated Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Designated Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that, upon notice from the holders of Senior Subordinated Notes to the holders of Designated Senior Indebtedness that such prohibited payment has been made, the holders of the Designated Senior Indebtedness (or their representative or representatives or a trustee or trustees) notify each of the holders of Senior Subordinated Notes in writing of the amounts then due and owing on the Designated Senior Indebtedness, if any, and only the amounts specified in such notice to each of the holders of Senior Subordinated Notes shall be paid to the holders of Designated Senior Indebtedness. Section 8.03 Payment Over of Proceeds upon Dissolution, Etc. (a) Upon any payment or distribution of assets or securities of the Borrower of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), upon any dissolution or winding-up or total liquidation or reorganization of the Borrower, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Senior Indebtedness shall first be paid in full in cash before any payment is made in respect of the Senior Subordinated Notes (excluding any payment or distribution of Permitted Junior Securities). Before any payment may be made by, or on behalf of, the Borrower of the principal of or interest on the Senior Subordinated Notes upon any such dissolution or winding-up or total liquidation or reorganization, any payment or distribution of assets or securities of the Borrower of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities) payment shall be made by the Borrower or by any receiver, trustee in bankruptcy, liquidation 61 trustee, agent or other Person making such payment or distribution, directly to the holders of the Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their representatives or to the trustee or trustees or agent or agents under any agreement or indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Senior Indebtedness in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. (b) In the event that, notwithstanding the foregoing provision prohibiting such payment or distribution, any payment or distribution of assets or securities of the Borrower of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), shall be paid by the Borrower to the holders of Senior Subordinated Notes at a time when such payment or distribution is prohibited by Section 8.03(a) and before all obligations in respect of Senior Indebtedness are paid in full in cash, such payment or distribution shall be received and held in trust for the benefit of, and shall be paid over or delivered by the recipient of such payment (if notice of the conditions prohibiting such payment under Section 8.03(a) has been received by the holders of Senior Subordinated Notes) to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their respective representatives, or to the trustee or trustees or agent or agents under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of Senior Indebtedness remaining unpaid until all such Senior Indebtedness has been paid in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. (c) The consolidation of the Borrower with, or the merger of the Borrower with or into, another corporation or the liquidation or dissolution of the Borrower following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Section 6.02 shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 8.03 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Section 6.02. Section 8.04 Subrogation. (a) Upon the payment in full in cash of all Senior Indebtedness, or provision for payment, the holders of the Senior Subordinated Notes shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Borrower made on such Senior Indebtedness until the principal of and interest on the Senior Subordinated Notes shall be paid in full in cash; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which such holders of the Senior Subordinated Notes would be entitled except for the provisions of this Article VIII, and no payment over pursuant to the provisions of this Article VIII to the holders of Senior Indebtedness by holders of the Senior Subordinated Notes, as between the Borrower, its creditors other than holders of Senior Indebtedness, and such holders 62 of the Senior Subordinated Notes, be deemed to be a payment by the Borrower to or on account of the Senior Indebtedness. It is understood that the provisions of this Article VIII are and are intended solely for the purpose of defining the relative rights of such holders of the Senior Subordinated Notes, on the one hand, and the holders of the Senior Indebtedness, on the other hand. (b) If any payment or distribution to which the holders of the Senior Subordinated Notes would otherwise have been entitled but for the provisions of this Article VIII shall have been applied, pursuant to the provisions of this Article VIII, to the payment of all amounts payable under Senior Indebtedness, then and in such case, the holders of the Senior Subordinated Notes shall be entitled to receive from the holders of such Senior Indebtedness any payments or distributions received by such holders of Senior Indebtedness in excess of the amount required to make payment in full in cash of such Senior Indebtedness. Section 8.05 Obligations of Borrower Unconditional. (a) Nothing contained in this Article VIII or elsewhere in this Agreement or in the Senior Subordinated Notes is intended to or shall impair, as among the Borrower and GOF, the obligation of the Borrower, which is absolute and unconditional, to pay to GOF and its successors and assigns the principal of and interest on the Senior Subordinated Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Senior Subordinated Notes and creditors of the Borrower other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent GOF and its successors or assigns from exercising all remedies otherwise permitted by applicable law upon default under this Agreement, subject to the rights, if any, under this Article VIII of the holders of the Senior Indebtedness in respect of cash, property or securities of the Borrower received upon the exercise of any such remedy. (b) Without limiting the generality of the foregoing, nothing contained in this Article VIII shall restrict the right of GOF and its successors and assigns to take any action to declare the Senior Subordinated Notes to be due and payable prior to its stated maturity pursuant to Sections 7.01 and 7.02 or to pursue any rights or remedies hereunder; provided, however, that all Senior Indebtedness then due and payable shall first be paid in full in cash before GOF or its successors and assigns are entitled to receive any direct or indirect payment from the Borrower of principal of or interest on the Senior Subordinated Notes. Section 8.06 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets or securities referred to in this Article VIII, the holders of the Senior Subordinated Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the holders of the Senior Subordinated Notes for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Borrower, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article VIII. 63 Section 8.07 Subordination Rights Not Impaired by Acts or Omissions of the Borrower or Holders of Senior Indebtedness. No right of any present or future holders of any Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Borrower or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Borrower with the terms of this Agreement, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. The provisions of this Article VIII are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Indebtedness. Section 8.08 This Article Not to Prevent Events of Default. The failure to make a payment on account of principal of, interest on or other amounts owing in respect of the Senior Subordinated Notes by reason of any provision of this Article VIII shall not be construed as preventing the occurrence of an Event of Default specified in clauses (a), (b) or (c) of Section 7.01. Section 8.09 No Waiver of Subordination Provisions. Without in any way limiting the generality of Section 8.07, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the holders of the Senior Subordinated Notes, without incurring responsibility to the holders of the Senior Subordinated Notes and without impairing or releasing the subordination provided in this Article VIII or the obligations hereunder of the holders of the Senior Subordinated Notes to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Borrower and any other Person. Section 8.10 Acceleration of the Senior Subordinated Notes. If payment of the Senior Subordinated Notes is accelerated because of an Event of Default, the Borrower shall promptly notify holders of the Senior Indebtedness of the acceleration. ARTICLE IX MISCELLANEOUS Section 9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Senior Subordinated Notes, nor consent to any departure by any party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and GOF, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 64 Section 9.02. Notices, Etc. (a) Any notice or demand authorized or required by this Agreement to be given or made shall be sufficiently given or made when and if delivered in person, by telecopier with a confirmation of good transmission, by FedEx or United Parcel Service or by registered or certified U.S. mail, addressed to the office of the party expressly designated by such party as its office for purposes of this Agreement (until otherwise notified in accordance with this Section), as follows: To the Borrower or any Guarantor, to it at: Polymer Group, Inc. 4838 Jenkins Avenue North Charleston, South Carolina 29405 Attention: General Counsel and Chief Financial Officer Telephone: (843) 566-7293 Fax: (843) 747-4092 With a copy to: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: H. Kurt von Moltke, Esq. Facsimile: (312) 861-2200 Telephone: (312) 861-2000 To GOF: MatlinPatterson Global Opportunities Partners LP C/O: MatlinPatterson Global Advisers LLC 520 Madison Avenue New York, NY 10022 Attention: General Counsel and Ramon Betolaza Telephone: (212) 651-9000 Fax: (212) 651-4010 With a copy to: Duncan D. Darrow, Esq. Orrick, Herrington & Sutcliffe LLP 666 Fifth Avenue New York, New York 10103 Telephone: (212) 506-5000 Fax: (212) 506-5151; (b) Unless otherwise specified herein, such notices or other communications shall be deemed effective (a) on the date delivered, if delivered personally, (b) one Business Day after being delivered, if delivered by telecopier with confirmation of good transmission, (c) one 65 Business Day after being sent by Federal Express or United Parcel Service, if sent by Federal Express or United Parcel Service and delivered thereto prior to their deadline for next-day delivery, or (d) seven Business Days after being sent, if sent by registered or certified mail. Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto. Section 9.03. No Waiver; Remedies. No failure on the part of any party to exercise, and no delay in exercising, any right hereunder or under the Senior Subordinated Notes shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 9.04. Costs and Expenses. The Obligors jointly and severally agree to pay on demand all reasonable costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses), of GOF and its successors and assigns in connection with the enforcement (whether through negotiations or in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise) of this Agreement or the Senior Subordinated Notes, including, without limitation, reasonable counsel fees and expenses in connection, with the enforcement of rights under this Section 9.04. Section 9.05. Binding Effect. This Agreement shall become effective when it shall have been executed by the Obligors and GOF and thereafter shall be binding upon and inure to the benefit of the Obligors and GOF and their respective successors and assigns, except that the Borrower shall not have the right to assign or otherwise transfer all or any part of its rights or obligations hereunder or any interest herein, whether by agreement, merger, change of control, by operation of law or otherwise, without the prior written consent of GOF. Section 9.06. Assignments. (a) GOF, and any assignee permitted pursuant to this Agreement, may assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of the Senior Subordinated Note held by it), provided, however, that (i) each such assignment shall be to an Eligible Assignee, and (ii) the parties to each such assignment shall execute and deliver to the Borrower an Assignment and Acceptance, together with any Senior Subordinated Note subject to such assignment. Upon such execution and delivery, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of the assignor hereunder and (y) the assignor shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of the assignor's rights and obligations under this Agreement, the assignor shall cease to be a party hereto). (b) Any Assignment and Acceptance shall contain the provisions set out in Exhibit B of this Agreement, including without limitation the following: (i) other than as provided in such Assignment and Acceptance, the assignor makes no representation or warranty 66 and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the Senior Subordinated Note or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the Senior Subordinated Note; (ii) the assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or the Senior Subordinated Note; (iii) such assignee confirms that it has received a copy of this Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the assignor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it. If GOF or any Assignee wishes to assign the right to repayment arising out of any future drawing under the Letter of Credit, the Assignment and Assumption will so state and will further state the percentage of such rights to repayment that are being assigned and all other agreements and information reasonably required in connection therewith. The parties hereto hereby agree to be bound by, and give full recognition to, such Assignment and Acceptance. (c) The assignor may, in connection with any assignment or proposed assignment pursuant to this Section 9.06, disclose to the assignee or proposed assignee, any information relating to the Borrower furnished to such assignor by or on behalf of the Borrower provided such proposed assignee agrees in writing to be bound by Section 9.12 as if it were such assignor. (d) Upon any assignment of all of a Senior Subordinated Note, upon surrender of such Senior Subordinated Note to the Borrower, the Borrower promptly shall issue, at is sole expense, a new Senior Subordinated Note payable to the assignee. Upon any assignment of a portion of a Senior Subordinated Note, upon surrender of such Senior Subordinated Note to the Borrower, the Borrower promptly shall issue, at its sole expense, one or more new Senior Subordinated Notes in accordance with the instructions of the assignor. Proper provision shall be made in any new Senior Subordinated Notes for the apportionment of the right to repayment arising out of any future drawing under the Letter of Credit, in accordance with the terms of the Assignment and Assumption; provided that in no event shall the aggregate face amount under all notes issued pursuant to this Section 9.06(d) exceed $25,000,000, and, in no event, shall the actual principal amount outstanding under any such notes exceed the aggregate principal amount outstanding immediately prior to such surrender. Section 9.07. Governing Law. This Agreement and the Senior Subordinated Notes shall be governed by, and construed in accordance with, the laws of the State of New York. Section 9.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which 67 when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 9.09. Consent to Jurisdiction. (a) The Obligors hereby irrevocably submit to the jurisdiction of any New York State or Federal court sitting in the City of New York, New York County and any court with jurisdiction to hear appeals from decisions of such courts, in any action or proceeding arising out of or relating to this Agreement or the Senior Subordinated Notes, and the Obligors hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such court. The Obligors hereby irrevocably waive, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Obligors hereby irrevocably consent to the service of copies of any summons and complaint and any other process which may be served in any such action or proceeding by certified mail, return receipt requested, or by delivering a copy of such process to any Obligor, at its address specified in Section 9.02 or by any other method permitted by law. The Obligors agree that a final judgment in any such action or proceeding may be enforced in other jurisdictions by suit on the judgment or by any other manner provided by law. (b) Nothing in this Section 9.09 shall affect the right of any party to serve legal process in any other manner permitted by law or affect the right of any party to bring any action or proceeding against the Borrower or their property in the courts of other jurisdictions. Section 9.10. WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS, AND GOF HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SENIOR SUBORDINATED NOTES, ANY DOCUMENT DELIVERED HEREUNDER OR THEREUNDER, OR THE ACTIONS OF THE OBLIGORS AND GOF IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. Section 9.11. Publicity and Confidentiality. (a) Publicity. The Obligors agree that none of them will make any press release or statement regarding the transactions contemplated hereby without the consent of GOF. Additionally, the Obligors shall not make any statement which is inconsistent with any press release agreed to by GOF. Notwithstanding the foregoing, each of the parties hereto may, in documents required to be filed by it with any regulatory body, make such statements with respect to the transactions contemplated hereby as each may be advised is legally necessary upon advice of its counsel. (b) Confidentiality. Except as otherwise required by law or judicial order or decree or by any governmental regulatory agency or authority, or any self-regulatory organization, GOF will use its best efforts to maintain the confidentiality of all nonpublic information obtained by it hereunder, such efforts being no less than GOF employs with respect to maintaining the confidentiality of similar non-public information about GOF. 68 Section 9.12. Termination. Subject to the repayment by the Borrower of all outstanding amounts, whether in the form of principal, interest or any costs and expenses payable under this agreement and other than Sections 1 (to the extent a definition is used in another section referred to in this Section 9.12), 9.02, 9.04 (to the extent this section is relevant to the other sections referred to in this Section 9.12), 9.11 and this Section 9.12, the provisions of this Agreement shall terminate on the Termination Date. Sections 1 (to the extent a definition is used in another section referred to in this Section 9.12), 9.02, 9.04 (to the extent this section is relevant to the other sections referred to in this Section 9.12), 9.11 and this Section 9.12, shall survive the Termination Date. REMAINDER OF PAGE LEFT INTENTIONALLY BLANK 69 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BORROWER POLYMER GROUP, INC. By:_____________________________________ Name: Title: GOF MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS LP By: MatlinPatterson Global Opportunities Advisers LLC, its Investment Advisor By:_____________________________________ Name: Title: [Execution Page to Senior Subordinated Note Purchase Agreement] THE GUARANTORS PGI POLYMER, INC. PGI EUROPE, INC. PNA CORP. FNA POLYMER CORP. FABRENE CORP. FABRENE GROUP, L.L.C. FIBERTECH GROUP, INC. TECHNETICS GROUP, INC. FIBERGOL CORPORATION CHICOPEE, INC. DOMINION TEXTILE (USA) INC. POLY-BOND INC. LORETEX CORPORATION FNA ACQUISITION, INC. FABPRO ORIENTED POLYMERS, INC. PGI ASSET MANAGEMENT COMPANY PGI SERVICING COMPANY PRISTINE BRANDS CORPORATION POLYIONIX SEPARATION TECHNOLOGIES, INC. BONLAM (S.C.), INC. as Guarantors By:_____________________________________ Name: Title: [Execution Page to Senior Subordinated Note Purchase Agreement] EXHIBIT A LETTER OF CREDIT EXHIBIT B ASSIGNMENT AND ACCEPTANCE Reference is made to the Senior Subordinated Note Purchase Agreement dated as of March 5, 2003 (as amended or modified from time to time, the "Agreement") among POLYMER GROUP, INC., a Delaware corporation (the "Borrower"), each of the entities identified under the caption "GUARANTORS" on the signature pages thereto (individually, a "Guarantor", and, together with the Borrower, the "Obligors") and MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS LP, a Delaware limited partnership ("GOF"). Capitalized terms used herein and not defined shall have the meanings ascribed thereto in the Agreement. The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Agreement as of the date hereof equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Agreement. After giving effect to such sale and assignment, the Assignee's pro rata share of the outstanding Borrowings owing to the Assignee will be as set forth on Schedule 1 hereto. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or the Senior Subordinated Note or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement or the Senior Subordinated Note, or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Agreement or the Senior Subordinated Note or any other instrument or document furnished pursuant thereto; and (iv) attaches the Senior Subordinated Note held by the Assignor and requests that the Borrower exchange such Senior Subordinated Note for a new Senior Subordinated Note payable to the order of the Assignee in an amount equal to the amount of the Assignee's pro rata share of the outstanding Borrowings owing to the Assignee pursuant hereto or new Senior Subordinated Notes payable to the order of the Assignee in an amount equal to the amount of the Assignee's pro rata share owing to the Assignee pursuant hereto and the Assignor in an amount equal to the amount of the Assignor's pro rata share of the outstanding Borrowings owing to the Assignor under the Agreement, respectively, as specified on Schedule 1 hereto. 3. The Assignee (i) confirms that it has received a copy of the Agreement thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Assignor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (iii) confirms that it is an Eligible Assignee; (iv) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Agreement are required to be performed by the Assignor; and (vi) attaches any U.S. Internal Revenue Service forms required under Section 2.05 of the Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Borrower. The effective date for this Assignment and Acceptance (the "Assignment Effective Date") shall be the date of receipt by the Borrower, unless otherwise specified on Schedule 1 hereto. 5. Upon such receipt by the Borrower, as of the Assignment Effective Date, (i) the Assignee shall be a party to the Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of the Assignor thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Agreement. 6. From and after the Assignment Effective Date, the Borrower shall make all payments under the Agreement and the Senior Subordinated Note in respect of the interest assigned hereby (including, without limitation, all payments of principal and interest with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Agreement and the Senior Subordinated Note for periods prior to the Assignment Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York, without reference to the principals of conflicts of law thereof. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. Schedule 1 to Assignment and Acceptance Percentage interest assigned: _________% Aggregate outstanding principal amount of outstanding Borrowings assigned: $__________ Principal amount of Senior Subordinated Note payable to Assignee: $__________ Principal amount of Senior Subordinated Note payable to Assignor: $__________ Assignment Effective Date*: ___________________, 200__ [NAME OF ASSIGNOR], as Assignor By__________________________________ Title: Dated: ____________________, 200__ [NAME OF ASSIGNEE], as Assignee By__________________________________ Title: - ------------------------- * This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to GOF. EXHIBIT C BYLAWS EXHIBIT D CERTIFICATE OF INCORPORATION EXHIBIT E SENIOR SUBORDINATED PROMISSORY NOTE $25,000,000.00 MARCH 5, 2003 FOR VALUE RECEIVED, POLYMER GROUP, INC., a Delaware corporation (the "Maker"), hereby promises to pay to the order of MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS LP, a Delaware corporation (the "Payee"), on the terms set forth below, the sum of TWENTY FIVE MILLION UNITED STATES DOLLARS (U.S. $25,000,000.00), or such lesser amount as equals the sum of all Borrowings, together with interest on the unpaid principal balance of each Borrowing from the date thereof at 10% per annum, payable in cash, semi-annually on January 1 and July 1 of each year. All capitalized terms in this Senior Subordinated Promissory Note (this "Senior Subordinated Note") shall have the same meaning as in the Senior Subordinated Note Purchase Agreement dated as of March 5, 2003 between the Maker and the Payee (the "Agreement"). The unpaid principal balance of, and any and all accrued and unpaid interest on, this Senior Subordinated Note (the "Aggregate Amount") shall be payable in cash, subject to any repayment made by the Maker in accordance with Section 2.03 of the Agreement, at the Maturity Date. If the Events of Default specified in Section 7.01(e) of the Agreement or a Change of Control occurs, the unpaid principal and interest of this Senior Subordinated Note, and all other amounts due hereunder, shall, at the option of the Payee, ipso facto become and be immediately due and payable in cash without any declaration or other act on the part of the Payee. Upon the occurrence of any other Event of Default set forth in Section 7.01, the unpaid principal and interest of this Senior Subordinated Note, and all other amounts due hereunder, shall, at the option of the Payee upon notice to the Borrower, become and be immediately due and payable in cash. During the period following the occurrence of an Event of Default until either (a) such Event of Default is remedied to the satisfaction of the Payee, or (b) the principal and interest of this Senior Subordinated Note is paid, default interest at a rate of 2% per annum will be payable on the principal amount in addition to the existing 10% rate. The Borrower shall, to the extent lawful, pay interest on overdue interest at the rate of 12% per annum. The Maker agrees to pay on demand all reasonable costs and expenses, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel to the Payee in connection with the enforcement, collection, protection or preservation (whether through negotiations, legal proceedings or otherwise) of any of its rights under this Senior Subordinated Note. The Maker hereby waives demand, presentment for payment, notice of extensions, nonpayment and protest, and agrees that any extensions or renewals hereof shall not affect its liability, whether has notice of such extensions or renewals or not, and waives any and all defenses and counterclaims with respect to this Note Senior Subordinated. No waiver of any right granted hereunder or amendment hereto shall be effective unless expressly waived or agreed to in writing by the party whose waiver or agreement to such amendment is alleged. This Senior Subordinated Note and the Agreement constitute the entire agreement of the parties with respect to the matters contained herein and therein. The provisions hereof shall bind and inure to the benefit of the respective successors and assigns of the Maker and the Payee. This Senior Subordinated Note shall be governed by, and interpreted under, the laws of the State of New York without giving effect to the principles of conflict of laws. IN WITNESS WHEREOF, the Maker has caused this instrument to be duly executed as of the date first written above. POLYMER GROUP, INC. By: __________________________ Name: Title: EX-7 7 efc3-0412_exh7.txt MATLIN PATTERSON POLYMER Exhibit 7 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF SOUTH CAROLINA In re: ) Chapter 11 ) POLYMER GROUP, INC. et al.,1 ) Case No. 02-5773 (W) ) (Jointly Administered) Debtors. ) - ------------------------------------------------------------------- DEBTORS' JOINT SECOND AMENDED MODIFIED PLAN OF REORGANIZATION - ------------------------------------------------------------------- James A. Stempel George B. Cauthen Jonathan P. Friedland District Court ID No. 81 Roger J. Higgins NELSON MULLINS RILEY Ryan Nadick & SCARBOROUGH, L.L.P. Ryan B. Bennett Keenan Building, Third Floor KIRKLAND & ELLIS 1330 Lady Street 200 East Randolph Drive P.O. Box 11070 (29211) Chicago, Illinois 60601 Columbia, SC 29201 Telephone: (312) 861-2000 Telephone: (803) 799-2000 Facsimile: (312) 861-2200 Facsimile: (803) 256-7500 Co-Counsel to Polymer Group, Inc., et al. Dated: January __, 2003 - --------------------------- 1 The Debtors are the following entities: Polymer Group, Inc., PGI Polymer, Inc., PGI Europe, Inc., Chicopee, Inc., FiberTech Group, Inc., Technetics Group, Inc., Fibergol Corporation, Fabrene Corp., Fabrene Group LLC, PNA Corp., FNA Polymer Corp., FNA Acquisition, Inc., Loretex Corporation, Dominion Textile (USA) Inc., Poly-Bond Inc., FabPro Oriented Polymers, Inc., PGI Asset Management Company, PGI Servicing Company, Pristine Brands Corporation; PolyIonix Separation Technologies, Inc., Bonlam (S.C.), Inc. TABLE OF CONTENTS ARTICLE I. DEFINITIONS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW....................................................1 A. Rules of Interpretation, Computation of Time and Governing Law...1 B. Defined Terms....................................................1 ARTICLE II. TREATMENT OF UNCLASSIFIED CLAIMS................................16 A. DIP Facility Claims.............................................16 B. Administrative Expense Claims...................................16 C. Compensation and Reimbursement Claims of Professionals..........16 D. Priority Tax Claims.............................................16 ARTICLE III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS.......................................................16 A. Summary.........................................................16 B. Classification and Treatment of Claims Against and Equity Interests in the Debtors........................................17 ARTICLE IV. ACCEPTANCE OR REJECTION OF THE AMENDED MODIFIED PLAN............20 A. Voting Classes..................................................20 B. Acceptance by Impaired Classes..................................20 C. Presumed Acceptance of Amended Modified Plan....................21 D. Presumed Rejection of Amended Modified Plan.....................21 E. Non-Consensual Confirmation.....................................21 ARTICLE V. MEANS FOR IMPLEMENTATION OF THE AMENDED MODIFIED PLAN............21 A. Continued Corporate Existence...................................21 B. Corporate Governance, Corporate Action, and Directors and Officers........................................................21 C. Cancellation of Securities And Agreements.......................24 D. Issuance of New Polymer Common Stock and New Polymer Notes......24 E. Revesting Of Assets; Releases of Liens..........................25 F. Sources of Cash for Amended Modified Plan Distribution..........25 G. Exit Revolving Credit Facility..................................25 H. New Investment..................................................25 I. Exit Letters of Credit..........................................26 J. Compensation And Benefit Programs...............................27 K. Restructuring Transactions......................................27 L. Limited Substantive Consolidation...............................27 ARTICLE VI. EXECUTORY CONTRACTS AND UNEXPIRED LEASES........................28 A. Assumption and Rejection of Executory Contracts and Unexpired Leases..........................................................28 B. Rejection Claims; Cure of Defaults..............................28 C. Indemnification and Reimbursement Obligations...................28 ARTICLE VII. PROVISIONS GOVERNING DISTRIBUTIONS.............................29 A. Manner of Payment...............................................29 B. Distributions for Claims Allowed as of the Effective Date.......29 C. Delivery of Distributions and Undeliverable or Unclaimed Distributions...................................................29 D. Record Date and Distribution Record Date........................30 E. Timing and Calculation of Amounts to be Distributed.............30 F. De Minimis and Fractional Distributions.........................30 G. Setoffs.........................................................30 H. Surrender of Canceled Instruments or Securities.................31 I. Lost, Stolen, Mutilated or Destroyed Instruments or Securities..31 J. Preservation of Subordination Rights............................31 i ARTICLE VIII. PROCEDURES FOR TREATMENT OF DISPUTED, CONTINGENT, AND UNLIQUIDATED CLAIMS...........................................32 A. Prosecution of Objections to Claims.............................32 B. Estimation of Claims............................................32 C. Payments and Distributions on Disputed Claims...................32 D. Allowance of Claims.............................................32 ARTICLE IX. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THIS AMENDED MODIFIED PLAN...........................................33 A. Conditions Precedent to Confirmation............................33 B. Conditions Precedent to Consummation............................33 C. Conditions Precedent to Closing of New Investment...............33 D. Waiver of Conditions Precedent..................................34 E. Effect of Non-Occurrence of Consummation........................34 ARTICLE X. RELEASE, INJUNCTIVE AND RELATED PROVISIONS.......................34 A. Certain Mutual Releases.........................................34 B. Limited Releases by Holders of Equity Interests and Claims......35 C. Preservation of Causes of Action................................35 D. Exculpation.....................................................37 E. Injunction......................................................37 F. Discharge of Claims and Termination of Equity Interests.........37 ARTICLE XI. RETENTION OF JURISDICTION.......................................37 ARTICLE XII. MISCELLANEOUS PROVISIONS.......................................38 A. Dissolution of Committee........................................38 B. Payment of Statutory Fees.......................................38 C. Fees and Expenses...............................................38 D. Maintenance of Director and Officer Liability Insurance.........39 E. Discharge of Debtors............................................39 F. Effectuating Documents, Further Transactions and Corporate Action..........................................................39 G. Modification of Amended Modified Plan...........................39 H. Revocation of Amended Modified Plan.............................40 I. Successors and Assigns..........................................40 J. Reservation of Rights...........................................40 K. Section 1146 Exemption..........................................40 L. Further Assurances..............................................40 M. Term of Existing Injunctions or Stays...........................40 N. Post Effective Date Fees and Expenses...........................41 O. Severability....................................................41 P. Conflicts.......................................................41 Q. Notices.........................................................41 R. Closing of Cases................................................43 -ii- - ------------------------------------------------------------------- DEBTORS' JOINT AMENDED MODIFIED PLAN OF REORGANIZATION - ------------------------------------------------------------------- Pursuant to chapter 11 of the Bankruptcy Code, Polymer Group, Inc. and its Filing Subsidiaries (as defined herein), debtors and debtors in possession in the above-captioned and numbered cases, hereby respectfully propose the following Joint Amended Modified Plan of Reorganization (the "Amended Modified Plan"). ARTICLE I. DEFINITIONS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW A. Rules of Interpretation, Computation of Time and Governing Law(2) 1. For purposes of this Amended Modified Plan: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, shall include both the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and the neuter gender; (b) any reference in this Amended Modified Plan to a contract, instrument, release, Indenture or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (c) any reference in this Amended Modified Plan to an existing document or exhibit Filed, or to be Filed, shall mean such document or exhibit, as it may have been or may be amended, modified or supplemented; (d) unless otherwise specified, all references in this Amended Modified Plan to Sections, Articles and Exhibits are references to Sections, Articles and Exhibits of or to this Amended Modified Plan; (e) the words "herein" and "hereto" refer to this Amended Modified Plan in its entirety rather than to a particular portion of this Amended Modified Plan; (f) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of, or to affect the interpretation of, this Amended Modified Plan; (g) the rules of construction set forth in section 102 of the Bankruptcy Code shall apply; and (h) any term used in capitalized form in this Amended Modified Plan that is not defined herein but that is defined in the Bankruptcy Code or the Bankruptcy Rules shall have the meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as the case may be. 2. In computing any period of time prescribed or allowed by this Amended Modified Plan, the provisions of Fed. R. Bankr. P. 9006(a) shall apply. 3. Except to the extent that the Bankruptcy Code or the Bankruptcy Rules are applicable, and subject to the provisions of any contract, instrument, release, Indenture or other agreement or document entered into in connection with this Amended Modified Plan, the rights and obligations arising under this Amended Modified Plan shall be governed by, and construed and enforced in accordance with, the laws of the State in which the Bankruptcy Court resides, without giving effect to the principles of conflict of laws thereof. B. Defined Terms Unless the context otherwise requires, as used in this Amended Modified Plan, the following terms shall have the respective meanings specified below: 1. "8 3/4% Indenture" means that certain Indenture dated March 1, 1998, between Harris Trust and Savings Bank (predecessor to The Bank of New York), as indenture trustee, and Polymer. - -------------- 2 Capitalized terms not defined in Article I.A. shall have the meaning ascribed in Article I.B. herein. 2. "8 3/4% Senior Subordinated Notes" means the 8 3/4% Series B Senior Subordinated Notes due in 2008 issued by Polymer pursuant to the 8 3/4% Indenture in the original principal amount of $200 million and guaranteed by all of the Debtors other than Polymer. 3. "8 7/8% Dominion Notes" means the 8 7/8% notes due 2003 issued by Dominion pursuant to a November 1, 1993 Indenture. 4. "9 1/4% Dominion Notes" means the 9 1/4% notes due 2006, issued by Dominion pursuant to an April 1, 1996 Indenture. 5. "9% Indenture" means that certain Indenture dated July 1, 1997, between Harris Trust and Savings Bank (predecessor to the Bank of New York), as indenture trustee, and Polymer. 6. "9% Senior Subordinated Notes" means the Series B 9% Senior Subordinated Notes due in 2007 issued by Polymer in the original principal amount of $400 million pursuant to the 9% Indenture and guaranteed by all of the Debtors other than Polymer. 7. "Accrued Professional Compensation" means, at any given moment: (a) all accrued fees (including but not limited to success fees) for services rendered by all Professionals in the Chapter 11 Cases that the Bankruptcy Court has not yet awarded as compensation, either pursuant to an interim order or a Final Order; and (b) all expenses incurred by all Professionals in the Chapter 11 Cases that the Bankruptcy Court has not awarded as reimbursement, either pursuant to an interim order or a Final Order. 8. "Adequate Protection Obligations" means any and all security interests, liens and/or superpriority Allowed Claims granted to the Prepetition Agent and/or Senior Lenders pursuant to the DIP Credit Agreement and Final Order (I) authorizing Debtors to (A) Obtain Post-Petition Financing pursuant to 11 U.S.C. ss.ss.105, 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3) and 364(d)(1); and (B) Utilize Cash Collateral pursuant to 11 U.S.C. ss.ss.105, 361, 362, 363; and (II) Granting Adequate Protection to Prepetition Secured Lenders pursuant to 11 U.S.C. ss.ss.105, 361, 362 and 363. 9. "Administrative Expense Claim" means any Claim for costs and expenses of administration of the Chapter 11 Cases under sections 503(b), 507(b) or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses of preserving the Estates and operating the businesses of the Debtors (such as wages, salaries or commissions for services and payments for goods and other services and leased premises) incurred after the Petition Date; (b) compensation for legal, financial advisory, accounting and other services and reimbursement of expenses awarded or allowed under section 330(a) or 331 of the Bankruptcy Code; (c) all fees and charges assessed against the Estates under Chapters 123 of Title 28 of the United States Code, 28 U.S.C. ss.ss.1911-30; (d) Adequate Protection Obligations; (e) obligations designated as Allowed Administrative Expense Claims pursuant to a Final Order. 10. "Affiliate" means any Person that is an "Affiliate" of any of the Debtors within the meaning of section 101(2) of the Bankruptcy Code. 11. "Allowed" means, with respect to any Claim or Equity Interest, as of the date of determination, except as otherwise provided herein: (a) a Claim or Equity Interest that has been scheduled by the Debtors in their schedules of liabilities or interests as other than disputed, contingent or unliquidated and as to which neither the Debtors nor any other party in interest has Filed an objection or request for estimation by the Effective Date; (b) a Claim or Equity Interest that either (i) is evidenced by a timely-filed Proof of Claim or Equity Interest and is not a Disputed Claim or Disputed Equity Interest after the deadline for objecting to or requesting an estimation of such a Claim or Equity Interest has expired; or (ii) has been allowed by an order of the Bankruptcy Court; (c) a Claim or Equity Interest that is allowed in any contract, instrument, Indenture or other agreement entered into or assumed in connection with this Amended Modified Plan; or (d) a Claim or Equity Interest that is allowed pursuant to the terms of this Amended Modified Plan. 12. "Amended Modified Disclosure Statement" means the Amended Modified Disclosure Statement with respect to this Amended Modified Plan, as it may be amended, supplemented or modified 2 from time to time, prepared by the Debtors and distributed in accordance with sections 1125, 1126(b) and/or 1145 of the Bankruptcy Code, Fed. R. Bankr. P. 3018 and/or other applicable law. 13. "Amended Modified Plan" means this Debtors' Joint Second Amended Modified Plan of Reorganization and any and all exhibits thereto, as may be modified, amended or supplemented from time to time. 14. "Amended Modified Plan Supplement" means a separate volume, to be Filed, containing, among other things, the Indenture governing the Convertible Notes, Series A Warrants and Series B Warrants. The Amended Modified Plan Supplement (containing drafts or final versions of the foregoing documents) shall be Filed as early as practicable (but in no event later than ten (10) Business Days) prior to the commencement of the Confirmation Hearing, or on such other date as the Bankruptcy Court may establish. 15. "Ballot" or "Ballots" means the forms accompanying the Amended Modified Disclosure Statement upon which the Holders of Impaired Claims and Impaired Equity Interests shall indicate their acceptance or rejection of this Amended Modified Plan. 16. "Balloting Order" means the order entered on December 3, 2002, (a) Approving Solicitation Procedures; (b) Approving the Form and Manner of Notice of the Confirmation Hearing; and (c) Scheduling the Hearing on Confirmation of the Amended Modified Plan of Reorganization. 17. "Bank Term Sheet" means the Summary of Terms and Conditions, dated as of May 8, 2002, as amended by the Supplement to Summary Terms and Conditions, the terms of which are supported by the Steering Committee of Senior Lenders, which shall be attached as Exhibit G to the Amended Modified Disclosure Statement. 18. "Bankruptcy Code" means Title I of the Bankruptcy Reform Act of 1978, as amended from time to time, as set forth in sections 101 et seq. of Title 11 of the United States Code, and applicable portions of Titles 18 and 28 of the United States Code. 19. "Bankruptcy Court" means the United States Bankruptcy Court for the District of South Carolina (Columbia Division) or any other court having jurisdiction of the Chapter 11 Cases. 20. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as amended from time to time, as applicable to the Chapter 11 Cases under 28 U.S.C. ss. 2075, and Local Rules of the Bankruptcy Court, as amended from time to time. 21. "Bar Date" means September 4, 2002, the last date on which Creditors could have timely filed Proofs of Claim or Equity Interests in the Chapter 11 Cases, or such other date as may be set by the Bankruptcy Court. 22. "Beneficial Holder" means the Person or Entity holding the beneficial interest in a Claim or Equity Interest. 23. "Bonlam (S.C.)" means Bonlam (S.C.), Inc., a South Carolina corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 24. "Boyd" means James G. Boyd. 25. "Business Day" means a day other than a Saturday, a Sunday or any other day on which commercial banks in New York, New York are required or are authorized to close by law or executive order. 26. "Cash" means legal tender of the United States of America or the equivalent thereof, including bank deposits, checks or similar instruments. 3 27. "Cash Equivalents" means equivalents of Cash in the form of readily marketable securities or instruments issued by a Person other than the Debtors, including, without limitation, readily marketable direct obligations of, or obligations guaranteed by, the United States of America, commercial paper of domestic corporations carrying a Moody's rating of "A" or better, or equivalent rating of any other nationally recognized rating service, or interest bearing certificates of deposit or other similar obligations of domestic banks or other financial institutions having a shareholders' equity or capital of not less than one hundred million dollars ($100,000,000) having maturities of not more than one (1) year, at the then best generally available rates of interest for like amounts and like periods. 28. "Causes of Action" means all Claims, actions, choses in action, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, third-party claims, counterclaims and cross claims (including, but not limited to, all Claims in any avoidance, recovery, subordination or other actions against Insiders and/or any other Persons under the Bankruptcy Code, including sections 510, 542, 543, 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code) of the Debtors, the Debtors-in-Possession and/or the Estates (including, but not limited to, those actions listed in the Amended Modified Disclosure Statement and the Amended Modified Plan Supplement) that are or may be pending on the Effective Date or instituted by the Reorganized Debtors after the Effective Date against any Person based on law or equity, including, but not limited to, under the Bankruptcy Code, whether direct, indirect, derivative, or otherwise and whether asserted or unasserted, known or unknown. 29. "Change of Control Agreement" means, with respect to Zucker and Boyd, those certain letter agreements, each of which is dated May 22, 1998, as amended on May 11, 2002. 30. "Chapter 11 Cases" means the above-captioned cases commenced by the Debtors under chapter 11 of the Bankruptcy Code on the Petition Date, styled In re Polymer Group, Inc., et al., Case No. 02-5773(W) (Bankr. D.S.C. 2002) (Jointly Administered), currently pending before the Bankruptcy Court. 31. "Chicopee" means Chicopee, Inc., a Delaware corporation and a debtor and debtor-in-possession in the Chapter 11 Cases. 32. "Chicopee Sale" means the sale of the warehouse in Dayton, New Jersey, owned by Chicopee. 33. "Chicopee Sale Order" means the Order of the Bankruptcy Court dated October 28, 2002 approving the Chicopee Sale. The Confirmation Order shall constitute the "further order" contemplated by the Chicopee Sale Order and shall contain provisions permitting the release from escrow of the Escrow Funds (as defined in the Chicopee Sale Order) and application thereof in accordance with the Bank Term Sheet. 34. "Chicopee Sale Proceeds" means 100% of the Net Proceeds (as defined in the Chicopee Sale Order) of the Chicopee Sale. 35. "Claim" means a claim, as defined in section 101(5) of the Bankruptcy Code, whether or not asserted by a Proof of Claim or otherwise in the Chapter 11 Cases. 36. "Claims Objection Deadline" means the date that is 60 days after the Effective Date unless otherwise extended by an order of the Bankruptcy Court. 37. "Class" means a category of Holders of Claims or Equity Interests, as described in Article III of this Amended Modified Plan. 38. "Class A Common Stock" means the shares of Class A Common Stock, par value $.01 per share of New Polymer (of which, 9.6 million shares, less the number of Class C Common Stock shall be issued on the Effective Date) containing terms and conditions to be described in the Amended Modified Plan Supplement. 4 39. "Class B Common Stock" means the 400,000 shares of Class B Common Stock, par value $.01 per share, representing 4% of the New Polymer Common Stock issued on the Effective Date, containing the terms and conditions described in the Amended Modified Plan Supplement, together with any additional shares subsequently issued in respect of the limited anti-dilution provisions of the Class B Common Stock relating to the issuance of Class A Common Stock upon the conversion of some or all of the Convertible Notes. 40. "Class C Common Stock" means the shares of Class C Common Stock, par value $.01 per share, authorized to be issued by New Polymer (which shall be issued on the Effective Date as part of the 9.6 million shares of Class A and Class C Common Stock) to the Electing Non-GOF Holders, who shall transfer, on the Effective Date, all such shares of Class C Common Stock to the SPE in exchange for their respective Pro Rata shares of SPE Equity and SPE Notes. The Class C Common Stock shall contain the terms and conditions described in the Amended Modified Plan Supplement. 41. "Class D Common Stock" means the 498,688 shares of Class D Common Stock, par value $.01 per share, authorized to be issued by New Polymer upon the exercise of the Series A Warrants, containing the terms and conditions described in the Amended Modified Plan Supplement, together with any additional shares subsequently issued in respect of the limited anti-dilution provisions of the Series A Warrants. 42. "Class E Common Stock" means the 523,557 shares of Class E Common Stock, par value $.01 per share, authorized to be issued by New Polymer upon the exercise of the Series B Warrants, containing the terms and conditions described in the Amended Modified Plan Supplement, together with additional shares subsequently issued in respect of the limited anti-dilution provisions of the Series B Warrants. 43. "Committee" means the official committee of unsecured creditors appointed in the Chapter 11 Cases by the United States Trustee on May 17, 2002. 44. "Committee Members" means any current or former members of the Committee. 45. "Confirmation" means entry on the docket by the clerk of the Bankruptcy Court of the Confirmation Order. 46. "Confirmation Date" means January 3, 2003, the date of entry on the docket by the clerk of the Bankruptcy Court of the Original Confirmation Order. 47. "Confirmation Hearing" means the hearing to consider confirmation of this Amended Modified Plan under section 1128 of the Bankruptcy Code. 48. "Confirmation Order" means the order entered by the Bankruptcy Court on January __, 2003, confirming this Amended Modified Plan, as may be supplemented, modified, amended or superseded by further order of the Bankruptcy Court, and which supersedes the Original Confirmation Order; provided, however, that the term "Confirmation Order" also includes the Original Confirmation Order as appropriate. 49. "Consummation" means the occurrence of the Effective Date. 50. "Convertible Notes" means the 10% convertible subordinated notes due December 2007, to be issued by New Polymer to the Participating Allowed Class 4 Claim Holders in exchange for the New Investment and which shall be issued pursuant to the Indenture attached as an exhibit to the Amended Modified Plan Supplement in an aggregate principal amount equal to $50 million. 51. "Critical Business Relations Claims" means all prepetition claims of Critical Business Relations. 52. "Critical Business Relations" means any vendor who provided services or goods on terms to the Debtors during the pendency of these Chapter 11 Cases and with whom the Reorganized Debtors intend to do business subsequent to the Effective Date. 5 53. "CSFB" means Credit Suisse First Boston. 54. "D&O Releasees" means all of the past and present directors, current Management, and Professionals of the Debtors and their Affiliates in each case in their capacity as such. 55. "Debtors" or "Debtors-in-Possession" means: Polymer, PGI Polymer, PGI Europe, Chicopee, FiberTech, Technetics, Fibergol, Fabrene, Fabrene Group, PNA, FNA, FNA Acquisition, Loretex, Dominion, Poly-Bond, FabPro, PGI Asset Management, PGI Servicing, Pristine; PolyIonix, and Bonlam (S.C.). 56. "DIP Agent" means J.P. Morgan Chase Bank, in its capacity as Administrator and Collateral Agent under the DIP Facility. 57. "DIP Credit Agreement" means the Revolving Credit and Guaranty Agreement, dated as of May 30, 2002, among Polymer, the DIP Lenders and JP Morgan Chase Bank, as Administrative, Documentation and Collateral Agent. 58. "DIP Facility" means the commitment secured by the Debtors for the debtors-in-possession financing from the DIP Lenders in the original principal amount of $125 million. 59. "DIP Facility Claim" means a Claim arising under or as a result of the DIP Facility. 60. "DIP Lenders" mean the lenders that are party to the DIP Credit Agreement. 61. "Disputed" means, with respect to any Claim or Equity Interest, as of the date of determination, any Claim or Equity Interest: (a) listed on the Schedules as unliquidated, disputed or contingent, unless and until it is Allowed; (b) as to which any Debtor or any other party-in-interest has Filed a timely objection or request for estimation in accordance with the Bankruptcy Code and the Bankruptcy Rules, which objection or request for estimation has not been withdrawn or determined by an order of the Bankruptcy Court; (c) as to which the deadline for filing objections has not passed (whether or not an objection has been filed), unless and to the extent such Claim or Equity Interest has been Allowed pursuant to an order of the Bankruptcy Court; or (d) is otherwise disputed by any of the Debtors or any other party in interest in accordance with applicable law, which dispute has not been withdrawn or determined by an order of the Bankruptcy Court. 62. "Distribution Notification Date" means the fortieth (40th) day following the Confirmation Date. 63. "Dominion" means Dominion Textile (USA) Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 64. "Dominion Notes" means, collectively, the 8 7/8% Dominion Notes and the 9 1/4% Dominion Notes. 65. "Dominion Note Claims" means, collectively, all Claims arising from or related to the Dominion Notes. 66. "Effective Date" means the date selected by the Debtors which is the later of (i) 45 days after the Confirmation Date; or (ii) three (3) business days after all conditions specified in Article IX.B herein have been (x) satisfied or (y) waived in accordance with Article IX.D herein; but, in no event later than February 21, 2003, unless waived in writing by the Prepetition Agent; provided, however, that the Prepetition Agent, on behalf of the Senior Lenders, will agree to waive compliance with this February 21, 2003, deadline to the extent that the Debtors make payments of current interest due under the Prepetition Credit Facility at rates set in the Bank Term Sheet (together with the applicable margins set forth in the Bank Term Sheet as applicable to the Restructured Facilities); provided, further, that the Effective Date shall in no event occur later than 90 days after the Confirmation Date unless waived in writing by GOF and the Prepetition Agent (on behalf of the Senior Lenders). 6 67. "Electing Non-GOF Holders" means Non-GOF Holders who elect to receive their Pro Rata shares of Class C Common Stock in satisfaction of their respective Allowed Class 4 Claims. On the Effective Date, Electing Non-GOF Holders shall be deemed to have transferred all of such shares of Class C Common Stock to the SPE in exchange for their Pro Rata shares of SPE Equity and SPE Notes. In order to be an Electing Non-GOF Holder, a Non-GOF Holder must be a Qualified Institutional Buyer and make a representation to that effect. 68. "Entity" means an "entity" within the meaning of section 101(15) of the Bankruptcy Code. 69. "Equity Interest" means any equity interest in any of the Debtors including, but not limited to, all issued, unissued, authorized or outstanding shares of stock or other Equity Security together with any warrants, options or contractual rights to purchase or acquire such interests at any time and all rights arising with respect thereto. 70. "Equity Releasees" means the Holders of Equity Interests in the Debtors, solely in their capacity as Holders of Equity Interests, and their attorneys, financial advisors, accountants, investment bankers, agents, and other representatives (solely in connection with their representation of such Holders in respect of their Equity Interests). 71. "Equity Security" means a (i) share in a corporation, whether or not denominated "stock" or security; (ii) an interest of a limited partner in a limited partnership; (iii) an interest in a general partnership; or (iv) a warrant or right (other than a right to consent) to purchase, sell or subscribe to a share, security or interest of the kind specified in (i), (ii) or (iii) of this definition. 72. "Estates" means the collective estates of each of the Debtors created by section 541 of the Bankruptcy Code on and after the Petition Date. 73. "Exit Facility" means the Restructured Facilities and the Exit Revolving Credit Facility. 74. "Exit Letters of Credit" means the letters of credit in the aggregate amount of $25 million to be issued or caused to be issued by GOF in favor of the Postpetition Agent to support amortization payments due between the Effective Date and December 31, 2004, under the Restructured Facilities pursuant to the Bank Term Sheet, which amount shall not exceed $25 million. 75. "Exit Revolving Credit Facility" means that certain five-year revolving credit facility in the amount of $50 million to be provided to the Debtors as contemplated by the Bank Term Sheet and pursuant to the terms and conditions of a Commitment Letter (which shall be consistent in all respects to those of the Bank Term Sheet) to be executed before the Confirmation Date and subject to definitive documentation to be filed as part of the Amended Modified Plan Supplement. 76. "FabPro" means FabPro Oriented Polymers, Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 77. "Fabrene Group" means Fabrene Group LLC, a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 78. "Fabrene" means Fabrene Corp., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 79. "Fibergol" means Fibergol Corporation, a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 80. "FiberTech" means FiberTech Group, Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 81. "File" means to file with the Clerk of the Bankruptcy Court in the Chapter 11 Cases in accordance with the Bankruptcy Code and Bankruptcy Rules. 7 82. "Filing Subsidiaries" means, collectively, PGI Polymer, PGI Europe, Chicopee, FiberTech, Technetics, Fibergol, Fabrene, Fabrene Group, PNA, FNA, FNA Acquisition, Loretex, Dominion, Poly-Bond, FabPro, PGI Asset Management, PGI Servicing, Pristine, PolyIonix, Bonlam (S.C.). 83. "Final Decree" means the decree contemplated under Fed. R. Bankr. P. 3022. 84. "Final Order" means an order of the Bankruptcy Court (i) as to which the time to appeal, petition for certiorari or move for reargument, reconsideration or rehearing has expired and as to which no appeal, petition for certiorari or other proceedings for reargument, reconsideration or rehearing is pending; or (ii) if an appeal, writ of certiorari, reargument or rehearing thereof has been sought, such order has been affirmed by the highest court to which such order was appealed or from which certiorari was sought, reargument, reconsideration or rehearing has been denied or resulted in no modification of such order, and the time to take any further appeal, petition for certiorari or move for reargument, reconsideration or rehearing has expired; provided, however, that a possibility that a motion under Rule 59 or 60 of the Federal Rules of Civil Procedure or any analogous Bankruptcy Rule may be, but has not been, Filed with respect to such order, shall not cause such order not to be a Final Order. 85. "FNA Acquisition" means FNA Acquisition Group, a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 86. "FNA" means FNA Polymer Corp, a North Carolina corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 87. "General Unsecured Claim" means any unsecured Claim against one or more of the Debtors (including the Dominion Note Claims and the GK/Ives Claims) that is not a Priority Tax Claim, Priority Non-Tax Claim, Administrative Expense Claim, Senior Lender Claim, Critical Business Relations Claim, Intercompany Claim or Other Securities Claim and Interest, and shall include, except as set forth above in this definition, all unsecured claims not otherwise classified that are not cured, paid, released or waived pursuant to this Amended Modified Plan, assumed by a Debtor pursuant to this Amended Modified Plan or agreements incorporated into this Amended Modified Plan, or classified in any other class, including, without limitation, claims (a) for goods sold and/or services rendered, (b) for monies lent, (c) based upon guarantees of performance or payment of the obligations or duties of any Person, (d) for tort liability, (e) for environmental remediation, (f) of Governmental Units under any applicable unclaimed property or escheat laws, (g) of Governmental Units for taxes, assessments, penalties or charges which are not Tax Claims, (h) for contribution, reimbursement or indemnity, (i) for fines, penalties or other assessments; (j) for the portion of any Claim supported directly or indirectly by a letter of credit issued for the account of a Debtor in excess of the amount available under such letter of credit; and (k) representing the undersecured portion of any claim that is otherwise a Secured Claim. 88. "GK/Ives" means, together, Dr. Guillermo Kraves and the Ives Company Limited. 89. "GK/Ives Claims" means those Claims against the Debtors of GK/Ives arising from that certain Purchase and Option Agreement, dated as of July 1, 2000, (and any other agreements, if any, referenced by GK/Ives in its proofs of claim) as evidenced in certain proofs of claim as timely filed on December 23, 2002, in the aggregate amount of $18,590,813.06, as the same may be amended or modified (with all rights of the Debtors and parties in interest to object to any proposed amendment or modification being reserved). 90. "GOF" means MatlinPatterson Global Opportunities Partners L.P. 91. "GOF Board Members" means the five members of the New Polymer Board of Directors who shall be appointed by GOF pursuant to this Amended Modified Plan. 92. "Holder" means the Beneficial Holder of a Claim or Equity Interest. 8 93. "Impaired" means, with respect to a Claim or an Equity Interest, a Claim or an Equity Interest with respect to which this Amended Modified Plan alters the legal, equitable or contractual rights to which such Claim or Equity Interest entitles its Holder. 94. "Impaired Claim" means a Claim classified in an Impaired Class. 95. "Impaired Class" means each of Classes 2, 4 and 6, as set forth in Article III herein. 96. "Impaired Equity Interest" means an Equity Interest that is classified in an Impaired Class. 97. "Intercompany Claim" means any Claim held by any direct or indirect subsidiary of Polymer that is not a Filing Subsidiary against any Debtor or by any Debtor against any other Debtor, including, but not limited to a Claim that was: (a) incurred after the Petition Date; or (b) incurred as a result of the extension of credit in connection with the purchase of goods or services in the ordinary course of business. 98. "Intercompany Interests" means any and all Equity Securities of a Debtor that are owned by another Debtor as of the Record Date. 99. "Lien" means any charge against or interest in property to secure payment of a debt or performance of an obligation, including a right of set off to secure payment of a debt or performance of an obligation. 100. "Loretex" means Loretex Corporation, a New York corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 101. "Management" means, collectively, Zucker, Boyd and all other officers covered by the director and officer liability insurance policies referred to in Article XII.D hereof. 102. "Master Ballots" means the forms accompanying the Amended Modified Disclosure Statement upon which the Nominees of the Beneficial Holders of the Senior Subordinated Notes and the Nominees of Beneficial Holders of Class 6 Equity Interests respectively, shall indicate acceptances or rejections of this Amended Modified Plan by the Beneficial Holders in accordance with the Voting Instructions. 103. "New Investment" means the purchase by the Participating Allowed Class 4 Claim Holders of Convertible Notes for a total purchase price of $50 million, all in accordance with the provisions of Article V.H hereof. 104. "New Polymer" means Polymer or any successor thereto, by merger, consolidation, or otherwise, on and after the Effective Date. 105. "New Polymer Affiliate" means (i) GOF; (ii) Zucker; (iii) Boyd; (iv) CSFB; (v) any "Insider" (as defined in the Bankruptcy Code) of GOF, Zucker, Boyd or CSFB; (vi) the Intertech Group, Inc.; (vii) GTC Fund III Limited Partnership and (viii) any other Entity directly or indirectly controlling or controlled by or under direct or indirect common control with GOF, Zucker, Boyd 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 New Polymer for any purpose other than for the purpose of defining New Polymer Affiliated Transactions. 106. "New Polymer Affiliated Transaction" means entering into any transaction involving any New Polymer Affiliate; provided, however, that, in the case of GOF, CSFB or a New Polymer Affiliate of GOF or CSFB, that such transaction exceeds $10 million, provided, further, that transactions between New Polymer, 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. The foregoing $10 million threshold shall not apply to management or transaction fees because such transactions are prohibited at any dollar amount. 9 107. "New Polymer Board of Directors" means the board of directors of New Polymer, constituted in accordance with Article V.B.3 hereof. 108. "New Polymer Common Stock" means collectively, the Class A Common Stock, the Class B Common Stock, the Class C Common Stock, the Class D Common Stock and the Class E Common Stock, authorized to be issued pursuant to, and with rights and obligations set forth in, any document created by, or agreement entered into by, New Polymer. 109. "New Polymer Notes" means the Convertible Notes and the New Senior Subordinated Notes. 110. "New Senior Subordinated Notes" means the 10% Senior Subordinated Notes due December 2007, to be issued by New Polymer to GOF in a face amount equal to the amount of any drawing under the Exit Letters of Credit (or any other advances made by or caused by GOF solely in lieu of drawing under the Exit Letters of Credit to make the amortization payments due under the Restructured Facilities from the Effective Date to December 31, 2004), which New Senior Subordinated Notes shall have the terms listed in an Exhibit to the Amended Modified Plan Supplement. The New Senior Subordinated Notes shall be senior in right of payment to the Convertible Notes. In no event shall the aggregate principal amount of the New Senior Subordinated Notes exceed $25 million. 111. "Nominee" means any broker, dealer, commercial bank, trust company, savings and loan association or other Person in whose name a Beneficial Holder's Subordinated Notes are registered or held of record as of the Record Date. 112. "Non-GOF Holders" means those Holders of Class 4 General Unsecured Claims other than GOF. 113. "Non-GOF Board Members" means the two members of the New Polymer Board of Directors appointed, pursuant to the Amended Modified Plan, by the Non-GOF Holders, who are Committee Members and who are Holders of Senior Subordinated Notes. 114. "Notice, Claims and Balloting Agent" means Trumbull Bankruptcy Services, located at 4 Griffin Road North, Windsor, CT 06095, Attn: Francine Gordon -- (860) 687-7592. 115. "Official Bankruptcy Forms" means the Official and Procedural Bankruptcy Forms, prescribed by the Judicial Conference of the United States, in accordance with Fed. R. Bankr. P. 9009. 116. "Old Polymer Common Stock" means all of the issued and outstanding shares of Polymer's common stock. 117. "Organizational Documents" means the certificate of incorporation, articles of organization, bylaws, operating agreement, partnership agreement, and/or other organizational and governing documents (including all those that govern or impact the appointment, election, and/or removal of directors, managers, managing partners or persons of equivalent authority), as the case may be, of an Entity. 118. "Original Confirmation Order" means the order entered by the Bankruptcy Court on January 3, 2003, confirming this Amended Modified Plan, which order is superseded by the Confirmation Order. 119. "Other Priority Claims" means any Claim accorded priority in right of payment under section 507(a) of the Bankruptcy Code, other than a Priority Tax Claim or an Administrative Expense Claim. 120. "Other Secured Claims" means all Secured Claims, other than Senior Lender Claims, against any of the Debtors held by any Person or Entity. 121. "Other Securities Claims and Interests" means (a) any Equity Interest in Polymer (other than Old Polymer Common Stock), including, but not limited to, any warrants, options, conversion privileges or contract rights to purchase or acquire any equity securities of Polymer at any time (including any rights, if any, under the Shareholder Rights Plan, whether contingent or otherwise), and (b) any Claims, obligations, 10 rights, suits, damages, causes of action, remedies, and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, currently existing or hereafter arising, in law, equity or otherwise arising from rescission of a purchase or sale of a security of Polymer (including the Senior Subordinated Notes and Old Polymer Common Stock) or the purchase or sale of a security of an Affiliate of Polymer, for damages arising from the purchase, sale or holding of such securities or the exercise of an option, warrant, conversion privilege or contractual right to such purchase or sale (including any rights, if any, under the Shareholder Rights Plan, whether contingent or otherwise), or for reimbursement, indemnification or contribution allowed under section 502 of the Bankruptcy Code on account of such a Claim. 122. "Over Subscription Rights" means, in the event that any Non-GOF Holder does not elect to exercise its Subscription Rights, the right of each Participating Allowed Class 4 Claim Holder to elect to purchase those unpurchased Convertible Notes on a Pro Rata basis (determined exclusive of accrued and unpaid interest). 123. "Participating Allowed Class 4 Claim Holders" means those Holders of Allowed Class 4 Claims or their permitted transferees who elect to participate in the New Investment in accordance with the Subscription Rights. 124. "Person" means a "person" within the meaning of section 101(41) of the Bankruptcy Code. 125. "Petition Date" means the date on which Debtors filed their respective voluntary petitions for relief commencing the Chapter 11 Cases, which for all the Debtors other than Bonlam (S.C.), was May 11, 2002, and which was April 23, 2002, for Bonlam (S.C.). 126. "PGI Asset Management" means PGI Asset Management Company, a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 127. "PGI Board Members" means the two members of the New Polymer Board of Directors appointed by Polymer's existing board of directors pursuant to the Amended Modified Plan and who initially shall be Zucker and Boyd. 128. "PGI Europe" means PGI Europe, Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 129. "PGI Polymer" means PGI Polymer, Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 130. "PGI Servicing" means PGI Servicing Company, a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 131. "Plan Party" means GOF, the Debtors, the Committee and each of the Committee Members. 132. "PNA" means PNA Corp., a North Carolina corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 133. "Poly-Bond" means Poly-Bond Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 134. "PolyIonix" means PolyIonix Separation Technologies, Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 135. "Polymer" means Polymer Group, Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 136. "Post-Confirmation Estates" means each Estate, collectively and individually, upon and after the Effective Date, pursuant to the terms and conditions of this Amended Modified Plan. 11 137. "Postpetition Agent" means J.P. Morgan Chase Bank, in its capacity as Agent under the Exit Facility. 138. "Prepetition Agent or Prepetition Administrative Agent" means JP Morgan Chase Bank (formerly known as The Chase Manhattan Bank), in its capacity as Agent under the Prepetition Credit Facility. 139. "Prepetition Credit Facility" means the Second Amended, Restated and Consolidated Credit Agreement, dated as of July 3, 1997, as amended through and including Amendment No. 7 among the Prepetition Agent, the Senior Lenders and the Debtors, which provides for secured revolving credit borrowings, term loans and letters of credit with aggregate commitments of up to $600 million, together with all related notes, certificates, security agreements, mortgages, pledges, indemnities, collateral assignments, undertakings, guarantees, and other instruments and documents, as each may have been amended or modified from time to time. 140. "Priority Non-Tax Claim" means a Claim entitled to priority pursuant to section 507(a) of the Bankruptcy Code other than a Priority Tax Claim. 141. "Priority Tax Claim" means a Claim entitled to priority treatment pursuant to section 507(a)(8) of the Bankruptcy Code. 142. "Pristine" means Pristine Brands Corporation, a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 143. "Pro Rata" means proportionately, so that, e.g., with respect to a distribution on account of an Allowed Claim, the ratio of (a) (i) the amount of property distributed on account of a particular Allowed Claim to (ii) the amount of the Allowed Claim, is the same as the ratio of (b) (i) the amount of property distributed on account of all Allowed Claims in the Class in which such Allowed Claim is included to (ii) the amount of all Allowed Claims in that Class. 144. "Professionals' Escrow Account" means an interest-bearing savings account maintained by the Reorganized Debtors with funds deposited solely for the purpose of paying all fees and expenses of Professionals in the Chapter 11 Cases. 145. "Professional" means a Person or Entity (a) employed pursuant to a Final Order in accordance with sections 327 and 1103 of the Bankruptcy Code and to be compensated for services rendered prior to the Effective Date, pursuant to sections 327, 328, 329, 330 and 331 of the Bankruptcy Code or (b) for which compensation and reimbursement has been allowed by the Bankruptcy Court pursuant to section 503(b)(4) of the Bankruptcy Code. 146. "Proof of Claim" has the meaning ascribed to it in Fed. R. Bankr. P. 3001. 147. "Qualified Institutional Buyer" means a "qualified institutional buyer" as defined in Rule 144A, promulgated under the Securities Act. 148. "Record Date" means the date to be established by the Bankruptcy Court in the Scheduling Order for the purpose of determining those Holders of Allowed Claims and Equity Interests that are entitled to vote to accept or reject this Amended Modified Plan. 149. "Releasees" means each of the Debtors, the Reorganized Debtors, the D&O Releasees, the Senior Lender Releasees, CSFB, GOF, MatlinPatterson Global Advisers LLC, CSFB Global Opportunities Advisers L.L.C., the Committee, the Committee Members, the DIP Agent and the DIP Lenders (and all Subsidiaries and Affiliates and officers, directors, partners, members, attorneys and other professionals, and agents of each of the foregoing), as such are referred to in connection with certain mutual releases described in Article X.A herein. 12 150. "Reorganized Debtors" means the Debtors and Debtors-in-Possession, or any successors thereto, by merger, consolidation, or otherwise pursuant to this Amended Modified Plan, on and after the Effective Date. 151. "Restated By-laws" means the restated by-laws of the Reorganized Debtors, the form of which shall be Filed on or before the Confirmation Date. 152. "Restated Certificate of Incorporation" means that certificate of incorporation of New Polymer that has been amended pursuant to Article V.B.1 herein. 153. "Restructured Facilities" means, the Prepetition Credit Facility as restructured pursuant to the terms and conditions contained in the Bank Term Sheet and subject to execution of definitive documentation, forms of which will be included as exhibits to the Amended Modified Plan Supplement. 154. "Restructuring Transactions" means the transactions described in Article V.K herein. 155. "Schedules" means the schedules of assets and liabilities and schedules of executory contracts as Filed on July 1, 2002, and the statement of financial affairs as Filed on June 28, 2002, as amended and supplemented from time to time. 156. "Scheduling Order" means the order entered by the Bankruptcy Court on November 14, 2002, granting the Motion of the Debtors with Supporting Memorandum of Law for Entry of an Order Approving the Procedures and Materials Employed to Provide Notice of the Modified Disclosure Statement, filed on November 14, 2002. 157. "Secured Claim" means that portion of a Claim (a) that is secured by a Lien on property in which any of the Debtors or their Estates has an interest, which Lien is valid, perfected and enforceable under applicable law or by reason of a Final Order and is not subject to avoidance under the Bankruptcy Code or applicable non-bankruptcy law, or that is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the value of the Claim Holder's interest in the Debtors' or Estates' interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) of the Bankruptcy Code; or (b) Allowed under this Amended Modified Plan as a Secured Claim. 158. "Securities Act" means the Securities Act of 1933, 15 U.S.C. sections 77a-77aa, as now in effect or hereafter amended, or any similar federal, state or local law. 159. "Senior Lender Claims" means any and all Claims of the Senior Lenders arising from the Prepetition Credit Facility, excluding the Adequate Protection Obligations, which Claims shall be deemed Allowed without the need to File any Proof of Claim. 160. "Senior Lender Closing Prepayment" means the payment that the Debtors shall make to the Prepetition Agent on the Effective Date, for the Pro Rata benefit of the Senior Lenders, to the extent Cash and Cash Equivalents held by Polymer and its subsidiaries (after giving effect to payment of (i) Professional Fees (which shall include any success fees payable by the Debtors or the Committee to a financial advisor) relating to these Chapter 11 Cases and the payments to GOF set forth in Article XII.C hereof; (ii) the Chicopee Sale Proceeds (to the extent that the Chicopee Sale closes before the Effective Date); and (iii) the Senior Lender Paydown) is greater than $35 million; provided that such Senior Lender Closing Prepayment shall be in an amount at least equal to $5 million. 161. "Senior Lender Paydown" means the payment that the Debtors shall make to the Prepetition Agent on the Effective Date, for the Pro Rata benefit of the Senior Lenders, comprising $50 million in Cash from funds generated by the New Investment. 162. "Senior Lender Releasees" means all Senior Lenders and the Prepetition Administrative Agent, Postpetition Agent, as well as all former Holders of indebtedness incurred under the Prepetition Credit Facility (solely in such capacity) and their attorneys, financial advisors, employees, officers and 13 directors, accountants, investment bankers, agents and other representatives (solely in connection with their representation of such Senior Lenders, Prepetition Administrative Agent, Postpetition Agent and former Holders of indebtedness incurred under the Prepetition Credit Facility in respect of the Prepetition Credit Facility). 163. "Senior Lenders" means those certain financial institutions party to the Prepetition Credit Facility that continue, as of the Record Date, to be Holders of indebtedness incurred under the Prepetition Credit Facility, and the other Holders, as of the Record Date, of indebtedness incurred under the Prepetition Credit Facility. 164. "Senior Subordinated Note Claims" means, collectively, all Claims arising from or related to the Senior Subordinated Notes. 165. "Senior Subordinated Notes" means, collectively, the 9% Senior Subordinated Notes and the 8 3/4% Senior Subordinated Notes. 166. "Senior Subordinated Note Indentures" means, collectively, the 8 3/4% Indenture and the 9% Indenture. 167. "Senior Subordinated Notes Indenture Trustee" means BNY Midwest Trust Company as successor trustee to Harris Trust and Savings Bank under the Senior Subordinated Note Indentures. 168. "Series A Warrants" means the Series A Warrants to purchase 498,688 shares of Class D Common Stock, par value $.01 per share, to be issued by New Polymer, which are designed to allow the Holders to participate as stockholders in the appreciation of the equity value of New Polymer above certain thresholds and which contain the terms and conditions described in Exhibit D to the Amended Modified Plan Supplement, including, without limitation, the requirement that the Series A Warrants shall not be exercisable until holders of Class A Common Stock, Class B Common Stock, and Class C Common Stock shall have received distributions in accordance with the priorities set forth in Exhibit J to the Amended Modified Disclosure Statement at section C, "Distributions". 169. "Series B Warrants" means the Series B Warrants to purchase 523,557 shares of Class E Common Stock, par value $.01 per share, to be issued by New Polymer, which are designed to allow the Holders to participate as stockholders in the appreciation of the equity value of New Polymer above certain thresholds and which contain the terms and conditions described in Exhibit E to the Amended Modified Plan Supplement, including, without limitation, the requirement that the Series A Warrants shall not be exercisable until holders of Class A Common Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock shall have received distributions in accordance with the priorities set forth in Exhibit J to the Amended Modified Disclosure Statement at section C, "Distributions". 170. "Shareholder Rights Plan" means Polymer's shareholder rights plan or "poison pill" embodied in the Rights Agreement, dated as of April 15, 1996, by and among Polymer and First Union National Bank of North Carolina. 171. "Solicitation Agent" means Innisfree M&A Incorporated, located at 501 Madison Avenue, New York, New York 10022. 172. "SPE" means the special purpose entity that will, in the event that Non-GOF Holders elect to receive Class C Common Stock, hold Class C Common Stock and whose SPE Equity and SPE Notes will, in such event, be held by the Electing Non-GOF Holders. 173. "SPE Equity" means the equity interests in the SPE that are issued to the Electing Non-GOF Holders, together with the SPE Notes, in exchange for their Class C Common Stock. 174. "SPE Notes" means those debt instruments that are to be issued by the SPE to the Electing Non-GOF Holders, together with the SPE Equity, in exchange for their Class C Common Stock. Such SPE Notes, at maturity, will equal the amount of the Allowed Class 4 Claims exchanged by such Electing Non- 14 GOF Holders for Pro Rata shares of Class C Common Stock under the Amended Modified Plan, which shall be contributed to the SPE in exchange for Pro Rata shares of SPE Equity and SPE Notes with interest payable-in-kind (other than payments on the SPE Notes from the irreducible cash payment in the form of a dividend or other contractual commitment by New Polymer on the Class C Common Stock that, in the aggregate, shall equal the lesser of (i) 1% per annum of the principal amount of the SPE Notes; and (ii) $1.0 million per annum). The SPE Notes will be nonrecourse to Polymer and New Polymer. 175. "Statement of Officers and Directors" means the statement Filed seven (7) Business Days prior to the commencement of the Confirmation Hearing identifying the initial officers and directors of the Reorganized Debtors, and containing any other information, if any, required by Article V.B.3 of this Amended Modified Plan. 176. "Subscription Rights" means (a) the right of the Holders of Allowed Class 4 Claims to elect to purchase the Convertible Notes on a Pro Rata basis (determined exclusive of accrued and unpaid interest), and (b) unless otherwise indicated, the Over Subscription Rights which shall be attached to, and inure to the benefit of, the Holders of Subscription Rights, in each case as described in Article V.H of this Amended Modified Plan. 177. "Subsidiary" means a corporation or limited liability company in which any Debtor owns or controls, directly or indirectly, at least a 50% equity interest. 178. "Substantive Consolidation Order" means the Order of the Bankruptcy Court substantively consolidating, for limited purposes, the Chapter 11 Cases (which may be part of the Confirmation Order). 179. "Supplemental Election Form" means the form by which a Participating Allowed Class 4 Claim Holder may indicate its intention to participate in the New Investment and by which a Holder of an Allowed Class 4 Claim (if such a Holder is a Qualified Institutional Buyer) must indicate whether such Holder elects to receive Class A Common Stock or Class C Common Stock as its treatment under the Amended Modified Plan. 180. "Tax Rate" means the rate equal to the underpayment rate specified in 26 U.S.C. ss. 6621 (determined without regard to 26 U.S.C. ss. 6621(c)) as of the Effective Date. 181. "Technetics" means Technetics Group, Inc., a Delaware corporation, a debtor and debtor-in-possession in the Chapter 11 Cases. 182. "Unimpaired Claim" means each Claim that is in an Unimpaired Class under the Amended Modified Plan. 183. "Unimpaired Classes" means Classes 1, 3, 5 and 7, which are not impaired Classes within the meaning of section 1124 of the Bankruptcy Code. 184. "Voting Deadline" means the date stated in the Voting Instructions by which all Ballots must be received. 185. "Voting Instructions" means the instructions for voting on this Amended Modified Plan contained in (a) the Section of the Amended Modified Disclosure Statement entitled VOTING AND CONFIRMATION PROCEDURE and (b) the Ballots and Master Ballots. 186. "Warrants" means the Series A Warrants and Series B Warrants. 187. "Zucker" means Jerry Zucker. 15 ARTICLE II. TREATMENT OF UNCLASSIFIED CLAIMS A. DIP Facility Claims On the Effective Date, each Holder of an Allowed DIP Facility Claim shall receive in full satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed DIP Facility Claim, any and all liens against, or security interests in, property of the Debtors or the Estates, Cash equal to the unpaid portion of such Allowed DIP Facility Claim. At such time, the DIP Facility shall be deemed terminated and the obligations thereunder of the Debtors and the Reorganized Debtor shall be terminated. B. Administrative Expense Claims Each Holder of an Allowed Administrative Expense Claim (other than Professionals) shall receive the full unpaid amount of such Allowed Administrative Expense Claim in Cash on the Effective Date, or upon such other terms as may be agreed upon by such Holder and the Debtors, or otherwise upon order of the Bankruptcy Court; provided, however, that Allowed Administrative Expense Claims representing obligations incurred in the ordinary course of business or otherwise assumed by the Reorganized Debtors pursuant to this Amended Modified Plan shall be paid in the ordinary course of business in accordance with the terms and conditions of the particular agreements governing such obligations. C. Compensation and Reimbursement Claims of Professionals All Professionals that are awarded compensation or reimbursement by the Bankruptcy Court in accordance with sections 330 or 331 of the Bankruptcy Code that are entitled to the priorities established pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code, shall be paid in full, in Cash, the amounts allowed by the Bankruptcy Court: (a) on or as soon as reasonably practicable following the later to occur of (i) the Effective Date; and (ii) the date upon which the Bankruptcy Court order allowing such Claim becomes a Final Order; or (b) upon such other terms as may be mutually agreed upon between such Professional and the Reorganized Debtors. On the Effective Date, there shall be escrowed into the Professionals' Escrow Account all estimated accrued amounts owed to Professionals through the Confirmation Date pending entry of a Final Order on each such Professional's final fee application. D. Priority Tax Claims Each Holder of an Allowed Priority Tax Claim, at the sole option of the Debtors, shall be entitled to receive on account of such Allowed Priority Tax Claim, in full satisfaction, settlement, release and discharge of and in exchange for such Allowed Priority Tax Claim, (i) equal Cash payments made on the last Business Day of every three-month period following the Effective Date, over a period not exceeding six (6) years after the assessment of the tax on which such Claim is based, totaling the principal amount of such Claim plus simple interest on any outstanding balance from the Effective Date calculated at the interest rate available on ninety (90) day United States Treasuries on the Effective Date; or (ii) such other treatment agreed to by the Allowed Priority Tax Claim Holder and the Debtors. ARTICLE III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS A. Summary Pursuant to sections 1122 and 1123(a)(1) of the Bankruptcy Code, the categories of Claims and Equity Interests listed below classify Claims and Equity Interests for all purposes, including voting and distribution pursuant to this Amended Modified Plan. A Claim or Equity Interest shall be deemed classified in a particular Class only to the extent that such Claim or Equity Interest qualifies within the description of that Class and shall be deemed classified in a different Class to the extent that any remainder of such Claim or Equity Interest qualifies within the description of such different Class. A Claim or Equity Interest is in a particular Class only to the extent 16 that such Claim or Equity Interest is Allowed in that Class and has not been paid or otherwise settled prior to the Effective Date. THIS AMENDED MODIFIED PLAN SEEKS LIMITED SUBSTANTIVE CONSOLIDATION OF THE DEBTORS' ESTATES SOLELY FOR THE LIMITED PURPOSES ENUMERATED IN THIS AMENDED MODIFIED PLAN, AS FURTHER DESCRIBED IN ARTICLE V.L HEREIN. IF SUCH LIMITED SUBSTANTIVE CONSOLIDATION IS AUTHORIZED AND ORDERED BY THE BANKRUPTCY COURT, ALL ALLOWED CLAIMS AGAINST THE DEBTORS OR THEIR ESTATES SHALL BE SATISFIED FROM THE COMBINED CASH AND OTHER ASSETS OF ALL OF THE DEBTORS AND REORGANIZED DEBTORS. The classification of Claims against and Equity Interests in the Debtors pursuant to this Amended Modified Plan is as follows: ==================================================================== Class Claim Status Voting Rights ==================================================================== 1 Priority Non-Tax Claims Unimpaired Not entitled to vote 2 Senior Lender Claims Impaired Entitled to vote 3 Other Secured Claims Unimpaired Not entitled to vote 4 General Unsecured Claims Impaired Entitled to vote 5 Critical Business Unimpaired Not entitled to vote Relations Claims and Intercompany Claims 6 Old Polymer Common Impaired Entitled to vote Stock Interests 7 Intercompany Interests Unimpaired Not entitled to vote 8 Other Securities Claims Impaired Not entitled to vote and Interests (deemed to have rejected) ====================================================================== B. Classification and Treatment of Claims Against and Equity Interests in the Debtors 1. Class 1 - Priority Non-Tax Claims a. Classification: Class 1 consists of all Priority Non-Tax Claims. b. Treatment: The legal, equitable and contractual rights of the Holders of Class 1 Claims are unaltered by this Amended Modified Plan. Unless the Debtors and the Holder of an Allowed Class 1 Claim agree to a different treatment, each such Holder shall receive one of the following alternative treatments, at the Reorganized Debtors' election. (i) to the extent due and owing on the Effective Date, such Claim will be paid on the Effective Date in full in Cash by the Reorganized Debtors; (ii) to the extent not due and owing on the Effective Date, such Claim will be paid in full in Cash by the Reorganized Debtors when and as such Claim becomes due and owing in the ordinary course of business; or (iii) such Claim will be otherwise treated in any other manner so that such Claim shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. 17 Any default with respect to any Class 1 Claim that existed immediately prior to the Petition Date shall be deemed cured upon the Effective Date. c. Voting: Class 1 is not impaired, and the Holders of Class 1 Claims are conclusively deemed to have accepted this Amended Modified Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class 1 are not entitled to vote to accept or reject this Amended Modified Plan. 2. Class 2 - Senior Lender Claims a. Classification: Class 2 consists of all Senior Lender Claims. b. Treatment: On or as soon as practicable after the Effective Date, in full and complete satisfaction of all Senior Lender Claims asserted against any and all Debtors, each Holder of an Allowed Senior Lender Claim shall receive, on account of its Allowed Senior Lender Claim in accordance with the Bank Term Sheet, its Pro Rata share of (A) participation in the Restructured Facilities, (B) the Senior Lender Paydown, (C) the Chicopee Sale Proceeds (provided, that the Chicopee Sale closes before the Effective Date) and (D) the Senior Lender Closing Prepayment. c. Voting: Class 2 is impaired, and the Holders of Class 2 Claims are entitled to vote to accept or reject this Amended Modified Plan. In the event Class 2 rejects this Amended Modified Plan, Debtors reserve the right to seek confirmation pursuant to section 1129(b) of the Bankruptcy Code as set forth in Article IV.E herein. 3. Class 3 - Other Secured Claims a. Classification: Class 3 consists of all Other Secured Claims. b. Treatment: Unless the Holder of such Claim and Debtors agree to a different treatment, each Holder of an Allowed Class 3 Claim shall receive one of the following alternative treatments, at the election of the Reorganized Debtors: (i) the legal, equitable and contractual rights of the Holders of Allowed Class 3 Claims shall be unaltered by this Amended Modified Plan; (ii) Debtors shall surrender all Collateral securing such Claim to the Holder thereof, without representation or warranty by or recourse against the Debtors or Reorganized Debtors; or (iii) such Claim will be otherwise treated in any other manner so that such Claim shall be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. Any default with respect to any Class 3 Claim that existed immediately prior to the Petition Date shall be deemed cured upon the Effective Date. c. Voting: Class 3 is not impaired, and the Holders of Class 3 Claims are conclusively deemed to have accepted this Amended Modified Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Class 3 Claims are not entitled to vote to accept or reject this Amended Modified Plan. 4. Class 4 - General Unsecured Claims a. Classification: Class 4 consists of all General Unsecured Claims. b. Treatment: Each Holder of an Allowed General Unsecured Claim shall receive, in full and complete satisfaction of each such Holder's Claim, on, or as soon as practicable after the Effective 18 Date, its Pro Rata share of Class A Common Stock in exchange for the amount of its Allowed Claim, provided, however, that, in the alternative, each such Holder who is a Qualified Institutional Buyer may elect to receive its Pro Rata share of Class C Common Stock, which shall be contributed to the SPE in exchange for SPE Equity and SPE Notes. The Holder of an Allowed Class 4 Claim may make only one election with respect to its Claim on the Supplemental Election Form, which election will be made after the Confirmation Date and prior to the 40th day thereafter. The failure of a Class 4 Claim Holder to make an election under this Amended Modified Plan shall be deemed an election to receive its Pro Rata share of Class A Common Stock with respect to its Allowed Claim. The total number of Class A Common Stock and Class C Common Stock shares to be issued on the Effective Date will be 9.6 million. Each Holder of an Allowed Class 4 Claim also will be given the option to take part in the New Investment by exercising its Subscription Rights in accordance with the Supplemental Election Form. c. Voting: Class 4 is impaired, and the Holders of Class 4 Claims are entitled to vote to accept or reject this Amended Modified Plan. In the event Class 4 rejects this Amended Modified Plan, Debtors reserve the right to seek confirmation pursuant to section 1129(b) of the Bankruptcy Code as set forth in Article IV.E herein. 5. Class 5 - Critical Business Relations Claims and Intercompany Claims a. Classification: Class 5 consists of all Critical Business Relations Claims and Intercompany Claims. b. Treatment: The legal, equitable and contractual rights of the Holders of Class 5 Claims are unaltered by this Amended Modified Plan. Unless the Holder of such Claim and Debtors agree to a different treatment, each Holder of an Allowed Class 5 Claim shall receive one of the following alternative treatments, at the election of the Debtors: (i) to the extent then due and owing on the Effective Date, such Claim will be paid in full in Cash by the Reorganized Debtors; (ii) to the extent not due and owing on the Effective Date, such Claim (A) will be paid in full in Cash by the Reorganized Debtors on the Effective Date, or (B) will be paid in full in Cash by the Reorganized Debtors when and as such Claim becomes due and owing in the ordinary course of business; or (iii) such Claim will be otherwise treated in any other manner so that such Claim shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. Any default with respect to any Class 5 Claim that existed immediately prior to the filing of the Chapter 11 Case shall be deemed cured upon the Effective Date. c. Voting: Class 5 is not impaired and the Holders of Class 5 Claims are conclusively deemed to have accepted this Amended Modified Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Class 5 Claims are not entitled to vote to accept or reject this Amended Modified Plan. 6. Class 6 - Old Polymer Common Stock Equity Interests a. Classification: Class 6 consists of all Old Polymer Common Stock Interests. b. Treatment: On or as soon as practicable after the Effective Date, each Holder of an Allowed Equity Interest in Old Polymer Common Stock shall receive, in full and complete satisfaction of such Equity Interest, a Pro Rata share of (i) Class B Common Stock (which shall not be diluted by any conversion of the Convertible Notes); (ii) the Series A Warrants; and (iii) the Series B Warrants. 19 c. Allowance: Each Holder of an Allowed Class 6 Old Polymer Common Stock Equity Interest shall be Allowed in the amount of the number of shares of Old Polymer Common Stock held by each applicable Holder as of the Record Date. d. Voting: Class 6 is impaired and Holders of Allowed Class 6 Old Polymer Common Stock Equity Interests are entitled to vote to accept or reject this Amended Modified Plan. In the event Class 6 rejects this Amended Modified Plan, Debtors reserve the right to seek confirmation pursuant to section 1129(b) of the Bankruptcy Code as set forth in Article IV.E herein. 7. Class 7 - Intercompany Interests a. Classification: Class 7 consists of all Intercompany Interests. b. Treatment: The legal, equitable and contractual rights of the Holders of Class 7 Claims are unaltered by this Amended Modified Plan. c. Voting: Class 7 is not impaired, and the Holders of Class 7 Claims are conclusively deemed to have accepted this Amended Modified Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Class 7 Claims are not entitled to vote to accept or reject this Amended Modified Plan. 8. Class 8 - Other Securities Claims and Interests a. Classification: Class 8 consists of all Other Securities Claims and Interests of whatever kind or nature. b. Treatment: On the Effective Date, all Other Securities Claims and Interests shall be deemed cancelled and of no further force and effect, whether surrendered for cancellation or otherwise, and no distribution to the Holders of Other Securities Claims and Interests shall be made hereunder. c. Voting: Class 8 is impaired, but since Holders of Other Securities Claims and Interests are receiving no distribution hereunder, Holders of Class 8 Claims shall be deemed to have rejected this Amended Modified Plan and are not entitled to vote to accept or reject this Amended Modified Plan. ARTICLE IV. ACCEPTANCE OR REJECTION OF THE AMENDED MODIFIED PLAN A. Voting Classes Subject to Articles IV.C and D herein, Claim and Equity Interest Holders in each Impaired Class of Claims or Equity Interests are entitled to vote as a class to accept or reject this Amended Modified Plan. Each Holder of an Allowed Claim or Equity Interest in Classes 2, 4 and 6 shall be entitled to vote to accept or reject this Amended Modified Plan. B. Acceptance by Impaired Classes An Impaired Class of Claims shall be deemed to have accepted this Amended Modified Plan if: (a) the Holders (other than any Holder designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount of the Allowed Claims actually voting in such Class have voted to accept this Amended Modified Plan; (b) the Holders (other than any Holder designated under section 1126(e) of the Bankruptcy Code) of more than one-half in number of the Allowed Claims actually voting in such Class have voted to accept this Amended Modified Plan. An Impaired Class of Equity Interests shall be deemed to have accepted this Amended Modified Plan if the Holders (other than any Holder designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount of the Allowed Equity Interests actually voting in such Class have voted to accept this Amended Modified Plan. 20 C. Presumed Acceptance of Amended Modified Plan Classes 1, 3, 5 and 7 are Unimpaired Classes under this Amended Modified Plan, and, therefore, are presumed to have accepted this Amended Modified Plan pursuant to section 1126(f) of the Bankruptcy Code. D. Presumed Rejection of Amended Modified Plan Class 8 is impaired under this Amended Modified Plan and is receiving no distribution hereunder. Accordingly, Class 8 is deemed to have rejected this Amended Modified Plan. E. Non-Consensual Confirmation To the extent that any Impaired Class rejects this Amended Modified Plan or is deemed to have rejected this Amended Modified Plan, the Debtors will request confirmation of this Amended Modified Plan as it may be modified from time to time, under section 1129(b) of the Bankruptcy Code. The Debtors reserve the right to alter, amend, modify, revoke or withdraw this Amended Modified Plan or any Amended Modified Plan Exhibit or Schedule, including to amend or modify it to satisfy the requirements of section 1129(b) of the Bankruptcy Code, if necessary. ARTICLE V. MEANS FOR IMPLEMENTATION OF THE AMENDED MODIFIED PLAN A. Continued Corporate Existence Subject to any Restructuring Transactions, the Reorganized Debtors shall continue to exist after the Effective Date as separate corporate entities, in accordance with the applicable laws in the respective jurisdictions in which they are incorporated and pursuant to their respective certificates or articles of incorporation and by-laws in effect prior to the Effective Date, except to the extent such certificates or articles of incorporation and by-laws are amended by, or pursuant to, this Amended Modified Plan. B. Corporate Governance, Corporate Action, and Directors and Officers 1. Certificates of Incorporation and By-laws. a. The certificate or articles of incorporation and by-laws of each Debtor shall be amended as necessary to satisfy the provisions of this Amended Modified Plan and the Bankruptcy Code, and shall include, among other things, pursuant to section 1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of non-voting equity securities, but only to the extent required by section 1123(a)(6) of the Bankruptcy Code. b. In addition to the foregoing, New Polymer's Certificate of Incorporation shall include the following terms and provisions: (i) New Polymer's authorized capital stock, and the designated shares in each class or series of capital stock, shall be limited to such number of shares as is necessary for the issuances contemplated hereunder, including conversion or exercise of all convertible or exercisable securities to be issued hereunder, including applicable anti-dilution protection; (ii) The stockholders of New Polymer shall be authorized to take action by written consent in lieu of a meeting thereof; (iii) The New Polymer Board of Directors shall not be classified; and (iv) The provisions of Polymer's current Certificate of Incorporation that require an affirmative vote of 80% of the voting capital stock for the taking of certain 21 actions shall be amended to provide that such actions may be taken with the affirmative vote of 50% of the voting capital stock. c. In addition to the foregoing, New Polymer's bylaws shall provide for the following terms and conditions: (i) Shareholders holding a minimum of 25% of New Polymer Common Stock shall be authorized to call special meetings; (ii) The notice requirements for shareholders to place matters on the ballot for consideration at annual and special meetings shall not be unduly prohibitive and, in any event, shall be to GOF's and the Committee's reasonable satisfaction; and (iii) Shareholders shall be authorized to take action by written consent in lieu of a meeting thereof. 2. Corporate Action. All actions contemplated by, and required for the effectiveness of, this Amended Modified Plan shall be deemed authorized and approved in all respects. All matters provided for in this Amended Modified Plan involving the corporate structure of the Debtors or the Reorganized Debtors, and any corporate action required by the Debtors or the Reorganized Debtors in connection with this Amended Modified Plan, shall be deemed to have occurred and shall be in effect, without any requirement of further action by the directors of the Debtors or the Reorganized Debtors. On the Effective Date, the appropriate officers and directors of the Reorganized Debtors are authorized and directed to issue, execute and deliver the agreements, documents, Equity Securities and instruments contemplated by this Amended Modified Plan in the name of and on behalf of the Reorganized Debtors. 3. Directors and Officers of the Reorganized Debtors. a. Pursuant to section 1129(a)(5) of the Bankruptcy Code, the Debtors will disclose, by Filing, ten (10) days prior to the Confirmation Date, a Statement of Officers and Directors, identifying any Person proposed to serve on the initial boards of directors of the Reorganized Debtors. To the extent any such Person is an Insider, the nature of any compensation for such Person also will be disclosed. The classification and composition of the boards of directors shall be consistent with each Reorganized Debtor's amended Certificate of Incorporation and other constituent documents. Each such director or officer shall serve from and after the Effective Date pursuant to the terms of each Reorganized Debtor's amended Certificate of Incorporation, other constituent documents, and the applicable state incorporation law. b. New Polymer will be governed by the New Polymer Board of Directors, which shall consist of nine members, each of whom shall have a term of three years, comprising the following categories: (i) five GOF Board Members; (ii) two PGI Board Members, who initially shall be Zucker and Boyd; and (iii) two Non-GOF Board Members. c. During such three year term, any vacancy by a GOF Board Member shall be filled by GOF, any vacancy by a PGI Board Member shall be filled by a nominee of the other PGI Board Member subject to the limitation set forth in clause d of this Article V.B.3, and any vacancy by a Non-GOF Board Member shall be filled by a nominee of the other Non-GOF Board Member. After three years from the Effective Date, each Non-GOF Board Member, each PGI Board Member and any other stockholder nominee will be included on New Polymer's slate of board nominees only if such Non-GOF Board Member, such PGI Board Member or other stockholder nominee is supported by the affirmative vote of shares representing not less than 12 1/2 % of the New Polymer Common Stock (provided that, for purposes of nomination, each share of holders of New Polymer Common Stock may only be counted in support of one nominee). GOF will agree to vote in favor of any nominee included on New Polymer's slate of board nominees whose nomination is supported by shares representing at least 12 1/2% of the New Polymer Common Stock as set forth above. 22 d. GOF Board Members, Non-GOF Board Members and PGI Board Members may be removed only for cause subject to the following exceptions: (i) GOF may remove any GOF Board Member with or without cause; and (ii) each of Zucker and Boyd (or any director who is appointed to fill a vacancy created by the death, resignation or removal of Zucker or Boyd) may be removed from the board (a) if Zucker's or Boyd's employment, as the case may be, with New Polymer or its subsidiaries is terminated for cause; or (b) if Zucker's or Boyd's employment, as the case may be, with New Polymer or any Subsidiaries or affiliates is terminated without cause or Zucker or Boyd, as the case may be, resigns and, in either such case under this clause (b), he is paid the amounts, if any, to which he is legally entitled under his respective Change of Control Agreement or any other applicable agreement, provided, however, that, during the pendency of any dispute relating to (x) his termination; (y) whether his termination is for cause; or (z) whether he is entitled to payment under his respective Change of Control Agreement or any other applicable agreement, the New Polymer Board of Directors shall be permitted to remove him (or his successor) from the New Polymer Board of Directors. If Zucker or Boyd ultimately is removed as a director for cause or pursuant to clause (ii) (b) of the foregoing sentence, the number of directors on the New Polymer Board of Directors shall be reduced to eliminate such vacancy or vacancies; provided, however, that during the pendency of any dispute as described above the vacancy or vacancies shall not be eliminated nor shall any replacement director be appointed. e. At least one Non-GOF Board Member shall be on each of the audit, compensation and executive committees of the New Polymer Board of Directors. 4. Corporate Governance. The Plan Parties will take all actions necessary to implement the corporate governance provisions as set forth below: a. New Polymer shall be a reporting company under Section 12(g) of the Securities Exchange Act of 1934, as amended, on the Effective Date. New Polymer will agree not to seek suspension of its reporting obligations pursuant to Rule 12h-3 of the Securities Exchange Act of 1934, as amended, or otherwise. Unless and until New Polymer is taken private, New Polymer shall remain a reporting company and shall continue to file quarterly and annual reports and all other required filings made by reporting companies regardless of the number of Holders of its New Polymer Common Stock or Convertible Notes. New Polymer shall remain a Delaware corporation, except to the extent necessary to effectuate a bonafide business combination or other transaction; provided, however, that any such business combination or other transaction with a New Polymer Affiliate shall require the approval of a Non-GOF Board Member. b. New Polymer shall use reasonable best efforts to be a listed company on the NYSE or included for quotation on The NASDAQ Stock Market on the Effective Date of the Amended Modified Plan or as soon as practicable thereafter. c. All Holders of outstanding shares of the New Polymer Common Stock shall have pre-emptive rights to buy a pro-rata share of any issuance of securities by New Polymer after the Effective Date, subject to customary exclusions, including, without limitation, exclusions for (i) employee and non-employee director stock option grants and similar stock-based compensatory arrangements; (ii) the shares issuable upon the conversion of the Convertible Notes; and (iii) the shares of Class B Common Stock pursuant to the anti-dilution provisions of the Class B Common Stock pursuant to conversion of the Convertible Notes. Holders of New Polymer Common Stock shall be granted "tag-along" rights by GOF applicable to all sales by GOF and GOF affiliates that result in GOF and GOF affiliates beneficially owning less than an aggregate of 54.9% of the New Polymer Common Stock on a fully-diluted basis and any sales thereafter. d. New Polymer shall not enter into any agreement to pay, nor will pay, any management or transaction fee to any New Polymer Affiliate. Without the written approval of at least one Non-GOF Board Member, New Polymer (i) may not enter into any New Polymer Affiliated Transaction; or (ii) may not change any provision of its charter, by-laws, shareholder agreements or other agreements or operative document that accomplish the provisions of Article V.B.3 or B.4 of this Amended Modified Plan. e. The Shareholder Rights Plan shall be terminated and rejected. 23 f. As of the Effective Date, the Organizational Documents of New Polymer and its Subsidiaries and Affiliates shall prohibit their respective officers from exercising voting rights of any securities held by New Polymer or such subsidiaries and affiliates without express authorization from the New Polymer Board of Directors or other applicable governing body. g. As of the Effective Date, the Organizational Documents of each Subsidiary and Affiliate of New Polymer (including, without limitation, each Entity identified on Exhibit H to the Amended Modified Disclosure Statement) shall each provide that the stockholders, members, partners or other equity Holders, as the case may be, of such Entity shall be permitted to remove as of the Effective Date, at any time and from time to time thereafter, any director, manager, managing partner or person of equivalent authority, with or without cause at any time, through action by a majority in interest of such stockholders, members, partners or other equity Holders (which action may, at the option thereof and to the extent permissible by law, be taken in writing or pursuant to a meeting thereof). h. Any action by the New Polymer Board of Directors requiring a vote from a Non-GOF Board Member shall require the vote of a Non-GOF Board Member only as long as the New Polymer Board of Directors continues to have seats designated for such Non-GOF Board Members. C. Cancellation of Securities And Agreements. On the Effective Date, except as otherwise provided for in this Amended Modified Plan, (a) Senior Subordinated Note Claims, Other Securities Claims and Interests, Old Polymer Common Stock, and any other note, bond, Indenture, or other instrument or document evidencing or creating any indebtedness or obligation of a Debtor, and (b) the obligations of the Debtors under any agreements, Indentures or certificates of designations governing Senior Subordinated Note Claims, Other Securities Claims and Interests, Old Polymer Common Stock, and any other note, bond, Indenture or other instrument or document evidencing or creating any indebtedness or obligation of a Debtor, as the case may be, shall be cancelled and terminated and shall be discharged pursuant to section 1141 of the Bankruptcy Code. D. Issuance of New Polymer Common Stock and New Polymer Notes 1. New Polymer Common Stock. On the Effective Date, New Polymer shall issue and distribute in accordance with the terms of this Amended Modified Plan, the New Polymer Common Stock as follows: the Class A Common Stock Pro Rata (in sum with the Class C Common Stock, 9.6 million shares to be issued on the Effective Date) to Holders of Allowed Class 4 Claims who elect to receive Class A Common Stock, the Class B Common Stock (400,000 shares of New Polymer Common Stock issued on the Effective Date) to Holders of Allowed Claims in Class 6 and the Class C Common Stock (representing in sum with the Class A Stock, 9.6 million shares to be issued on the Effective Date) to the Electing Non-GOF Holders. 2. Section 1145 Exemption. To the maximum extent provided by section 1145 of the Bankruptcy Code and applicable nonbankruptcy laws, the shares of New Polymer Common Stock issued pursuant to this Amended Modified Plan are exempt from registration under the Securities Act. 3. Issuance of Instruments. Except as otherwise provided herein, on or as soon as reasonably practicable after the Effective Date, the Reorganized Debtors shall issue all securities, notes, instruments, certificates, warrants and other documents to be issued in accordance with this Amended Modified Plan. The Reorganized Debtors shall execute and deliver such other agreements, documents and instruments as are required to be executed in accordance with the terms herein. 4. Pursuant to Article V.H hereof, on the Effective Date, New Polymer shall issue Convertible Notes to the new indenture trustee(s) on behalf of the Holders of Participating Allowed Class 4 Claim in exchange for the New Investment in an aggregate principal amount equal to $50 million. The Convertible Notes shall be issued pursuant to the Indenture attached as an exhibit to the Amended Modified Plan Supplement. 24 5. New Polymer also shall issue New Senior Subordinated Notes to GOF to the extent of any draws on the Exit Letters of Credit (or any other advance made, or caused to be made, by GOF solely in lieu of a drawing under the Exit Letters of Credit to make the amortization payments under the Restructured Facilities from the Effective Date through December, 2004, which amount shall not exceed $25 million). The New Senior Subordinated Notes shall be senior in right of payment to the Convertible Notes. 6. Except as otherwise provided in this Amended Modified Plan, on or as soon as reasonably practicable after the Effective Date, the Reorganized Debtors shall issue all Equity Securities, notes, instruments, certificates, warrants and other documents to be issued in accordance with this Amended Modified Plan. The Reorganized Debtors shall execute and deliver such other agreements, documents and instruments as are required to be executed in accordance with the terms of this Amended Modified Plan. E. Revesting Of Assets; Releases of Liens The property of each Debtor's Estate, together with any property of each Debtor that is not property of its Estate and that is not specifically disposed of pursuant to this Amended Modified Plan, shall revest in the applicable Debtor on the Effective Date. Thereafter, each Reorganized Debtor may operate its business and may use, acquire, and dispose of property free of any restrictions of the Bankruptcy Code, the Bankruptcy Rules, and the Bankruptcy Court. As of the Effective Date, all property of each Reorganized Debtor shall be free and clear of all Claims and Equity Interests, except as specifically provided in this Amended Modified Plan or the Confirmation Order. Without limiting the generality of the foregoing, each Reorganized Debtor may, without application to or approval by the Bankruptcy Court, pay fees that it incurs after the Effective Date for reasonable professional fees and expenses. F. Sources of Cash for Amended Modified Plan Distribution All Cash necessary for the Reorganized Debtors to make payments pursuant to this Amended Modified Plan shall be obtained from existing Cash balances, the New Investment, the operations of the Debtors or Reorganized Debtors or post-Confirmation borrowing under all available facilities of the Debtors or Reorganized Debtors, including, but not limited to, the Exit Revolving Credit Facility, to the extent permitted thereunder. The Reorganized Debtors may also make such payments using Cash received from their Subsidiaries and Affiliates in the ordinary course of business. G. Exit Revolving Credit Facility 1. On the Effective Date, New Polymer, certain of its Subsidiaries, and certain Senior Lenders and, if necessary, other parties, shall enter into the Exit Revolving Credit Facility, in order to (a) make other payments required to be made on the Effective Date; provided, that the Exit Revolving Credit Facility may not be used to repay the DIP Facility Claim, and (b) provide such additional borrowing capacity as may be required by the Reorganized Debtors and the Subsidiaries following the Effective Date to maintain their operations. The Confirmation Order shall provide that the Debtors are authorized to execute, deliver, record or file all documents necessary or appropriate to implement the Exit Revolving Credit Facility. H. New Investment 1. General. On the Effective Date, New Polymer will be provided with $50.0 million of funding. The New Investment will be made by the Participating Allowed Class 4 Claim Holders who choose to participate in the New Investment by exercising their Subscription Rights and will consist of $50.0 million in Cash which will be used to fund the Senior Lender Paydown on the Effective Date in accordance with the Bank Term Sheet. The Participating Allowed Class 4 Claims Holders shall receive Convertible Notes as summarized below. 2. Subscription Rights and Over Subscription Rights; Method of Election to Participate in New Investment. On the Confirmation Date, all Holders of Allowed Class 4 Claims as of the Record Date shall be deemed to have been issued Subscription Rights to purchase their Pro Rata share (determined exclusive of accrued and unpaid interest) of the Convertible Notes to be issued by New Polymer on the 25 Effective Date. Each Subscription Right shall carry with it an Over Subscription Right, which shall attach to, and inure to the benefit of, the Beneficial Holder of the Subscription Right. Subject to all applicable state and federal securities laws, the Subscription Rights, along with any attendant Over Subscription Rights, shall be transferable for a period of not less than forty (40) days commencing on the Confirmation Date. Parties electing to purchase or sell Subscription Rights and Over Subscription Rights separately from the corresponding underlying Claims shall do so at their own risk and judgment as to whether such purchases and sales comply with applicable laws and regulations. To purchase Convertible Notes and participate in the New Investment, Beneficial Holders of Subscription Rights (which may include the Holders of Allowed Class 4 Claims to which such Subscription Rights are initially issued or their transferees) must exercise the Subscription Rights in the manner set forth on the Supplemental Election Form on or prior to the date which is forty (40) days after the Confirmation Date. Non-GOF Holders are not obligated to exercise their Subscription Rights, and, in the event that not all Subscription Rights are properly exercised, Participating Allowed Class 4 Claim Holders shall be entitled to exercise their Over Subscription Rights. Exercise of the Over Subscription Rights shall be in the manner set forth in the Supplemental Election Form. Participating Allowed Class 4 Claim Holders that are Non-GOF Holders are not obligated to exercise their Over Subscription Rights. GOF has committed itself to elect to exercise its Subscription Rights and its Over Subscription Rights, if any. As to all Convertible Notes allocated for purchase by the Non-GOF Holders pursuant to the Subscription Rights or the Over Subscription Rights which are not purchased by such Non-GOF Holders, GOF agrees to act as "Standby Purchaser" to ensure that all such Convertible Notes will be purchased and the issuance of such Convertible Notes results in proceeds of $50 million. 3. Convertible Notes. Interest on the Convertible Notes will be paid in cash, semi-annually in arrears, at a rate of 10% per annum. The principal of the Convertible Notes is due December 2007. Holders of the Convertible Notes will be entitled at any time before the final maturity of the Convertible Notes, subject to prior redemption or repurchase, to convert any Convertible Notes or portions thereof into Class A Common Stock at the then applicable conversion price. The Convertible Notes, prior to giving effect to any anti-dilution adjustments, shall be convertible into an aggregate number of shares of New Polymer Common Stock representing 40% of the outstanding equity of New Polymer (after giving effect to the conversion of such Convertible Notes and the related anti-dilution provisions of the Class B Common Stock issued to Holders of Allowed Equity Interests in Old Polymer Common Stock). The Convertible Notes will have anti-dilution provisions equivalent to customary broad-based anti-dilution protections of preferred stock with customary exclusions. At any time prior to the final maturity of the Convertible Notes, subject to any limitations contained in the Exit Facility, New Polymer may redeem the outstanding Convertible Notes in whole or from time to time in part on at least thirty (30) days prior written notice if the trading price of the Class A Common Stock exceeds 130% of the conversion price of the Convertible Notes for twenty (20) trading days in a period of thirty (30) consecutive trading days. The redemption price will equal 100% of the face amount of the Convertible Notes to be redeemed together with accrued interest thereon. The Convertible Notes will be unsecured and will be subordinate in right of payment to (i) all other existing and future senior indebtedness of New Polymer; and (ii) any Senior Subordinated Notes. Each Reorganized Debtor shall guarantee the Convertible Notes on a junior subordinated basis. I. Exit Letters of Credit. Under this Amended Modified Plan, GOF will issue or cause to be issued the Exit Letters of Credit to guarantee the amortization payments due from the Effective Date through December 31, 2004, under the Restructured Facilities and the Bank Term Sheet in the event that the Reorganized Debtors are unable to make such amortization payments. Any drawings under the Exit Letters of Credit (or any advances made, or caused to be made, by GOF, solely in lieu of drawing on the Exit Letters of Credit to make the amortization payments under the Restructured Facilities from the Effective Date through December 31, 2004, which amount shall not exceed 26 $25 million) will be evidenced by the New Senior Subordinated Notes to be issued by New Polymer to GOF. On the Effective Date, GOF will receive certain fees for posting the Exit Letters of Credit. See Article XII.C herein. J. Compensation And Benefit Programs Except and to the extent previously assumed by a Final Order on or before the Confirmation Date, all employee compensation and benefit programs of the Debtors, including programs subject to sections 1114 and 1129(a)(13) of the Bankruptcy Code, entered into before or after the Petition Date and not since terminated, shall be deemed to be, and shall be treated as though they are, executory contracts that are assumed under Article VI.A herein. K. Restructuring Transactions On or after the Effective Date, the applicable Reorganized Debtors may enter into such transactions and may take such actions as may be necessary or appropriate to effect a corporate restructuring of their respective businesses, to otherwise simplify the overall corporate or capital structure of the Reorganized Debtors, or to reincorporate certain of the Filing Subsidiaries under the laws of jurisdictions other than the laws of which the applicable Filing Subsidiaries are presently incorporated. Such restructuring may include one or more mergers, consolidations, restructures, dispositions, liquidations, or dissolutions, as may be determined by the Debtors or Reorganized Debtors to be necessary or appropriate (collectively, the "Restructuring Transactions"). The actions to effect the Restructuring Transactions may include: (a) the execution and delivery of appropriate agreements or other documents of merger, consolidation, restructuring, disposition, liquidation, or dissolution containing terms that are consistent with the terms of this Amended Modified Plan and that satisfy the applicable requirements of applicable state law and such other terms to which the applicable entities may agree; (b) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property, right, liability, duty, or obligation on terms consistent with the terms of this Amended Modified Plan and having such other terms to which the applicable entities may agree; (c) the filing of appropriate certificates or articles of merger, consolidation, or dissolution pursuant to applicable state law; and (d) all other actions that the applicable entities determine to be necessary or appropriate, including making filings or recordings that may be required by applicable state law in connection with such transactions. In each case in which the surviving, resulting, or acquiring corporation in any such transaction is a successor to a Reorganized Debtor, such surviving, resulting, or acquiring corporation will perform the obligations of the applicable Reorganized Debtor pursuant to this Amended Modified Plan to pay or otherwise satisfy the Allowed Claims against such Reorganized Debtor, except as provided in any contract, instrument, or other agreement or document effecting a disposition to such surviving, resulting, or acquiring corporation, which may provide that another Reorganized Debtor will perform such obligations. L. Limited Substantive Consolidation 1. This Amended Modified Plan is premised upon the limited substantive consolidation of the Debtors solely for purposes of actions associated with the confirmation and consummation of this Amended Modified Plan, including but not limited to voting, confirmation and distribution. This Amended Modified Plan does not contemplate the merger or dissolution of any Debtor or the transfer or commingling of any asset of any Debtor, except to accomplish the distributions under this Amended Modified Plan, other than distributions on account of Intercompany Claims, which shall be made in the ordinary course of business following the Effective Date. Such limited substantive consolidation shall not effect (other than for Amended Modified Plan voting, treatment, and/or distribution purposes) (i) the legal and corporate structures of the Reorganized Debtors, subject to the right of the Debtors or Reorganized Debtors to effect Restructuring Transactions as provided in Article V.K herein; (ii) Equity Interests in the Subsidiaries or (iii) pre- and post-Petition Date guarantees that are required to be maintained (x) in connection with executory contracts or unexpired leases that were entered into during the Chapter 11 Cases or that have been or will be assumed; or (y) pursuant to the terms and conditions contained herein. 27 2. This Amended Modified Plan shall serve as a motion seeking entry of an order substantively consolidating the Chapter 11 Cases, as described herein. Unless an objection to substantive consolidation is made in writing by any creditor affected by this Amended Modified Plan as herein provided on or before five (5) days prior to the date that is fixed by the Bankruptcy Court as the last date on which acceptances to this Amended Modified Plan may be received, or such other date as may be fixed by the Bankruptcy Court, the Substantive Consolidation Order (which may be the Confirmation Order) may be entered by the Bankruptcy Court. In the event any such objections are timely filed, a hearing with respect thereto shall be scheduled by the Bankruptcy Court, which hearing may, but need not, coincide with the Confirmation Hearing. ARTICLE VI. EXECUTORY CONTRACTS AND UNEXPIRED LEASES A. Assumption and Rejection of Executory Contracts and Unexpired Leases Attached as an exhibit to the Amended Modified Disclosure Statement is a list of executory contracts and unexpired leases that the Debtors wish to reject. Such executory contracts and unexpired leases shall be deemed rejected by the Debtors on the Effective Date, and the entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such rejections pursuant to sections 365(a) and 1123 of the Bankruptcy Code. The Debtors may, in the future, identify additional executory contracts and unexpired leases that they may wish to reject and reserve the right to seek such rejection prior to the Effective Date. Any executory contracts or unexpired leases which (i) have not expired by their own terms on or prior to the Effective Date; (ii) have not been assumed, assumed and assigned or rejected prior to the Effective Date; (iii) have not been rejected pursuant to the terms of this Amended Modified Plan; or (iv) are not the subject of a motion to reject pending as of the Effective Date, shall be deemed assumed by the Debtors on the Effective Date, and the entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such assumptions pursuant to sections 365(a) and 1123 of the Bankruptcy Code. B. Rejection Claims; Cure of Defaults If the rejection of an executory contract or unexpired lease results in damages to the other party or parties to such contract or lease, any claim for such damages, if not heretofore evidenced by a Proof of Claim that has been Filed, shall be forever barred and shall not be enforceable against the Debtors, the Reorganized Debtors, or their properties, successors or assigns, unless a Proof of Claim is Filed and served upon counsel for the Debtors on or before thirty (30) days after the later to occur of (i) the Confirmation Date; and (ii) the date of entry of an order by the Bankruptcy Court authorizing rejection of a particular executory contract or unexpired lease. The Debtors believe that no cure payments pursuant to section 365(b)(1) of the Bankruptcy Code need to be made on any of the executory contracts and unexpired leases that they are assuming under this Amended Modified Plan because the Debtors are current on all of their obligations with respect to such contracts and leases and all prepetition obligations will have been satisfied under the Amended Modified Plan. If, however, a counterparty to any such executory contract or unexpired lease believes that cure payments are due pursuant to section 365(b)(1) of the Bankruptcy Code, or that there is a dispute regarding the ability of the Reorganized Debtors to provide "adequate assurance of future performance" within the meaning of the Bankruptcy Code under the contract or lease to be assumed, or there is a dispute with regard to any other matters pertaining to the assumption or the cure payments required by section 365(b)(1) of the Bankruptcy Code, such counterparty must File an objection to the assumption of its executory contract or unexpired lease by the Debtors not later than ten (10) days prior to the Confirmation Date. The Bankruptcy Court shall have, and exercise, jurisdiction over any such objection, and which objection shall be resolved by a Final Order. The effective date of the assumption of an executory contract or unexpired lease subject to any such objection shall be determined by any such Final Order. C. Indemnification and Reimbursement Obligations Pursuant to this Amended Modified Plan, the Reorganized Debtors shall assume the obligations of the Debtors, if any, to indemnify and reimburse the D&O Releasees against and for any obligations incurred pursuant to 28 articles or certificates of incorporation, codes of regulations, by-laws, applicable law or specific agreements, or any combination of the foregoing. ARTICLE VII. PROVISIONS GOVERNING DISTRIBUTIONS A. Manner of Payment Any payment in Cash to be made by the Debtors shall be made, at the election of the Debtors, by check drawn on a domestic bank or by wire transfer from a domestic bank. B. Distributions for Claims Allowed as of the Effective Date Except as otherwise required by the Bankruptcy Code or as may be ordered by the Bankruptcy Court, distributions to be made on the Effective Date on account of Claims that are Allowed as of the Effective Date and that are entitled to receive distributions under this Amended Modified Plan shall be made on the Effective Date or as soon as practicable thereafter. Distributions on account of Claims that become Allowed Claims after the Effective Date shall be made pursuant to Article VII and Article VIII hereof. C. Delivery of Distributions and Undeliverable or Unclaimed Distributions 1. Delivery of Distributions in General Distributions to the Holders of Allowed Claims who are Holders of record as of the Record Date shall be made at the address of such Holder as indicated on the books and records of the Debtors. Except as otherwise provided by the Amended Modified Plan or the Bankruptcy Code, distributions shall be made in accordance with the provisions of the applicable Indenture, participation agreement, loan agreement or analogous instrument or agreement, if any. Distributions of Class A Common Stock to the Holders of Allowed Senior Subordinated Note Claims shall be made directly to the Senior Subordinated Notes Indenture Trustee. Similarly, distributions of Class A Common Stock to Holders of Allowed Dominion Note Claims shall be made to the Indenture Trustee for the Dominion Notes. Distribution of Class C Common Stock shall be made to the Electing Non-GOF Holders, who shall contribute such Class C Common Stock to the SPE in exchange for SPE Equity and SPE Notes, pursuant to the terms of the SPE governing instruments. 2. Undeliverable Distributions a. Holding of Undeliverable Distributions. If any Allowed Claim Holder's distribution is returned to the Reorganized Debtors as undeliverable, no further distributions shall be made to such Holder unless and until the Reorganized Debtors are notified in writing of such Holder's then-current address, such that the distribution becomes deliverable. Undeliverable distributions shall remain in the possession of the Reorganized Debtors until such time as a distribution becomes deliverable. Undeliverable Cash shall not be entitled to any interest, dividends or other accruals of any kind. b. Failure to Claim Undeliverable Distributions. In an effort to ensure that all Holders of Allowed Claims receive their allocated distributions, the Reorganized Debtors shall File a listing of Holders of undeliverable distributions. This list will be maintained for as long as the Chapter 11 Cases remain open. Any Holder of an Allowed Claim that does not assert a Claim for an undeliverable distribution within two years after the Effective Date shall have his, her, or its Claim for such undeliverable distribution discharged and shall be forever barred from asserting any such Claim against the Reorganized Debtors or their property. In such cases, any Cash or New Polymer Common Stock held for distribution on account of such Claims shall become property of the Reorganized Debtors, free of any restrictions thereon. Nothing contained herein requires the Reorganized Debtors to attempt to locate any Holder of an Allowed Claim. c. Compliance with Tax Requirements. In connection with this Amended Modified Plan, to the extent applicable, the Reorganized Debtors shall comply with all tax withholding and reporting 29 requirements imposed by any government unit, and all distributions pursuant to this Amended Modified Plan shall be subject to such withholding and reporting requirements. 3. Time Bar to Cash Payments Checks issued by the Reorganized Debtors on account of Allowed Claims shall be null and void if not negotiated within ninety (90) days from and after the date of issuance thereof. Requests for reissuance of any check shall be made directly to the Reorganized Debtors by the Holder of the Allowed Claim with respect to which the check was originally issued. Any Claim in respect of such a voided check shall be made on or before the second (2nd) anniversary of the Effective Date. After such date, all Claims and respective voided checks shall be discharged and forever barred and the Reorganized Debtors shall retain all monies related thereto. D. Record Date and Distribution Record Date As of the close of business on the Record Date, the transfer registers for any instrument, security, or other documentation canceled pursuant to Article V.C herein shall be closed for voting purposes. From the Confirmation Date until the Distribution Notification date, Holders of Allowed Class 4 Claims may freely trade Allowed Class 4 Claims and the associated Subscription Rights. As of the close of business in the Distribution Notification Date, the transfer registers shall be closed for all Claims and Equity Interests. Each Reorganized Debtor shall have no obligation to recognize the transfer of any such instrument, security, or other documentation occurring after the Distribution Notification Date, and shall be entitled for all purposes herein to recognize and deal only with those Holders of record as of the close of business on the Distribution Notification Date, as the case may be. E. Timing and Calculation of Amounts to be Distributed Beginning on the Effective Date, the Reorganized Debtors, in their sole discretion and as frequently as reasonably practicable and efficient under the circumstances, shall make the distributions to the Holders of Allowed Claims in accordance with this Amended Modified Plan. Beginning on the date that is the end of each calendar quarter following the Effective Date, the Reorganized Debtors, in their discretion and as frequently and reasonably practicable and efficient under the circumstances, shall also make the distributions to Holders of Disputed Claims whose Claims were Allowed during the preceding calendar quarter, in accordance with this Amended Modified Plan. F. De Minimis and Fractional Distributions No Cash payment of less than ten dollars ($10.00) shall be made by the Reorganized Debtors on account of any Allowed Claim, unless a specific request therefore is made in writing by the Holder of any such Claim. In the event a Holder of an Allowed Claim is entitled to distribution that is not a whole dollar number, the actual payment or issuance made will reflect a rounding of such fractional portion of such distribution down or up to the nearest whole dollar, but in any case not to result in a distribution that exceeds total distribution authorized by this Amended Modified Plan for such Holder. No fractional shares of New Polymer will be issued. If any issuance of shares would otherwise call for issuance of a fraction of a share, (a) fractions 1/2 or greater shall be rounded to the next higher whole number, and (b) fractions of less than 1/2 shall be rounded to the next lower whole number. G. Setoffs Except as otherwise provided herein, the Reorganized Debtors may, pursuant to sections 502(d) or 553 of the Bankruptcy Code or applicable non-bankruptcy law, offset against any Allowed Claim, and the distributions to be made pursuant to this Amended Modified Plan on account of such Claim (before any distribution is made on account of such Claim), the Claims, rights, and Causes of Action of any nature that the Debtors or Reorganized Debtors may hold against the Holder of such Allowed Claim; provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim hereunder shall constitute a waiver or release by the Debtors or Reorganized Debtors of any such Claims, rights, and Causes of Action that the Debtors or Reorganized Debtors may possess against such Holder. 30 H. Surrender of Canceled Instruments or Securities 1. Generally Except as set forth in Section I of Article VII herein, as a condition precedent to receiving any distribution pursuant to this Amended Modified Plan on account of an Allowed Claim evidenced by the instruments, securities or other documentation canceled pursuant to Article V.C herein, the Holder of a Claim shall tender the applicable instruments, securities or other documentation evidencing the Holder's Claim to the Reorganized Debtors except as set forth herein. Any distributions pursuant to this Amended Modified Plan on account of any Claim evidenced by such instruments, securities, or other documentation shall, pending such surrender, be treated as an undeliverable distribution pursuant to Article VII.C hereof. 2. Old Polymer Common Stock Each record Holder of an Allowed Equity Interest representing Old Polymer Common Stock shall transmit the certificates representing its Old Polymer Common Stock to the Solicitation Agent in accordance with written instructions that the Reorganized Debtors will provide, as promptly as practicable following the Effective Date, to those record Holders. These instructions shall specify that delivery of stock certificates representing Old Polymer Common Stock will be effected, and risk of loss and title thereto will pass, only upon the proper delivery of stock certificates with a letter of transmittal in accordance with those instructions. All surrendered stock certificates shall be marked as canceled. 3. Failure to Surrender Canceled Instruments If any Holder of an Allowed Claim evidenced by an instrument, security, or other documentation canceled pursuant to Article V.C herein, fails to either tender such instrument, security, or other documentation or comply with the provisions of Article VII herein within one year after the Effective Date, its entitlement to a distribution pursuant to this Amended Modified Plan on account of such canceled instrument, security, or other documentation shall be discharged, and such Holder shall be forever barred from asserting such Claim against or interest in any Reorganized Debtor or its property. In such case, any property held for distribution on account of such Claim shall be disposed of pursuant to the provisions set forth in Article VII.C herein. I. Lost, Stolen, Mutilated or Destroyed Instruments or Securities Any Holder of an Allowed Claim on account of any instrument, security, or other documentation canceled pursuant to Article V.C herein that has been lost, stolen, mutilated or destroyed shall, in lieu of surrendering any such instrument, security or other documentation: (i) deliver to the Reorganized Debtors (or, in the case of the Senior Subordinated Notes, the applicable Senior Subordinated Notes Indenture Trustee) (A) an affidavit of loss reasonably satisfactory to the Reorganized Debtors (or, in the case of a Senior Subordinated Note, to the applicable Senior Subordinated Notes Indenture Trustee) setting forth the unavailability of such instrument, security, or other document; and (B) such additional security or indemnity as may reasonably be required by the Reorganized Debtors to hold the Reorganized Debtors (or, in the case of the Senior Subordinated Notes and the Dominion Notes, the applicable Indenture trustee) harmless from any damages, liabilities or costs incurred in treating such individual as a Holder of an Allowed Claim; and (ii) satisfy any other requirements under the applicable Senior Subordinated Note Indenture, any article or certificate of incorporation or by-law, or any other relevant document. Upon compliance with this Section of this Amended Modified Plan by a Holder of a Claim evidenced by such instrument, security or other documentation, such Holder shall, for all purposes under this Amended Modified Plan, be deemed to have surrendered such instrument, security or other documentation. J. Preservation of Subordination Rights All subordination rights and Claims relating to subordination of the Allowed Claim of any Creditor shall remain valid, enforceable and unimpaired in accordance with section 510 of the Bankruptcy Code or otherwise, except as otherwise provided in this Amended Modified Plan. 31 ARTICLE VIII. PROCEDURES FOR TREATMENT OF DISPUTED, CONTINGENT, AND UNLIQUIDATED CLAIMS A. Prosecution of Objections to Claims After the Confirmation Date, the Debtors and the Reorganized Debtors shall have the exclusive authority to File, settle or compromise (with the consent of GOF) withdraw or litigate to judgment, any objections to Claims. From and after the Confirmation Date, the Debtors and the Reorganized Debtors, with the consent of GOF, may settle or compromise any Disputed Claim without approval of the Bankruptcy Court. B. Estimation of Claims The Debtors or the Reorganized Debtors may, at any time, request that the Bankruptcy Court estimate any contingent or unliquidated Claim pursuant to section 502(c) of the Bankruptcy Code regardless of whether the Debtors or Reorganized Debtors previously have objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim at any time during the litigation concerning any objection to any Claims, including without limitation, during the pendency of any appeal relating to any such objection. Subject to the provisions of section 502(j) of the Bankruptcy Code, in the event that the Bankruptcy Court estimates any contingent or unliquidated Claim, the amount so estimated shall constitute the Allowed amount of such Claim. If the estimated amount constitutes a maximum limitation on the amount of such Claim, the Debtors may pursue supplementary proceedings to object to the allowance of such Claim. All of the aforementioned objection, estimation and resolution procedures are intended to be cumulative and not necessarily exclusive of one another. Claims may be estimated and subsequently compromised, settled, withdrawn or resolved by any mechanism approved by the Bankruptcy Court. C. Payments and Distributions on Disputed Claims Notwithstanding any provision herein to the contrary, except as otherwise agreed to by the Debtors or the Reorganized Debtors in their sole discretion, no partial payments and no partial distributions will be made with respect to a Disputed Claim until the resolution of such dispute by settlement or Final Order. In accordance with Article VII herein, as soon as reasonably practicable after a Disputed Claim becomes an Allowed Claim, the Holder of such Allowed Claim will receive all payments and distributions to which such Holder is then entitled under this Amended Modified Plan. Notwithstanding the foregoing, any Person or Entity who holds both an Allowed Claim(s) and a Disputed Claim(s) will receive the appropriate payment or distribution on the Allowed Claim(s), although, except as otherwise agreed to by the Debtors or the Reorganized Debtors in their sole discretion, no payment or distribution will be made on the Disputed Claim(s) until such dispute is resolved by settlement or Final Order. In the event there are Disputed Claims requiring adjudication and resolution, the Debtors reserve the right to, or, if so ordered by the Bankruptcy Court shall, establish appropriate reserves for potential payment of such Claims. D. Allowance of Claims Except as expressly provided herein or any order entered in the Chapter 11 Cases prior to the Effective Date (including the Confirmation Order), no Claim shall be deemed Allowed, unless and until such Claim is deemed Allowed under the Bankruptcy Code or by the Debtors or Reorganized Debtors, or the Bankruptcy Court enters a Final Order in the Chapter 11 Cases allowing such Claim. Except as expressly provided in this Amended Modified Plan or any order entered in the Chapter 11 Cases prior to the Effective Date (including the Confirmation Order), the Reorganized Debtors after Confirmation will have and retain any and all rights and defenses the Debtors had with respect to any Claim as of the Petition Date, including the Causes of Action referenced in Article X.C herein and Section III.J.3 of the Amended Modified Disclosure Statement and the Filing of any motions or other pleadings for estimation of the amount of disputed claims. All Claims of any Person or Entity that owes money to the Debtors shall be disallowed unless and until such Person or Entity pays the full amount it owes the Debtors. Any objection to an Administrative Expense Claim, Priority Claim, Secured Claim or Critical Business Relations Claims and Intercompany Claims must be Filed and served on or before one hundred and twenty (120) days after the Effective Date. 32 ARTICLE IX. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THIS AMENDED MODIFIED PLAN A. Conditions Precedent to Confirmation It shall be a condition precedent to the Confirmation of this Amended Modified Plan that the following conditions shall have been satisfied or waived pursuant to the terms and conditions contained herein: 1. The Clerk of the Bankruptcy Court shall have entered an order granting approval of the Amended Modified Disclosure Statement and finding that it contains adequate information pursuant to section 1125 of the Bankruptcy Code and that order shall have become a Final Order; and 2. The Substantive Consolidation Order and the Confirmation Order in form and substance acceptable to the Debtors and GOF shall have been signed by the Bankruptcy Court and duly entered on the docket for the Chapter 11 Cases by the Clerk of the Bankruptcy Court. B. Conditions Precedent to Consummation It shall be a condition to the Consummation of this Amended Modified Plan that the following conditions shall have been satisfied or waived pursuant to the provisions of Article IX.D herein: 1. The Confirmation Order and the Substantive Consolidation Order shall be Final Order(s); 2. The closing of the Exit Revolving Credit Facility and the Restructured Facilities shall have occurred; 3. The New Investment shall have been made by the Participating Allowed Class 4 Claim Holders; 4. The Senior Lenders shall have received the Senior Lender Paydown, the Chicopee Sale Proceeds, (provided, that the Chicopee Sale shall have closed prior to the Effective Date) and the Senior Lender Closing Prepayment as contemplated by the Bank Term Sheet; and 5. GOF shall have issued, or caused the issuance, of the Exit Letters of Credit for the benefit of the Postpetition Agent. C. Conditions Precedent to Closing of New Investment It shall be a condition to the closing of the New Investment and GOF's obligations as a standby purchaser that the following conditions, among others, shall have been satisfied or waived by GOF: 1. The closing of the Exit Revolving Credit Facility and the Restructured Facilities shall have occurred in accordance with this Amended Modified Plan. 2. GOF shall not have given Polymer written notice that GOF, in its sole discretion, has determined that the results of its environmental diligence review were not reasonably satisfactory. 3. The Debtors, GOF or New Polymer, as the case may be, shall have obtained all governmental consents and made all governmental filings required or reasonably advisable in connection with the transactions contemplated by the Amended Modified Plan (including without limitation, any consents and filings required or reasonably advisable pursuant to the Hart-Scott-Rodino Antitrust Act (the "HSR Act"), any applicable foreign antitrust law or regulation, and the New Jersey Industrial Site Recovery Act) prior to the applicable deadlines, filing periods or other timeframes associated with such consents and filings, and the applicable waiting period under the HSR Act or any applicable foreign antitrust law or regulation, if any, shall have expired or been terminated. 33 4. New Polymer's Certificate of Incorporation shall have been duly amended to reflect the changes set forth in this Amended Modified Plan. 5. New Polymer's Bylaws shall have been amended to reflect the changes set forth in this Amended Modified Plan. 6. Polymer's Shareholder Rights Plan shall be rejected pursuant to a Filed order, which order may be the Confirmation Order. 7. The Organizational Documents of each Reorganized Debtor and their direct or indirect subsidiaries shall be duly modified to reflect changes set forth in this Amended Modified Plan. 8. On or before the Confirmation Date, Zucker and Boyd shall execute and deliver a letter in the form of Exhibit L and Exhibit M, respectively, to the Amended Modified Disclosure Statement, unless this condition is waived in writing by GOF. D. Waiver of Conditions Precedent To the extent legally permissible, each of the conditions precedent set forth in Article IX.A and Article IX.B may be waived, in whole or in part, by the Debtors with the consent of GOF, the Prepetition Agent, the Postpetition Agent and the Committee. Any such waiver of a condition precedent shall be in writing and may be effected at any time, without notice or leave or order of the Bankruptcy Court and without any formal action. E. Effect of Non-Occurrence of Consummation If the Confirmation Order is vacated, this Amended Modified Plan shall be null and void in all respects and nothing contained in this Amended Modified Plan or the Amended Modified Disclosure Statement shall: (1) constitute a waiver or release of any Claims by or against, or any Equity Interests in, the Debtors; (2) prejudice in any manner the rights of the Debtors; or (3) constitute an admission, acknowledgment, offer or undertaking by the Debtors in any respect. ARTICLE X. RELEASE, INJUNCTIVE AND RELATED PROVISIONS A. Certain Mutual Releases Except as otherwise specifically provided herein, on and after the Effective Date, each of the Releasees, for good and valuable consideration, including, but not limited to, the commitment, obligation and service of each of the aforementioned individuals and entities to facilitate the expeditious reorganization of the Debtors and the implementation of the restructuring contemplated by this Amended Modified Plan, shall automatically be deemed to have released one another unconditionally and forever from any and all Claims, obligations, rights, suits, damages, Causes of Action, remedies and liabilities whatsoever, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any of the foregoing Persons or Entities would have been legally entitled to assert (in their own right, whether individually or collectively, or on behalf of the Holder of any Claim or Equity Interest or other Person or Entity), based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date, relating in any way to the Debtors, the Reorganized Debtors, the Chapter 11 Cases, this Amended Modified Plan, the Amended Modified Disclosure Statement, or any related agreements, instruments or other documents, except for (i) Claims arising under this Amended Modified Plan; and (ii) any intentional acts of the D&O Releasees, GOF and the Committee and Committee Members which constitute fraud and, when the party bringing the cause of action (or its respective employees, agents or advisors) did not have actual knowledge of such intentional acts (or the substance of such acts) as of the Effective Date; provided, however, with respect to any intentional acts which constitute fraud, the knowledge of former and existing officers and directors of Polymer or any of its Debtor Affiliates shall not be imputed to Polymer or New Polymer (before or after the Effective Date). With respect to any claim brought by the Reorganized Debtors in the nature of a derivative claim or otherwise (x) if the action is initiated by Non-GOF Holders, directly or indirectly, the actual knowledge of the Committee Members or of their and the Committee's 34 employees, agents or advisors who have provided advice in the Chapter 11 Cases shall determine whether or not the Debtors or the Reorganized Debtors had actual knowledge of the intentional acts as of the Effective Date; and (y) if the action is initiated by GOF, directly or indirectly, the actual knowledge of GOF or its employees, agents or advisors shall determine whether or not the Debtors or the Reorganized Debtors had actual knowledge of the intentional acts as of the Effective Date, provided, however, that the approval of the New Polymer Board of Directors of an action primarily initiated by the Non-GOF Holders or Non-GOF Board Members shall not change the determination of actual knowledge. Each of GOF and each Committee Member, after inquiry of its employees, agents and advisors who have provided advice in the Chapter 11 Cases, acknowledges and agrees that either (i) it has no actual knowledge of any intentional acts which constitute fraud, or could reasonably form the basis for a claim that such acts constitute fraud, as of the date hereof; or (ii) to the extent that either GOF or any Committee Member may have any actual knowledge of any such intentional acts which constitute fraud, or could reasonably form the basis for a claim that such acts constitute fraud, as of the date hereof, GOF or the applicable Committee Member, as the case may be, agrees that any claims based on such knowledge will be released on the Effective Date. Notwithstanding the foregoing, D&O Releasees shall not be released or discharged from contractual obligations to the Debtors or Reorganized Debtors with respect to employment and other agreements assumed pursuant to the Amended Modified Plan or otherwise. B. Limited Releases by Holders of Equity Interests and Claims On and after the Effective Date, each Holder of a Claim or Equity Interest who is voting on the Amended Modified Plan should make an election on their Ballot to either agree or not agree to the Releases described in the paragraph below. Any Holder of a Claim or Interest in Class 4 or 6 that does not make an election will be deemed to not agree to the Releases. Holders of Class 8 Claims, who are deemed to have rejected the Amended Modified Plan, shall be deemed to have not agreed to the Releases. Holders of Class 1, 3, 5 or 7 Claims (who are deemed to have accepted the Amended Modified Plan pursuant to section 1126 of the Bankruptcy Code) also shall be deemed not to have agreed to the Releases. This Release does not apply to (i) Holders of Class 2 Claims, (ii) GK/Ives or (iii) any Holder of an Allowed Class 4 Claim or Class 6 Equity Interest that did not specifically agree to the Limited Release. The Limited Release applies only to those Holders of Allowed Class 4 Claims and Class 6 Equity Interests who specifically agree to the Limited Releases. The Release unconditionally releases the Releasees from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, rights, suits, damages, causes of action, remedies and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that such Person or Entity would have been legally entitled to assert (whether individually or collectively), based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date in any way relating or pertaining to the Debtors or the Reorganized Debtors, the Debtors' Chapter 11 Cases, or the negotiation, formulation and preparation of this Amended Modified Plan or any related agreements, instruments or other documents. C. Preservation of Causes of Action The Debtors are currently investigating whether to pursue potential Causes of Action against certain Persons or Entities. The investigation has not been completed to date, and, subject to the Releases granted in Article X hereof, the Reorganized Debtors shall retain all rights on behalf of the Debtors to commence and pursue any and all Causes of Action (under any theory of law, including, without limitation, the Bankruptcy Code, and in any court or other tribunal including, without limitation, in an adversary proceeding Filed in the Chapter 11 Cases) discovered in such an investigation to the extent the Reorganized Debtors deem appropriate. Potential Causes of Action currently being investigated by the Debtors, which may but need not be pursued by the Debtors prior to the Effective Date and by the Reorganized Debtors after the Effective Date to the extent warranted include, without limitation, (i) a list of potential Claims and Causes of Action that will be set forth in the Amended Modified Plan Supplement to the extent determined as of the date thereof; and (ii) Preference Actions that will be set forth in the Amended Modified Plan Supplement to the extent determined as of the date thereof: 1. Any other Causes of Action, whether legal, equitable or statutory in nature, arising out of, or in connection with the Debtor's businesses or operations, including, without limitation, the following: possible claims against vendors, landlords, sublessees, assignees, customers or suppliers for warranty, 35 indemnity, back charge/set-off issues, overpayment or duplicate payment issues and collections/accounts receivables matters; deposits or other amounts owed by any creditor, lessor, utility, supplier, vendor, landlord, sublessee, assignee, or other Person or Entity; employee, management or operational matters; claims against landlords, sublessees and assignees arising from the various leases, subleases and assignment agreements relating thereto, including, without limitation, claims for overcharges relating to taxes, common area maintenance and other similar charges; financial reporting; environmental, and product liability matters; actions against insurance carriers relating to coverage, indemnity or other matters; counterclaims and defenses relating to notes or other obligations; contract or tort claims which may exist or subsequently arise; 2. Any and all avoidance actions pursuant to any applicable section of the Bankruptcy Code, including, without limitation sections 544, 545, 547, 548, 549, 550, 551, 553(b) and/or 724(a) of the Bankruptcy Code, arising from any transaction involving or concerning any of the Debtors; and 3. Any and all Causes of Action listed in the Schedule of Causes of Action set forth in the Amended Modified Plan Supplement. In addition, there may be numerous other Causes of Action which currently exist or may subsequently arise that are not set forth herein, in the Cause of Action Summary or in the List of Retained Causes of Action, because the facts upon which such Causes of Action are based are not currently or fully known by the Debtors and, as a result, can not be raised during the pendency of the Chapter 11 Cases (collectively, the "Unknown Causes of Action"). The failure to list any such Unknown Cause of Action herein, or in the Cause of Action Summary or the List of Retained Causes of Action, is not intended to limit the rights of the Reorganized Debtors to pursue any Unknown Cause of Action to the extent the facts underlying such Unknown Cause of Action subsequently become fully known to the Debtors. Unless Causes of Action against a Person or Entity are expressly waived, relinquished, released, compromised or settled in the Amended Modified Plan or any Final Order, the Debtors expressly reserve all Causes of Action and Unknown Causes of Action, including the Causes of Action described herein and in the Causes of Action Summary and the List of Retained Causes of Action, as well as any other Causes of Action or Unknown Causes of Action, for later adjudication and therefore, no preclusion doctrine, including, without limitation, the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable or otherwise) or laches shall apply to such Causes of Action upon or after the confirmation or consummation of the Amended Modified Plan. In addition, the Debtors expressly reserve the right to pursue or adopt any claims alleged in any lawsuit in which the Debtors are a defendant or an interested party, including the lawsuits described in the Amended Modified Disclosure Statement, against any Person, including, without limitation, the plaintiffs and co-defendants in such lawsuits. Except as otherwise provided in the Amended Modified Plan or in any contract, instrument, release, Indenture or other agreement entered into in connection with the Amended Modified Plan, in accordance with section 1123(b)(3) of the Bankruptcy Code, any Claims, rights, and Causes of Action that the respective Debtors, Estates, or Post-Confirmation Estates may hold against any Person or Entity, including but not limited to those Causes of Action listed in the Amended Modified Disclosure Statement, shall vest in the Reorganized Debtors, and the Reorganized Debtors shall retain and may exclusively enforce, as the authorized representatives of the respective Estates and Post-Confirmation Estates, any and all such Claims, rights, or Causes of Action. The Reorganized Debtors may pursue any and all such Claims, rights, or Causes of Action, as appropriate, in accordance with the best interests of the Reorganized Debtors. Subject to Article VIII.A herein, the Reorganized Debtors shall have the exclusive right, authority, and discretion to institute, prosecute, abandon, settle, or compromise any and all such Claims, rights, and Causes of Action without the consent or approval of any third party and without any further order of the Bankruptcy Court. The Debtors specifically waive any and all Claims, rights and Causes of Action accruing prior to the Confirmation Date that they or their respective estates may have against the Senior Lenders, the Prepetition Agent, GOF, CSFB Global Opportunities Advisers L.L.C., MatlinPatterson Global Advisers LLC or the Committee. 36 D. Exculpation The Releasees shall neither have nor incur any liability to any Person or Entity for any act taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, implementation, administration, Confirmation or Consummation of this Amended Modified Plan, the Amended Modified Disclosure Statement or any contract, instrument, release or other agreement or document created or entered into in connection with this Amended Modified Plan (except for any obligations arising in the ordinary course of business), or any other act taken or omitted to be taken in connection with the Chapter 11 Cases; provided, however, that the foregoing provisions of this Article X.D shall have no effect on the liability of any Person or Entity that results from any such act or omission that is determined in a Final Order to have constituted gross negligence or willful misconduct; provided, however, that exculpation for any such acts or omissions shall remain subject to the Bankruptcy Court's potential future review, whether sua sponte or at the request of a party-in-interest. E. Injunction From and after the Effective Date, the Releasees, all Persons and Entities specifically and expressly agreeing to the Limited Release and all Persons and Entities to whom the Exculpation applies are permanently enjoined from commencing or continuing in any manner, any suit, action or other proceeding, on account of or respecting any Claim, demand, liability, obligation, debt, right, Cause of Action, interest or remedy exculpated, released or to be released as to such Person or Entity pursuant to this Article. F. Discharge of Claims and Termination of Equity Interests Except as otherwise provided in the Amended Modified Plan, (a) the rights afforded in the Amended Modified Plan and the treatment of all Claims and Equity Interests therein, shall be in exchange for and in complete satisfaction, discharge and release of Claims and Equity Interests of any nature whatsoever, including any interest accrued on such Claims from and after the Petition Date, against the Debtors and the Debtors-in-Possession, or any of their assets or properties, (b) on the Effective Date, all such Claims against, and Equity Interests in the Debtors shall be satisfied, discharged and released in full and (c) all Persons and Entities shall be precluded from asserting against the Reorganized Debtors, their successors or their assets or properties any other or further Claims or Equity Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. ARTICLE XI. RETENTION OF JURISDICTION Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain such jurisdiction over the Chapter 11 Cases after the Effective Date as is legally permissible, including without limitation, jurisdiction to: A. allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or unsecured status of any Claim, including the resolution of any request for payment of any Administrative Expense Claim and the resolution of any and all objections to the allowance or priority of Claims; B. grant or deny any applications for allowance of compensation or reimbursement of expenses authorized pursuant to the Bankruptcy Code or this Amended Modified Plan, for periods ending on or before the Confirmation Date; C. resolve any matters related to the assumption, assumption and assignment, or rejection of any executory contract or unexpired lease to which any of the Debtors is a party or with respect to which any of the Debtors may be liable and to hear, determine and, if necessary, liquidate any Claims arising therefrom; D. ensure that distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of this Amended Modified Plan, including without limitation ruling on any motion Filed pursuant to Article VIII herein and resolving any disputes concerning any distributions contemplated in or relating to Article VII herein; 37 E. decide or resolve any motions, adversary proceedings, contested or litigated matters and any other matters and grant or deny any applications involving the Debtors that may be pending on the Effective Date; F. enter such orders as may be necessary or appropriate to implement or consummate the provisions of this Amended Modified Plan and all contracts, instruments, releases, Indentures and other agreements or documents created in connection with this Amended Modified Plan or the Amended Modified Disclosure Statement; G. resolve any cases, controversies, suits or disputes that may arise in connection with the Consummation, interpretation or enforcement of this Amended Modified Plan or any Person's or Entity's obligations incurred in connection with this Amended Modified Plan; H. issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any Person or Entity with the Consummation or enforcement of this Amended Modified Plan, except as otherwise provided herein; I. resolve any cases, controversies, suits or disputes with respect to the releases, injunction and other provisions contained in Article X herein and enter such orders as may be necessary or appropriate to implement such releases, injunction and other provisions; J. enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked or vacated; K. determine any other matters that may arise in connection with or relate to this Amended Modified Plan, the Confirmation Order or any contract, instrument, release, Indenture or other agreement or document created in connection with this Amended Modified Plan or the Amended Modified Disclosure Statement; and L. enter an order and/or final decree closing the Chapter 11 Cases. ARTICLE XII. MISCELLANEOUS PROVISIONS A. Dissolution of Committee On the Effective Date, the Committee shall dissolve and the Committee Members, and the Professionals retained by the Committee shall be released and discharged from all rights and duties arising from, or related to the Chapter 11 Cases. B. Payment of Statutory Fees All fees payable pursuant to 28 U.S.C. ss. 1930, as determined by the Bankruptcy Court at the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or before the Effective Date. C. Fees and Expenses On the Effective Date, in consideration of GOF acting as Standby Purchaser for the New Investment, and in consideration of GOF's role in facilitating a consensual resolution of the disputes among the Plan Parties and the Senior Lenders Steering Committee, New Polymer shall pay GOF a standby purchaser fee of $2 million plus a plan facilitation fee of $2 million. GOF and New Polymer shall support payment in full of all the Committee's reasonable documented professionals' fees and expenses and those of Committee Members (for actions taken in these Chapter 11 Cases as Committee Members), subject to approval of all such fees and expenses by the bankruptcy court, and shall support any reasonable documented request for payment by White & Case LLP, The McNair Law Firm, P.A., and Loeb Partners for work done prior to the commencement of these cases or prior to the retention of Kasowitz, Benson, Torres & Friedman LLP. GOF and the Committee shall support payment in full of all Polymer's reasonable documented legal fees and expenses, subject to approval of all such fees and expenses by the Bankruptcy Court. 38 On the Effective Date, in accordance with the Bank Term Sheet, GOF shall receive a fee of 2% ($500,000) of the face amount for posting, or causing to be posted, the Exit Letters of Credit. Upon any drawing under the Exit Letters of Credit (or other advances made, or caused to be made, by GOF solely in lieu of a drawing under the Exit Letters of Credit to make the amortization payments under the Restructured Facilities from the Effective Date through December 31, 2004, which amount shall not exceed $25 million), New Polymer shall issue New Senior Subordinated Notes in a face amount equal to such drawing (or other advance). D. Maintenance of Director and Officer Liability Insurance New Polymer shall cause to be maintained in effect for six years from the Effective Date, the current policies of the directors' and officers' liability insurance maintained by Polymer (provided that New Polymer may substitute therefore policies of at least the same coverage containing terms and conditions which are not materially less advantageous) with respect to matters or events occurring on or prior to the Effective Date to the extent available; provided, however, that in no event shall New Polymer be required to expend more than an amount per year in excess of 200% of the per annum premiums for such insurance paid by New Polymer as of the Effective Date to maintain or procure insurance coverage pursuant hereto; and, provided further, that if the annual premiums of such insurance coverage exceed such amount, New Polymer shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount. E. Discharge of Debtors Except as otherwise provided herein, on the Effective Date: (1) the rights afforded herein and the treatment of all Claims and Equity Interests therein, shall be in exchange for and in complete satisfaction, discharge and release of Claims and Equity Interests of any nature whatsoever, including any interest accrued on such Claims from and after the Petition Date, against the Debtors and the Debtors in Possession, or any of their assets, property, or Estates; (2) this Amended Modified Plan shall bind all Holders of Claims against, and Equity Interests in, the Debtors and Debtors in Possession, and the Debtors' liability with respect thereto shall be extinguished completely, including, without limitation, any liability of the kind specified under section 502(g) of the Bankruptcy Code; and (3) all Persons and Entities shall be precluded from asserting against the Debtors, the Estates, and the Reorganized Debtors, their successors and assigns, their assets and properties, any other Claims or Equity Interests based upon any documents, instruments, or any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date. F. Effectuating Documents, Further Transactions and Corporate Action Each of the Debtors and the Reorganized Debtors are authorized to execute, deliver, file or record such contracts, instruments, releases and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement and further evidence the terms and conditions herein and the notes and securities issued pursuant to the terms and conditions herein, including, but not limited to, all documents related to the Exit Facility. Prior to, on or after the Effective Date (as appropriate), all matters provided for under this Amended Modified Plan that would otherwise require approval of the shareholders or directors of the Debtors or the Reorganized Debtors shall be deemed to have occurred and shall be in effect prior to, on or after the Effective Date (as appropriate) pursuant to the applicable general corporation law of each state in which the respective Debtors or Reorganized Debtors are organized without any requirement of further action by the shareholders or directors of the Debtors or the Reorganized Debtors. G. Modification of Amended Modified Plan Subject to the limitations contained herein, (1) the Debtors reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify this Amended Modified Plan prior to the entry of the Confirmation Order and (2) after the entry of the Confirmation Order, the Debtors or the Reorganized Debtors, as the case may be, may, upon order of the Bankruptcy Court, amend or modify this Amended Modified Plan, in accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any 39 inconsistency in this Amended Modified Plan in such manner as may be necessary to carry out the purpose and intent of this Amended Modified Plan. H. Revocation of Amended Modified Plan The Debtors reserve the right, at any time prior to the entry of the Confirmation Order, to revoke and withdraw this Amended Modified Plan. I. Successors and Assigns The rights, benefits and obligations of any Person or Entity named or referred in this Amended Modified Plan shall be binding on, and shall inure to the benefit of, any heir, executor, administrator, successor or assign of such Person or Entity. J. Reservation of Rights Except as expressly set forth herein, this Amended Modified Plan shall have no force or effect unless the Bankruptcy Court shall enter the Confirmation Order. The filing of this Amended Modified Plan, any statement or provision contained in this Amended Modified Plan, or the taking of any action by the Debtors or Debtors-in-Possession with respect to this Amended Modified Plan shall not be and shall not be deemed to be an admission or waiver of any rights of the Debtors or Debtors-in-Possession with respect to the Holders of Claims or Equity Interests. K. Section 1146 Exemption Pursuant to section 1146(c) of the Bankruptcy Code, under this Amended Modified Plan, (1) the issuance, distribution, transfer, or exchange of any debt, Equity Security or other interest in the Debtors or Reorganized Debtors; (2) the creation, modification, consolidation or recording of any mortgage, deed or trust, or other security interest, or the securing of additional indebtedness by such or other means (whether (a) in connection with the issuance and distribution of any debt, Equity Security, or other interest in the Debtors or Reorganized Debtors, (b) the Exit Revolving Credit Facility, or (c) otherwise in furtherance of, or in connection with, this Amended Modified Plan); (3) the making, assignment, or recording of any lease or sublease; or (4) the making, delivery, or recording of any deed or other instrument of transfer under, in furtherance of, or in connection with, this Amended Modified Plan, including any deeds, bills of sale, assignments or other instrument of transfer executed in connection with any transaction arising out of, contemplated by, or in any way related to this Amended Modified Plan, shall not be subject to any document recording tax, mortgage recording tax, stamp tax, or similar tax or government assessment, and the appropriate state or local government official or agent shall be directed by the Bankruptcy Court to forego the collection of any such tax or government assessment and to accept for filing and recording any of the foregoing instruments or other documents without the payment of any such tax or government assessment. L. Further Assurances The Debtors, the Reorganized Debtors, all Holders of Allowed Claims receiving distributions under this Amended Modified Plan, and all other parties in interest shall, from time to time, prepare, execute and deliver any agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of this Amended Modified Plan. M. Term of Existing Injunctions or Stays Unless otherwise provided in the Confirmation Order or herein, all injunctions or stays in effect in the Chapter 11 Cases, pursuant to sections 105, 362 or 525 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date. 40 N. Post Effective Date Fees and Expenses From and after the Effective Date, the Reorganized Debtors shall, in the ordinary course of business and without the necessity for any approval by the Bankruptcy Court, pay the reasonable professional fees and expenses incurred by the Reorganized Debtors related to the Consummation and to the implementation of this Amended Modified Plan. O. Severability The provisions of this Amended Modified Plan shall not be severable unless such severance is agreed to by the Debtors or Reorganized Debtors, as applicable, and such severance would constitute a permissible modification of this Amended Modified Plan pursuant to section 1127 of the Bankruptcy Code. P. Conflicts To the extent any provision of the Amended Modified Disclosure Statement, and any documents executed in connection with the Confirmation Order (or any exhibits, schedules, appendices, supplements or amendments to the foregoing) conflicts with or is in any way inconsistent with the terms of this Amended Modified Plan, the terms and provisions of this Amended Modified Plan shall govern and control. Q. Notices All notices, requests, and demands to or upon the Debtors or the Reorganized Debtors to be effective shall be in writing, including by facsimile transmission, and unless otherwise expressly provided herein, shall be deemed to have been duly given or made when actually delivered to all of the following or, in the case of notice by facsimile, when received by all of the following, addressed as follows or to such other addresses as Filed with the Bankruptcy Court. Polymer Group, Inc. PO Box 5069 4838 Jenkins Avenue North Charleston, SC 29405 Attention: Jerry Zucker James G. Boyd Telephone: (843) 566-7293 Telecopier: (843) 308-0104 With a copy to: Kirkland & Ellis Aon Building 200 East Randolph Drive Chicago, Illinois 60601 Attention: James A. Stempel, Esq. Roger J. Higgins, Esq. Telephone: (312) 861-2000 Telecopier: (312) 861-2200 Nelson Mullins Riley & Scarborough, LLP Keenan Building, Third Floor 1330 Lady Street P.O. Box 11070 (29211) Columbia, SC 29201 Attention: George B. Cauthen, Esq. Telephone: (803) 799-2000 Telecopier: (803) 256-7500 41 MatlinPatterson Global Advisers LLC 520 Madison Avenue New York, NY 10022 Attention: Ramon Betolaza Lap Chan Telecopier: (212) 651-4014 Kasowitz, Benson, Torres & Friedman, LLP 1633 Broadway New York, NY 10019 Attention: David S. Rosner, Esq. Robert M. Novick, Esq. Telephone: (212) 506-1700 Telecopier: (212) 506-1800 42 R. Closing of Cases The Reorganized Debtors shall promptly, upon the full administration of the Chapter 11 Cases, File with the Bankruptcy Court all documents required by Fed. R. Bankr. P. 3022 and any applicable order of the Bankruptcy Court. Respectfully submitted, Polymer Group, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- PGI Polymer, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- PGI Europe, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- Chicopee, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- FiberTech Group, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- 43 Technetics Group, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- Fibergol Corporation, Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- Fabrene Corp., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- Fabrene Group L.L.C., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- PNA Corp., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- FNA Polymer Corp., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- 44 FNA Acquisition, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- Loretex Corporation, Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- Dominion Textile (USA) Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- Poly-Bond Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- PolyIonix Separation Technologies, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- FabPro Oriented Polymers, Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- 45 Pristine Brands Corporation,, Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- 46 PGI Asset Management Company, Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- PGI Servicing Company, Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- Bonlam (S.C.), Inc., Debtor and Debtor-in-Possession By: ----------------------- Name: --------------------- Title: -------------------- -----END PRIVACY-ENHANCED MESSAGE-----