<PAGE>

                                                                    Exhibit 10.1
                                                                    ------------

                                                                  EXECUTION COPY


                                AMENDMENT NO. 3


          AMENDMENT NO. 3 dated as of April 9, 1999, between Polymer Group, Inc.
("PGI"); each of the other "Borrowers" identified under the caption "BORROWERS"
on the signature pages hereto, each of the Domestic Non-Borrower Guarantors
identified under the caption "DOMESTIC NON-BORROWER GUARANTORS" on the signature
pages hereto; each of the lenders that is a signatory hereto identified under
the caption "LENDERS" on the signature pages hereto; and THE CHASE MANHATTAN
BANK, as administrative agent for the Lenders (in such capacity, together with
its successors in such capacity, the "Administrative Agent").

          PGI, the other Borrowers, the Domestic Non-Borrower Guarantors, the
Lenders referred to therein and the Administrative Agent are parties to a Second
Amended, Restated and Consolidated Credit Agreement dated as of July 3, 1997 (as
heretofore amended, the "Credit Agreement"), providing for the Lenders to extend
credit (by way of revolving credit loans, term loans and letters of credit) to
the Borrowers in U.S. Dollars and in certain Alternative Currencies in an amount
at any time not exceeding U.S. $450,000,000. PGI has now requested that the
Lenders extend additional credit to PGI by way of an additional single-draw term
loan facility in U.S. Dollars in the amount of U.S. $50,000,000 to be used by
PGI to partially finance capital expenditures in connection with a planned
capital expansion program including expansion of its Miratec and Miralace
product lines and capital expansion in respect of nonwovens manufacturing
capacity in Colombia and in China. PGI, the other Borrowers, the Domestic Non-
Borrower Guarantors, the Lenders and the Administrative Agent wish to amend the
Credit Agreement in order to provide for such additional credit and in certain
other respects, and, accordingly, the parties hereto hereby agree as follows:

          Section 1.  Definitions.  Capitalized terms used but not otherwise
defined herein have the meanings given them in the Credit Agreement.

          Section 2.  Amendments Requiring Consent of Majority Lenders. Subject
to the execution and delivery to the Administrative Agent of this Amendment No.
3 by the Majority Lenders and each Obligor, but effective as of the date hereof,
the Credit Agreement shall be amended as follows:

          Section 2.01.  General.  References in the Credit Agreement (including
references to the Credit Agreement as amended hereby) to "this Agreement" (and
indirect references such as "hereunder", "hereby", "herein" and "hereof") shall
be deemed to be references to the Credit Agreement as amended by this Section 2.

          Section 2.02.  Definitions.  Section 1.01 of the Credit Agreement
shall be amended by adding the following new definitions (to the extent not
already included in said Section 1.01) and inserting the same in the appropriate
alphabetical locations and amending in
<PAGE>

                                      -2-

their entirety the following definitions (to the extent already included in said
Section 1.01), as follows:

          "Alternative Currency" shall mean, at any time, Dutch Guilders,
     Canadian Dollars or Euros, so long as at such time, (i) such Currency is
     freely transferable and convertible into U.S. Dollars in the London foreign
     exchange market, (ii) no central bank or other governmental authorization
     in the country of issue of such Currency is required to permit use of such
     Currency by any Lender for making any Loan hereunder and/or to permit the
     relevant Borrower to borrow and repay the principal thereof and to pay the
     interest thereon, unless such authorization has been obtained, and (iii) in
     the case of Dutch Guilders or Euros, also so long as at such time such
     Currency is dealt with in the London interbank deposit market.

          "EMU" shall mean economic and monetary union as contemplated in the
     Treaty on European Union.

          "EMU Legislation" shall mean legislative measures of the European
     Council for the introduction of, changeover to or operation of a single or
     unified European currency (whether known as the euro or otherwise), being
     in part the implementation of the third stage of EMU.

          "Euro" shall mean the single currency of Participating Member States
     of the European Union, which shall be a Currency under this Agreement.

          "Euro Unit" shall mean a currency unit of the Euro.

          "Dividend Payment" shall mean, with respect to any Person, dividends
     (in cash, Property or obligations) on, or other payments or distributions
     on account of, or the setting apart of money for a sinking or other
     analogous fund for, or the purchase, redemption, retirement or other
     acquisition of, any shares of any class of stock of such Person or of any
     warrants, options or other rights to acquire the same (or to make any
     payments, such as "phantom stock" payments, where the amount thereof is
     calculated with reference to the fair market or equity value of such Person
     or any of its Subsidiaries), but excluding dividends payable solely in
     shares of common stock of such Person and excluding also any dividends or
     other distributions made by any Wholly Owned Restricted Subsidiary to PGI
     or to any other Wholly Owned Restricted Subsidiary. For purposes hereof,
     the amount of any Dividend Payment made by any Restricted Subsidiary that
     is not a Wholly Owned Restricted Subsidiary shall be deemed to be equal to
     the amount of such Dividend Payment that is made to holders of the equity
     interests in such Restricted Subsidiary other than PGI and its Wholly Owned
     Restricted Subsidiaries.
<PAGE>

                                      -3-

          "Dutch Guilders" and "GL" shall mean the National Currency Unit of the
     Netherlands.

          "Eurocurrency Loans" shall mean Loans denominated in either U.S.
     Dollars, Dutch Guilders or Euros, the interest rates on which are
     determined (i) on the basis of rates referred to in the definition of
     "Eurocurrency Base Rate" in this Section 1.01 or (ii) as set forth in
     Section 12.20(d) hereof.

          "Euroguilder Loans" shall mean Eurocurrency Loans that are denominated
     in Dutch Guilders or Euros.

          "Fixed Charges Ratio" shall mean, as at any date, the ratio of (a)
     EBITDA for the period of four fiscal quarters ending on or most recently
     ended prior to such date minus Capital Expenditures for such period (except
     that, for any period ending on or before the fiscal year ending on or
     nearest to December 31, 2000, that portion, up to an aggregate amount equal
     to U.S. $200,000,000, of Capital Expenditures, for the relevant period,
     made by PGI and its Restricted Subsidiaries in connection with expansion of
     its Miratec and Miralace product lines and capital expansion in respect of
     nonwovens manufacturing capacity in Colombia and in China, shall be
     excluded) to (b) Debt Service for such period.

          "Joint Venture Restricted Subsidiary" shall mean any Restricted
     Subsidiary of PGI, established as a joint venture with one or more other
     joint venture parties, in which at least 80% of the aggregate outstanding
     ownership interests on a fully-diluted basis in such Restricted Subsidiary
     is owned by PGI and/or a Wholly Owned Restricted Subsidiary of PGI.

          "National Currency Unit" shall mean a unit of any Currency (other than
     a Euro Unit) of a Participating Member State.

          "Participating Member State" shall mean each state so described in any
     EMU Legislation.

          "Principal Financial Center" shall mean, in the case of any Currency,
     the principal financial center where such Currency is cleared and settled,
     as determined by the Administrative Agent.

          "Target Operating Day" shall mean any day that is not (i) a Saturday
     or Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on
     which the Trans-European Real-time Gross Settlement Operating System (or
     any successor settlement system) is not operating (as determined by the
     Administrative Agent).
<PAGE>

                                      -4-

          "Treaty on European Union" shall mean the Treaty of Rome of March 25,
     1957, as amended by the Single European Act 1986 and the Maastricht Treaty
     (which was signed at Maastricht on February 7, 1992, and came into force on
     November 1, 1993), as amended from time to time.

          Section 2.03.  Payments.  Section 4.01(a) of the Credit Agreement
shall be deleted in its entirety and replaced with the following:

          "(a) Except to the extent otherwise provided herein, all payments of
     principal, interest, Reimbursement Obligations and other amounts (other
     than the principal of and interest on Loans made in an Alternative
     Currency) to be made by the Borrowers under this Agreement and the Notes,
     and, except to the extent otherwise provided therein, all payments to be
     made by the Obligors under any other Basic Document, shall be made in U.S.
     Dollars, and all payments of principal and interest on Loans made in an
     Alternative Currency shall be made in such Alternative Currency, in each
     case in immediately available funds, without deduction, set-off or
     counterclaim, to the Payment Office for the applicable Currency, not later
     than 1:00 p.m. New York time (in the case of such payments to be made in
     U.S. Dollars) or 10:00 a.m. local time in the location of the relevant
     Payment Office (in the case of payments to be made in an Alternative
     Currency) on the date on which such payment shall become due (each such
     payment made after such time on such due date to be deemed to have been
     made on the next succeeding Business Day and interest shall be payable in
     respect of any principal so extended for the period of such extension)."

          Section 2.04.  Indebtedness.  Section 9.07(k) of the Credit
Agreement shall be deleted in its entirety and replaced with the following:

          "(k) additional Indebtedness of the Borrowers (including Indebtedness
     secured by Liens permitted under Section 9.06(i) hereof and, to the extent
     relating to Liens described in Section 9.06(i), under 9.06(j) hereof) so
     long as the aggregate principal amount thereof does not exceed U.S.
     $50,000,000 at any one time outstanding."

          Section 2.05.  Investments in Joint Ventures.  Section 9.08(d) of the
Credit Agreement shall be deleted in its entirety and replaced with the
following:

          "(d) Investments by any Group Member in any Wholly Owned Restricted
     Subsidiary (other than in Bonlam, Fabrene or their respective Subsidiaries
     and other than any Resulting Nonwovens Entity that is not incorporated or
     otherwise formed under the laws of the United States of America or any of
     its states, as to which clauses (e), (f), (g) and (h) below shall apply)
     and Investments after the effectiveness of the amendments provided for in
     Section 2 of Amendment No. 3 hereto in any Joint Venture Restricted
     Subsidiary, provided that (i) the aggregate amount of such Investments in
     Joint Venture Restricted Subsidiaries shall not exceed U.S. $100,000,000,
     (ii) no such Investment shall
<PAGE>

                                      -5-

     be made in any Joint Venture Restricted Subsidiary if such Joint Venture
     Restricted Subsidiary shall at any time have been a Wholly Owned Restricted
     Subsidiary and (iii) if any Joint Venture Restricted Subsidiary shall at
     any time become a Wholly Owned Restricted Subsidiary, the Investments in
     such Joint Venture Restricted Subsidiary shall no longer be subject to such
     U.S. $100,000,000 limit;"

          Section 2.06.  Investments.  The final sentence of Section 9.08 of the
Credit Agreement shall be deleted in its entirety and replaced with the
following:

          "The aggregate amount of an Investment at any one time outstanding for
     purposes of clauses (d) and (k) above, shall be deemed to be equal to (A)
     the aggregate amount of cash, together with the aggregate fair market value
     of Property, loaned, advanced, contributed, transferred or otherwise
     invested that gives rise to such Investment minus (B) the aggregate amount
     of dividends, distributions or other payments received in cash in respect
     of such Investment; the amount of an Investment shall not in any event be
     reduced by reason of any write-off of such Investment.

          Section 2.07.  Restricted Payments.  Section 9.09 of the Credit
Agreement shall be deleted in its entirety and replaced with the following:

          "9.09  Restricted Payments.  No Obligor will, nor will it permit any
     of its Restricted Subsidiaries to, make any Restricted Payments at any time
     during any fiscal year, provided that PGI or a Joint Venture Restricted
     Subsidiary may make Restricted Payments in cash so long as:

               (i) no Default shall have occurred and be continuing, and after
          giving effect to such Restricted Payment no Default shall have
          occurred and be continuing; and

               (ii) the sum of the aggregate amount of such Restricted Payments
          made by PGI plus the aggregate amount of such Restricted Payments made
          by all Joint Venture Restricted Subsidiaries during the period (the
          "Determination Period") from and including December 28, 1996 to and
          including the date of such Restricted Payment shall not exceed an
          amount equal to the sum of (x) U.S. $25,000,000 plus 50% of
          Consolidated Net Income (to the extent positive) for each full fiscal
          year included in the Determination Period minus (y) 100% of
          Consolidated Net Income (to the extent negative) for each full fiscal
          year included in the Determination Period plus (z) the aggregate
          amount of dividends, distributions or other payments received by PGI
          or any of its Restricted Subsidiaries in cash in respect of any
          Investment constituting a Restricted Payment hereunder, and the
          aggregate amount received in cash in respect of the
<PAGE>

                                      -6-

          sale or other disposition or any Investments constituting a Restricted
          Payment hereunder (but shall not in any event be reduced by reason of
          any write-off of any such Investment).

          Notwithstanding the foregoing, PGI may make cash payments to officers
     and employees in respect of shares of stock (or options therefor) granted
     to such officers and employees upon the termination of employment of such
     officer or employee (so long as the aggregate amount thereof paid in any
     single fiscal year shall not exceed U.S. $750,000) (and such cash payments
     shall not be included in determining the amount of Restricted Payments
     permitted above).

          Section 2.08.  Leverage Ratio.  Section 9.10(a) of the Credit
Agreement shall be deleted in its entirety and replaced with the following:

          "(a) Leverage Ratio.  PGI will not permit the Leverage Ratio to exceed
     the following respective ratios at any time during the following respective
     periods:

<TABLE>
<CAPTION>
          Period                                                     Ratio
          ------                                                     -----
          <S>                                                       <C>

          From the Effective Date through
           but excluding the last day
           of the first fiscal quarter in 2000                      5.85 to 1

          From the last day of the first fiscal
           quarter in 2000 through but excluding the
           last day of the first fiscal quarter in 2001             5.25 to 1

          From the last day of the first fiscal
           quarter in 2001 through but excluding the
           last day of the first fiscal quarter in 2002             4.75 to 1

          From the last day of the first fiscal
           quarter in 2002 through but excluding the
           last day of the first fiscal quarter in 2003             4.50 to 1

          From the last day of the first fiscal
           quarter in 2003 and at all times thereafter              4.25 to 1
</TABLE>
<PAGE>

                                      -7-

          Section 2.09.  Year 2000 Issues.  Section 9 of the Credit Agreement
shall be amended by adding the following new Section 9.19:

          "9.19.  Year 2000 Issues.  Any reprogramming required to permit the
     proper functioning, prior to, during and following the year 2000, of (i)
     the Borrower's computer systems and (ii) equipment containing embedded
     microchips (including systems and equipment supplied by others or with
     which the Borrower's systems interface) which is material to the operation
     of the Borrower's business and the testing of all such systems and
     equipment, as so reprogrammed, will be completed in all material respects
     prior to October 2, 1999. The cost to the Borrower of such reprogramming
     and testing and of the reasonably foreseeable consequences of year 2000 to
     the Borrower (including, without limitation, reprogramming errors and the
     failure of others' systems or equipment) will not result in a Default or a
     Material Adverse Change."

          Section 2.10.  European Monetary Union.  Section 12 of the Credit
Agreement shall be amended by adding the following new Section 12.20:

          "12.20.  European Monetary Union.

          (a) Effectiveness of Provisions.  The provisions of paragraphs (b)
    through (g) below shall be effective at and from the effective date of the
    amendments provided for in Section 2 of Amendment No. 3 hereto, provided,
    that if and to the extent that any such provision relates to any state (or
    the currency of such state) that is not a Participating Member State on the
    commencement of the third stage of EMU, and that has not become a
    Participating Member State prior to the effective date of the amendments
    provided for in Section 2 of Amendment No. 3 hereto, such provision shall
    become effective in relation to such state (and the currency of such state)
    at and from the date on which such state becomes a Participating Member
    State.

          (b) Redenomination and Alternative Currencies.  Each obligation under
     this Agreement of a party to this Agreement which has been denominated in
     the National Currency Unit of a Participating Member State shall be
     redenominated into the Euro Unit in accordance with EMU Legislation,
     provided, that if and to the extent that any EMU Legislation provides that
     following the commencement of the third stage of EMU an amount denominated
     either in the Euro or in the National Currency Unit of a Participating
     Member State and payable within the Participating Member State by crediting
     an account of the creditor can be paid by the debtor either in the Euro
     Unit or in that National Currency Unit, any party to this Agreement shall
     be entitled to pay or repay any such amount either in the Euro Unit or in
     such National Currency Unit.
<PAGE>

                                      -8-

          (c) Payments by the Administrative Agent Generally.  With respect to
     the payment of any amount denominated in the Euro or in a National Currency
     Unit, the Administrative Agent shall not be liable to the Dutch Borrowers
     or either of them or any of the Lenders in any way whatsoever for any
     delay, or the consequences of any delay, in the crediting to any account of
     any amount required by this Agreement to be paid by the Administrative
     Agent if the Administrative Agent shall have taken all relevant steps to
     achieve, on the date required by this Agreement, the payment of such amount
     in immediately available, freely transferable, cleared funds (in the Euro
     Unit or, as the case may be, in a National Currency Unit) to the account of
     any Lender in the Principal Financial Center in the Participating Member
     State which the Dutch Borrowers or either of them or, as the case may be,
     such Lender shall have specified for such purpose.  In this paragraph (c),
     "all relevant steps" shall mean all such steps as may be prescribed from
     time to time by the regulations or operating procedures of such clearing or
     settlement system as the Administrative Agent may from time to time
     determine for the purpose of clearing or settling payments of the Euro.

          (d) Determination of Eurocurrency Base Rate. For the purposes of
     determining the date on which the applicable rate for Eurocurrency
     Borrowings is determined under this Agreement for any Loan denominated in
     the Euro (or any National Currency Unit) for any Interest Period therefor,
     references in this Agreement to Business Days shall be deemed to be
     references to Target Operating Days.  In addition, if the Administrative
     Agent determines that there is no Eurocurrency Base Rate displayed on the
     applicable Telerate screen page for deposits denominated in the National
     Currency Unit in which any Loans are denominated, the Eurocurrency Base
     Rate for such Loans shall be based upon the rate displayed on the
     applicable Telerate screen page for the offering of deposits denominated in
     Euro Units.

          (e) Basis of Accrual.  If the basis of accrual of interest or fees
     expressed in this Agreement with respect to the Currency of any state that
     becomes a Participating Member State shall be inconsistent with any
     convention or practice in the applicable interbank market for the basis of
     accrual of interest or fees in respect of the Euro, such convention or
     practice shall replace such expressed basis effective as of and from the
     date on which such state becomes a Participating Member State, provided,
     that if any Loan in the Currency of such state if outstanding immediately
     prior to such date, such replacement shall take effect, with respect to
     such Loan, at the end of the then current Interest Period.

          (f) Rounding.  Without prejudice and in addition to any method of
     conversion or rounding prescribed by the EMU Legislation, each reference in
     this Agreement to a minimum amount (or a multiple thereof) in a National
     Currency Unit to be paid to or by the Administrative Agent shall be
     replaced by a reference to such reasonably comparable
<PAGE>

                                      -9-

     and convenient amount (or a multiple thereof) in the Euro Unit as the
     Administrative Agent may from time to time specify.

          (g) Other Consequential Changes.  Without prejudice to the respective
     liabilities of the Dutch Borrowers to the Lenders and the Lenders to the
     Dutch Borrowers under or pursuant to this Agreement, except as expressly
     provided in this Section 12.20, each provision of this Agreement shall be
     subject to such reasonable changes of construction as the Administrative
     Agent may from time to time specify to be necessary or appropriate to
     reflect the introduction of or changeover to the Euro in Participating
     Member States.

          Section 3.  Amendments Requiring Consent of Each Lender.  Subject to
the execution and delivery to the Administrative Agent of this Amendment No. 3
by each Lender and each Obligor, but effective as of the date hereof, the Credit
Agreement shall be amended as follows:

          Section 3.01.  General.  References in the Credit Agreement (including
references to the Credit Agreement as amended hereby) to "this Agreement" (and
indirect references such as "hereunder", "hereby", "herein" and "hereof") shall
be deemed to be references to the Credit Agreement as amended by this Section 3.

          Section 3.02.  Preamble.  The fourth paragraph in the preamble to the
Credit Agreement shall be amended by replacing the amount "U.S. 450,000,000"
with the amount "U.S. $500,000,000".

          Section 3.03.  Definitions.  Section 1.01 of the Credit Agreement
shall be amended by adding the following new definitions (to the extent not
already included in said Section 1.01) and inserting the same in the appropriate
alphabetical locations and amending in their entirety the following definitions
(to the extent already included in said Section 1.01), as follows:

          "Applicable Margin" shall mean with respect to Eurocurrency Revolving
     Credit Loans, Base Rate Revolving Credit Loans, Canadian Base Rate Loans,
     letter of credit fees (as such term is used in Section 2.03(g) hereof),
     commitment fees (as such term is used in Section 2.05 hereof), Eurocurrency
     Term Loans, and Base Rate Term Loans during any Accrual Period (as defined
     below), the respective rates set forth below for such Loans of such Class
     and Type and such fees for such Accrual Period, which rates shall be based
     upon the Leverage Ratio for such Accrual Period:
<PAGE>

                                      -10-

<TABLE>
<CAPTION>
                                       Base Rate
                                       Revolving
                                      Credit Loans
                     Eurocurrency     and Canadian
                      Revolving        Base Rate        Letter of       Commitment     Eurocurrency     Base Rate
Leverage Ratio       Credit Loans        Loans         Credit Fees         Fees         Term Loans      Term Loans
-----------------------------------------------------------------------------------------------------------------
<S>                 <C>              <C>             <C>              <C>             <C>             <C>
Greater than or
 equal to 4.50               2.25%           1.00%           2.25%           0.50%           2.50%         1.25%
-----------------------------------------------------------------------------------------------------------------
Greater than or
 equal to 4.25 by
 less than 4.50              1.75%           0.50%           1.75%          0.375%           2.25%         1.00%
-----------------------------------------------------------------------------------------------------------------
Greater than or
 equal to 3.75
 but less than
 4.25                        1.50%           0.25%           1.50%          0.375%           2.00%         0.75%
-----------------------------------------------------------------------------------------------------------------
Greater than or
 equal to 3.00
 but less than
 3.75                        1.25%              0%           1.25%           0.30%           2.00%         0.75%
-----------------------------------------------------------------------------------------------------------------
Greater than or
 equal to 2.50
 but less than
 3.00                        1.00%              0%           1.00%            .25%           2.00%          .75%
-----------------------------------------------------------------------------------------------------------------

Less than 2.50                .75%              0%            .75%            .20%           2.00%          .75%
-----------------------------------------------------------------------------------------------------------------
</TABLE>


          For purposes hereof, an "Accrual Period" shall mean each of the
     following successive periods, as applicable:

               (i)  the period commencing during any fiscal quarter on the date
          (the "Change Date") that is the second Business Day following the
          receipt by the Administrative Agent of the certificate referred to in
          clause (a) of the next following paragraph or

               (ii)  in the event that PGI or any of its Restricted Subsidiaries
          makes an Acquisition and borrows hereunder in an amount equal to or
          greater than U.S. $25,000,000 (or the Foreign Currency Equivalent
          thereof) in connection with such Acquisition, the period commencing
          during any fiscal quarter on the second Business Day (the "Acquisition
          Change Date") following the date of such Acquisition,

     in each case to but not including the earlier of (x) the Change Date in the
     immediately following fiscal quarter and (y) the next Acquisition Change
     Date, provided, that the initial Accrual Period shall commence on the
     Effective Date and continue until the earlier of (x) the Change Date during
     the fiscal quarter ending on December 27, 1997 and (y) an Acquisition
     Change Date, and provided further, that the Leverage Ratio for any Accrual
     Period commencing with an Acquisition Change Date shall be calculated on a
     pro forma basis, as at the end of and for the period of four fiscal
     quarters most recently ended prior
<PAGE>

                                     -11-

     to the date of the related Acquisition for which financial statements of
     PGI are available, under the assumption that such Acquisition and the
     incurrence of any Indebtedness in connection with such Acquisition, shall
     have occurred at the beginning of the applicable period.

          The Leverage Ratio for the initial Accrual Period shall be determined
     on the basis of the certificate of a senior officer delivered pursuant to
     Section 7.01(p) hereof (together with the financial statements for the
     fiscal quarter on which such calculation is based). The Leverage Ratio for
     any Accrual Period after the initial Accrual Period shall be determined (a)
     if such Accrual Period commences with a Change Date, on the basis of a
     certificate of a senior officer setting forth a calculation of the Leverage
     Ratio as at the last day of the fiscal quarter immediately prior to the
     first day of such Accrual Period (together with the financial statements
     for the fiscal quarter on which such calculation is based) and (b) if such
     Accrual Period commences with an Acquisition Change Date, on the basis of
     the certificate of a senior officer delivered pursuant to Section
     9.05(d)(iv)(z) hereof in connection with the related Acquisition.

          Anything in this Agreement to the contrary notwithstanding, the
     Applicable Margin shall be the highest applicable rate provided for above
     (i.e., 2.25% for Eurocurrency Revolving Credit Loans, 1.00% for Base Rate
     Revolving Credit Loans and Canadian Base Rate Loans, 2.25% for letter of
     credit fees, 0.50% for commitment fees, 2.50% for Eurocurrency Term Loans
     and 1.25% for Base Rate Term Loans (i) during any period when an Event of
     Default shall have occurred and be continuing or (ii) if the Obligors shall
     default in the delivery of any financial statements pursuant to Section
     9.01(a) or 9.01(b) hereof, or in the delivery of the certificate of a
     senior financial officer pursuant to Section 9.05(d)(iv)(z).

          "Commitments" shall mean the Facility A Revolving Credit Commitments,
     the Facility B Revolving Credit Commitments, the Term B Loan Commitments
     and the Term B-1 Loan Commitments.

          "Interest Period" shall mean, with respect to any Eurocurrency Loan,
     each period commencing on the date such Eurocurrency Loan is made or
     Converted from a Base Rate Loan or the last day of the next preceding
     Interest Period for such Loan and ending on the numerically corresponding
     day in the first, third or sixth (or, subject to the agreement of each
     Lender participating in such Loan in its sole discretion, twelfth) calendar
     month thereafter, as the Borrowers may select as provided in Section 4.05
     hereof, except that each Interest Period that commences on the last
     Business Day of a calendar month (or on any day for which there is no
     numerically corresponding day in the appropriate subsequent calendar month)
     shall end on the last Business Day of the appropriate subsequent calendar
     month. Notwithstanding the foregoing:
<PAGE>

                                     -12-

               (i)  if any Interest Period for any Revolving Credit Loan would
          otherwise end after the Revolving Credit Termination Date, such
          Interest Period shall end on the Revolving Credit Termination Date;

               (ii)  no Interest Period for any Facility A Revolving Credit Loan
          may commence before and end after any Reduction Date unless, after
          giving effect thereto, the aggregate principal amount of the Facility
          A Revolving Credit Loans having Interest Periods that end after such
          Reduction Date shall be equal to or less than the aggregate amount of
          the Facility A Revolving Credit Commitments on such Reduction Date;

               (iii)  no Interest Period for any Term B Loan may commence before
          and end after any Principal Payment Date applicable thereto unless,
          after giving effect thereto, the aggregate principal amount of the
          Term B Loans having Interest Periods that end after such Principal
          Payment Date shall be equal to or less than the aggregate principal
          amount of the Term B Loans scheduled to be outstanding after giving
          effect to the payments of principal required to be made on such
          Principal Payment Date;

               (iv)  no Interest Period for any Term B-1 Loan may commence
          before and end after any Principal Payment Date applicable thereto
          unless, after giving effect thereto, the aggregate principal amount of
          the Term B-1 Loans having Interest Periods that end after such
          Principal Payment Date shall be equal to or less than the aggregate
          principal amount of the Term B-1 Loans scheduled to be outstanding
          after giving effect to the payments of principal required to be made
          on such Principal Payment Date;

               (v)  each Interest Period that would otherwise end on a day which
          is not a Business Day shall end on the next succeeding Business Day
          (or, if such next succeeding Business Day falls in the next succeeding
          calendar month, on the next preceding Business Day); and

               (vi)  notwithstanding clauses (i), (ii), (iii) and (iv) above, no
          Interest Period shall have a duration of less than one month and, if
          the Interest Period for any Loan would otherwise be a shorter period,
          such Loan shall not be available hereunder for such period.

          "Lenders" shall mean, collectively, the Facility A Revolving Credit
     Lenders, the Facility B Revolving Credit Lenders, the Term B Loan Lenders
     and the Term B-1 Loan Lenders.
<PAGE>

                                     -13-

          "Loans" shall mean, collectively, the Facility A Revolving Credit
     Loans, the Facility B Revolving Credit Loans, the Term B Loans and the Term
     B-1 Loans.

          "Majority Term B-1 Loan Lenders" shall mean Term B-1 Loan Lenders
     holding at least 51% of the aggregate outstanding principal amount of the
     Term B-1 Loans.

          "Project" shall mean the capital expansion program including expansion
     of PGI's Miratec and Miralace product lines and capital expansion in
     respect of nonwovens manufacturing capacity in Colombia and China.

          "Notes" shall mean, collectively, the Facility A Revolving Credit
     Notes, the Facility B Revolving Credit Notes, the Term B Loan Notes and the
     Term B-1 Loan Notes.

          "Revolving Credit" refers, as applicable, to the Facility A Revolving
     Credit Commitments, Lenders, Loans and Notes and the Facility B Revolving
     Credit Commitments, Lenders, Loans and Notes.

          "Supermajority Lenders" shall mean, subject to the last paragraph of
     Section 12.04 hereof, Lenders having at least 66-2/3% of the sum of (i) the
     aggregate unused amount, if any, of the Commitments at such time plus (ii)
     the aggregate outstanding principal amount of the Loans at such time
     (including, without limitation, in the case of the Facility B Revolving
     Credit Lenders, Bankers' Acceptance Loans).

          "Term" refers, as applicable, to the Term B Loan Commitments, Loan
     Lenders, Loans and Loan Notes and the Term B-1 Loan Commitments, Loan
     Lenders, Loans and Loan Notes.

          "Term B-1 Loans" shall mean the loans provided for by Section 2.01(d)
     hereof, which may be Base Rate Loans and/or U.S. Dollar denominated
     Eurocurrency Loans.

          "Term B-1 Loan Closing Date" shall mean the date on which each of the
     conditions precedent to the making of the Term B-1 Loans specified in
     Sections 7.02 and 7.04 hereof shall have been satisfied or waived.

          "Term B-1 Loan Commitment" shall mean, for each Term B-1 Loan Lender,
     the obligation of such Lender to make a Term B-1 Loan to PGI on the
     Term B-1 Loan Closing Date in U.S. Dollars in an amount up to but not
     exceeding the amount set opposite the name of such Lender on Schedule XIII
     hereof or, in the case of any Person that becomes a Term B-1 Loan Lender
     pursuant to an assignment permitted under
<PAGE>

                                     -14-

     Section 12.06(b) hereof, as specified in the respective instrument of
     assignment pursuant to which such assignment is effected (as the same may
     be reduced from time to time pursuant to Section 2.04 hereof). The original
     aggregate principal amount of the Term B-1 Loan Commitments is U.S.
     $50,000,000.

          "Term B-1 Loan Lenders" shall mean (a) on the date hereof, the Lenders
     having Term B-1 Loan Commitments on Schedule XIII hereof and (b)
     thereafter, the Lenders from time to time holding Term B-1 Loans and
     Term B-1 Loan Commitments after giving effect to any assignments thereof
     permitted by Section 12.06 hereof.

          "Term B-1 Loan Notes" shall mean the promissory notes provided for by
     Section 2.08(d) hereof and all promissory notes delivered in substitution
     or exchange therefor, in each case as the same shall be modified and
     supplemented and in effect from time to time.

     Section 3.04.  Classes of Loans. Section 1.03 of the Credit Agreement shall
be deleted in its entirety and replaced with the following:

          "1.03 Classes, Types and Currencies of Loans. Loans hereunder are
     distinguished by "Class", "Type" and "Currency." The "Class" of a Loan (or
     of a Commitment to make a Loan) refers to whether such Loan is a Facility A
     Revolving Credit Loan, a Facility B Revolving Credit Loan, a Term B Loan or
     a Term B-1 Loan, each of which constitutes a Class. The "Type" of a Loan as
     used in connection with U.S. Dollar-denominated Loans refers to whether
     such Loan is a Base Rate Loan or a Eurodollar Loan, each of which
     constitutes a Type, and, as used in connection with Canadian Dollar-
     denominated Loans refers to whether such Loan is a Canadian Base Rate Loan
     or a Bankers' Acceptance Loan, each of which constitutes a Type. The
     "Currency" of a Loan refers to whether such Loan is to be made in U.S.
     Dollars, Dutch Guilders or Canadian Dollars, each of which constitutes a
     "Currency." Loans may be identified by Class, Type and Currency."

          Section 3.05.  Loans. Section 2.01 of the Credit Agreement shall be
amended by relettering paragraphs (d), (e) and (f) thereof, as paragraph (e),
(f) and (g), respectively, and inserting a new paragraph (d) as follows:

          "(d) Term B-1 Loans. Each Term B-1 Loan Lender severally agrees, on
     the terms and conditions of this Agreement, to make loans to PGI on the
     Term B-1 Loan Closing Date in U.S. Dollars in an aggregate principal amount
     up to but not exceeding such Lender's Term B-1 Loan Commitment as then in
     effect. After the Term B-1 Loan Closing Date, and subject to the terms and
     conditions of this Agreement, PGI may Convert Term B-1 Loans of one Type
     into Term B-1 Loans of another Type (as provided
<PAGE>

                                     -15-

     in Section 2.09 hereof) or Continue Term B-1 Loans of one Type as Term B-1
     Loans of the same Type (as provided in Section 2.09 hereof). Proceeds of
     Term B-1 Loans shall be available for any use permitted under Section 9.13
     hereof."

          Section 3.06.  Borrowings. Section 2.02 of the Credit Agreement shall
be amended by adding after the words "Term B Loan Lender" in the second sentence
thereof the following: "or Term B-1 Loan Lender".

          Section 3.07.  Reduction of Commitments. Section 2.04(a) of the Credit
Agreement shall be amended by inserting the following after the second sentence
thereof:

          "The Term B-1 Loan Commitments shall be automatically terminated on
     the Term B-1 Loan Closing Date (following the making of the loans under
     Section 2.01(d) hereof to be made on such Date)."

          Section 3.08.  Notes. Section 2.08 of the Credit Agreement shall be
amended by relettering paragraphs (d) and (e) thereof, as paragraph (e) and (f),
respectively, and inserting a new paragraph (d) as follows:

          "(d)  The Term B-1 Loan made by each Term B-1 Loan Lender to PGI shall
     be evidenced by a single promissory note of PGI, substantially in the form
     of Exhibit A-4 hereto, dated the Term B-1 Loan Closing Date, payable to
     such Lender in a principal amount equal to the amount of its Term B-1 Loan
     Commitment as originally in effect, and otherwise duly completed."

          Section 3.09.  Prepayments. Section 2.10 of the Credit Agreement shall
be amended by deleting paragraph (e) in its entirety and replacing it with the
following:

          "(e)  Application. Prepayments and reductions of Commitments described
     in the above paragraphs of this Section 2.10 shall be effected as follows:

               (i)  in the case of paragraphs (a), (c) and (d) above, the amount
          of the required prepayment and reduction shall be apportioned between
          the Term B-1 Loans, the Term B Loans and the Revolving Credit Loans
          (and Letter of Credit Liabilities) ratably in accordance with the
          respective then-outstanding aggregate principal amounts of the
          Term B-1 Loans, the Term B Loans and the Revolving Credit Commitments
          with the amounts so apportioned to be applied to the prepayment of the
          respective Loans of each such Class (and to provide cover for Letter
          of Credit Liabilities and to the reduction of Revolving Credit
          Commitments), such reductions of Revolving Credit Commitments, and
          prepayments of the Revolving Credit Loans, to be applied first to the
          reduction of
<PAGE>

                                     -16-

          Facility A Revolving Credit Commitments (and to the prepayment first
          of Facility A Revolving Credit Loans denominated in U.S. Dollars,
          second to the prepayment of Facility A Revolving Credit Loans
          denominated in Dutch Guilders and third to provide cover for Letter of
          Credit Liabilities), and second, after all outstanding Facility A
          Revolving Credit Commitments have been reduced to zero (and all
          Facility A Revolving Credit Loans paid in full and cover for all
          Letter of Credit Liabilities provided), to the reduction of Facility B
          Revolving Credit Commitments (and to the prepayment of Facility B
          Revolving Credit Loans), provided that to the extent any such required
          reduction of Revolving Credit Commitments shall exceed the then-
          outstanding aggregate principal amount of Revolving Credit Loans (and
          Letter of Credit Liabilities), such excess shall be applied ratably to
          the prepayment of Term B-1 Loans and Term B Loans, and

               (ii)  in the case of paragraph (b) above, the amount of the
          required prepayment and reduction shall be apportioned between the
          Term B-1 Loans, the Term B Loans and the Revolving Credit Loans (and
          Letter of Credit Liabilities) ratably in accordance with the
          respective then-outstanding aggregate principal amounts of the Term
          B-1 Loans, the Term B Loans and the Revolving Credit Commitments with
          the amounts so apportioned to be applied to the prepayment of the Term
          B-1 Loans, to the prepayment of the Term B Loans and to the prepayment
          of the Revolving Credit Loans (to provide cover for Letter of Credit
          Liabilities), but not to the reduction of the Revolving Credit
          Commitments, such prepayments to the Revolving Credit Loans to be
          applied first to Facility A Revolving Credit Loans denominated in U.S.
          Dollars, second to Facility A Revolving Credit Loans denominated in
          Dutch Guilders, third to the provision of cover for Letter of Credit
          Liabilities and fourth to Facility B Revolving Credit Loans.

     Notwithstanding anything herein to the contrary, any Term Loan Lender shall
     have the option to forego a prepayment of any Term Loan at its sole
     discretion, and in any such case, the amount of any such foregone
     prepayment will be applied pro rata to the outstanding Term Loan Lenders
     who have not foregone such prepayment; provided, in the event that, with
     respect to any such prepayment, each Term Loan Lender shall forego such
     prepayment, the amount of such foregone prepayment will be applied pro rata
     to the outstanding Revolving Credit Loans (and Letter of Credit
     Liabilities) of the Revolving Credit Lenders (and, in the case of any such
     prepayment contemplated by paragraphs (a), (c) or (d) above, to the
     reduction of the Revolving Credit Commitments), all in accordance with and
     subject to the priorities set forth in clauses (i) and (ii) above."
<PAGE>

                                    - 17 -

          Section 3.10.  Amortization of Term B-1 Loans. Section 3.01 of the
Credit Agreement shall be amended by appending the following new paragraph (d):

          "(d)  PGI hereby promises to pay to the Administrative Agent in U.S.
     Dollars for account of the Term B-1 Loan Lenders the following aggregate
     principal amounts on the following Principal Payment Dates:

<TABLE>
<CAPTION>
          Principal Payment Date              Amount of Payment
          ----------------------              -----------------

          <S>                                 <C>
          June 20, 1999                        U.S.$   240,000
          December 20, 1999                    U.S.$   240,000

          June 20, 2000                        U.S.$   240,000
          December 20, 2000                    U.S.$   240,000

          June 20, 2001                        U.S.$   240,000
          December 20, 2001                    U.S.$   240,000

          June 20, 2002                        U.S.$   240,000
          December 20, 2002                    U.S.$   240,000

          June 20, 2003                        U.S.$   240,000
          December 20, 2003                    U.S.$   240,000

          June 20, 2004                       U.S. $11,900,000
          December 20, 2004                   U.S. $11,900,000

          June 20, 2005                       U.S. $11,900,000
          December 20, 2005                   U.S. $11,900,000"
</TABLE>

          Section 3.11.  Limitation of Eurodollar Loans.  Section 5.02 of the
Credit Agreement shall be amended by deleting Section 5.02(b) in its entirety
and replacing it with the following:

          "(b)  if the related Loans are Facility A Revolving Credit Loans, the
     Majority Facility A Revolving Credit Lenders determine or, if the related
     Loans are Term B Loans, the Majority Term B Loan Lenders determine or, if
     the related Loans are Term B-1 Loans, the Majority Term B-1 Loan Lenders
     determine (in each case, which determination shall be conclusive), and
     notify the Administrative Agent that the relevant rates of interest
     referred to in the definition of "Eurocurrency Base Rate" in Section 1.01
     hereof upon the basis of which the rate of interest for Eurodollar Loans
     for such Interest

<PAGE>

                                    - 18 -

     Period is to be determined are not likely to adequately cover the cost to
     such Lenders of making or maintaining Eurodollar Loans for such Interest
     Period;"

          Section 3.12.  Conditions.  Section 7.02 of the Credit Agreement shall
be deleted in its entirety and replaced with the following:

          "7.02  Initial and Subsequent Extensions of Credit.  The obligation of
     the Lenders to make any Loan, including, without limitation, the obligation
     to create and discount any Bankers' Acceptance, or otherwise extend any
     credit to the Borrowers upon the occasion of each borrowing or other
     extension of credit hereunder (including the initial borrowing, the
     borrowing to be made on the Term B Loan Closing Date, and the borrowing to
     be made on the Term B-1 Loan Closing Date) is subject to the further
     conditions precedent that, both immediately prior to the making of such
     Loan or creation and discount of such Bankers' Acceptance or other
     extension of credit and also after giving effect thereto and to the
     intended use thereof:

               (a)  no Default shall have occurred and be continuing; and

               (b)  the representations and warranties made by the Obligors in
          Section 8 hereof, and by each of the Group Members in each of the
          other Basic Documents to which it is a party, shall be true and
          complete on and as of the date of the making of such Loan or other
          extension of credit with the same force and effect as if made on and
          as of such date (or, if any such representation or warranty is
          expressly stated to have been made as of a specific date, as of such
          specific date).

     Each notice of borrowing or request for the issuance of a Letter of Credit
     by the Borrowers hereunder shall constitute a certification by the
     Borrowers to the effect set forth in the preceding sentence (both as of the
     date of such notice or request and, unless the Borrowers otherwise notify
     the Administrative Agent prior to the date of such borrowing or issuance,
     as of the date of such borrowing or issuance).

          Notwithstanding anything herein to the contrary, for purposes of Loans
     to be made on the Term B Loan Closing Date, any determination to be made
     that there has been no material adverse change in the financial condition,
     operation, business or prospects of PGI and its consolidated Subsidiaries
     taken as a whole from that set forth in the financial statements referred
     to in Section 8.02 hereof shall be made only by the Administrative Agent."

<PAGE>

                                    - 19 -

          Section 3.13.  Additional Conditions to Term B-1 Loans.  Section 7 of
the Credit Agreement shall be amended by adding the following new Section 7.04:

          "7.04  Term B-1 Loan Closing Date.  Without in any way limiting the
     applicability of Section 7.02 hereof, the obligation of each Term B-1 Loan
     Lender to make its Term B-1 Loan on the Term B-1 Loan Closing Date is
     subject to the satisfaction of the following conditions precedent or, as
     applicable, to the receipt by the Administrative Agent of the following
     documents, in each case in a manner in form and substance satisfactory to
     the Administrative Agent:

               (a)  Corporate Documents.  Certified copies of the charter
          and by-laws (or equivalent documents) of each Group Member and of all
          corporate authority for each Group Member (including, without
          limitation, board of director resolutions and evidence of the
          incumbency of officers) with respect to the execution, delivery and
          performance of such Basic Documents to which such Group Member is or
          is intended to be a party and each other document to be delivered by
          such Group Member from time to time in connection with the
          transactions contemplated in connection with the Term B-1 Loan
          Commitments and Term B-1 Loans hereunder (and the Administrative Agent
          and each Lender may conclusively rely on such certificate until it
          receives notice in writing from such Group Member).

               (b)  Officer's Certificate.  A certificate of a senior financial
          officer of PGI, dated the Term B-1 Loan Closing Date, to the effect
          set forth in paragraphs (a) and (b) of the first sentence of Section
          7.02 hereof.

               (c)  Opinions of Counsel to the Group Members.  Opinions, dated
          the Term B-1 Loan Closing Date, of Kirkland & Ellis, special New York
          counsel to the Group Members, covering matters covered by the opinions
          of Kirkland & Ellis delivered in connection with the Credit Agreement
          (including, without limitation, with respect to the Term B-1 Loans),
          and in each case covering such other matters as the Administrative
          Agent or any Lender may reasonably request, including, without
          limitation, matters related to the Security Documents (and each
          Obligor hereby instructs such counsel to deliver each such opinion to
          the Lenders and to the Administrative Agent).

               (d)  Additional Security Documents.  The Administrative Agent
          shall have received the following:

                    (i)  all necessary modifications or confirmations to the
               Security Documents in effect on the Term B-1 Loan Closing Date
               duly executed

<PAGE>

                                    - 20 -

               and delivered so as to ensure the continued effectiveness of the
               security interests created thereby and the spreading of the liens
               created thereby to cover the additional obligations to be
               incurred by the Obligors on the Term B-1 Loan Closing Date, in
               each case covering such matters as shall be requested by the
               Administrative Agent and in each case in form and substance
               satisfactory to the Administrative Agent; and

                    (ii)  evidence that such other action (including opinions of
               counsel and, in the case of real property, obtaining appropriate
               mortgagee title insurance policies) as shall be necessary to
               perfect or record the Liens contemplated by the foregoing clause
               (i) under applicable law shall have been taken.

               (e)  Notes.  The Term B-1 Loan Notes described in Section 2.08(d)
          hereof shall have been duly completed and executed.

               (f)  Payment of Certain Fees and Expenses.  All amounts owing to
          Lenders under the Credit Agreement as in effect immediately prior to
          the Term B-1 Loan Closing Date shall have been paid to such Lenders in
          full in the manner contemplated by Section 2.01(d) hereof including,
          for the avoidance of doubt, fees payable to such Lenders to obtain
          their consent hereto.

               (g)  Other Documents.  Such other documents as the Administrative
          Agent, any Lender or special New York counsel to Chase may reasonably
          request."

          Section 3.14.  Certain Agency Provisions.  Sections 11.02 and 11.03 of
the Credit Agreement shall be amended by adding after the words "the Majority
Term B Loan Lenders" the following wherever such words appear: "or the Majority
Term B-1 Loan Lenders".

          Section 3.15.  Consents under Basic Documents.  Section 11.09 of the
Credit Agreement shall be deleted in its entirety and replaced with the
following:

          "11.09  Consents under Basic Documents.  Except as otherwise provided
     in Section 12.04 hereof with respect to this Agreement, the Administrative
     Agent may, with the prior consent of the Majority Lenders (but not
     otherwise), consent to any modification, supplement or waiver under any of
     the Basic Documents, provided that, without the prior consent of each
     Lender, the Administrative Agent shall not (except as provided herein or in
     the Security Documents) do any of the following:
<PAGE>

                                    - 21 -

               (i)  release all or substantially all of the collateral or
          otherwise terminate all or substantially all of the Liens under the
          Basic Documents providing for collateral security, except that the
          Administrative Agent may, with the prior consent of the Supermajority
          Lenders (but not otherwise), release less than all or substantially
          all of the collateral or otherwise terminate less than all or
          substantially all of the Liens under the Basic Documents providing for
          collateral security,

               (ii)  alter with respect to all or substantially all of the
          collateral the relative priorities of the obligations entitled to the
          benefits of the Liens created under the Security Documents, except
          that the Administrative Agent may, with the prior consent of the
          Majority Lenders (but not otherwise), consent to: (i) any
          modification, supplement or waiver under any of the Basic Documents
          that would result in additional obligations hereunder being secured by
          all or substantially all of such collateral security or (ii) a Lien
          securing such additional obligations that is junior to the Lien in
          favor of the other obligations secured by such Basic Document or

               (iii)  release all, or substantially all of the Domestic or
          Foreign Non-Borrower Guarantors from their obligations under Section 6
          hereof, except that the Administrative Agent may, with the prior
          consent of the Supermajority Lenders (but not otherwise), release
          fewer than all or substantially all of the Domestic or Foreign Non-
          Borrower Guarantor.

     No such consent shall be required, and the Administrative Agent is hereby
     authorized, to release any Lien covering Property (and to release any such
     Domestic or Foreign Non-Borrower Guarantor from such guarantee obligations)
     which is the subject of either a disposition of Property permitted
     hereunder or a disposition to which the Majority Lenders have consented."

          Section 3.16.  Amendments.  Section 12.04 of the Credit Agreement
shall be deleted in its entirety and replaced with the following:

         "12.04  Amendments, Etc.  Except as otherwise expressly provided in
     this Agreement, any provision of this Agreement, including any amendment
     providing for extension of new credit hereunder to be secured equally and
     ratably by the collateral hereunder, may be modified or supplemented only
     by an instrument in writing signed by each Obligor, the Administrative
     Agent and the Majority Lenders, or by each Obligor and the Administrative
     Agent acting with the consent of the Majority Lenders, and any provision of
     this Agreement may be waived by the Majority Lenders or by the
     Administrative Agent acting with the consent of the Majority Lenders;
     provided that:

<PAGE>

                                    - 22 -

               (a)  no modification, supplement or waiver shall, unless by an
          instrument signed by each Lender affected thereby: (i) increase, or
          extend the term of any of the Commitments, or extend the time or waive
          any requirement for the reduction or termination of any of the
          Commitments, (ii) extend any date fixed for the payment of principal
          of or interest on any Loan, the Reimbursement Obligations or any fee
          hereunder, (iii) reduce the amount of any such payment of principal,
          (iv) reduce the rate at which interest is payable thereon or any fee
          is payable hereunder;

               (b)  no modification, supplement or waiver shall, unless by an
          instrument signed by the "Majority Lenders" of each Class of Loans
          hereunder or by the Administrative Agent acting with the consent of
          the "Majority Lenders" of each Class of Loans hereunder: (i) alter the
          manner of application to the Loans hereunder of any prepayment or (ii)
          modify the definition of the term "Majority Lenders", "Majority
          Facility A Revolving Credit Lenders", "Majority Facility B Revolving
          Credit Lenders", "Majority Term B Loan Lenders" or "Majority Term B-1
          Loan Lenders";

               (c)  no modification, supplement or waiver shall, unless by an
          instrument signed by all of the Lenders or by the Administrative Agent
          acting with the consent of all of the Lenders: (i) alter the terms of
          this Section 12.04 (other than by amendment to the terms referred to
          in paragraph (b) above) or (ii) modify the definition of the term
          "Supermajority Lenders" or modify in any manner any requirement
          hereunder that determinations or waivers of any rights, or
          modifications of any provision, be made only with the consent of each
          Lender; and

               (d)  any modification or supplement of Section 11 hereof, or any
          of the rights or duties of the Administrative Agent hereunder, shall
          require the consent of the Administrative Agent.

               Anything in this Agreement to the contrary notwithstanding, (A)
     no waiver or modification of any provision of this Agreement that has the
     effect (either immediately or at some later time) of enabling PGI to
     satisfy a condition precedent to the making of a Facility A Revolving
     Credit Loan or the issuance of a Letter of Credit shall be effective
     against the Facility A Revolving Credit Lenders for the purposes of the
     Facility A Revolving Credit Commitments unless the Majority Facility A
     Revolving Credit Lenders shall have concurred with such waiver or
     modification, (B) no waiver or modification of any provision of this
     Agreement that has the effect (either immediately or at some later time) of
     enabling Fabrene to satisfy a condition precedent to the making of a

<PAGE>

                                     -23-

     Facility B Revolving Credit Loan shall be effective against the Facility B
     Revolving Credit Lenders for the purposes of the Facility B Revolving
     Credit Commitments unless the Majority Facility B Revolving Credit Lenders
     shall have concurred with such waiver or modification, (C) no waiver or
     modification of any provision of this Agreement that has the effect (either
     immediately or at some later time) of enabling PGI to satisfy a condition
     precedent to the making of a Term B Loan shall be effective against the
     Term B Loan Lenders for the purposes of the Term B Loan Commitments unless
     the Majority Term B Loan Lenders shall have concurred with such waiver or
     modification and (D) no waiver or modification of any provision of this
     Agreement that has the effect (either immediately or at some later time) of
     enabling PGI to satisfy a condition precedent to the making of a Term B-1
     Loan shall be effective against the Term B-1 Loan Lenders for the purposes
     of the Term B-1 Loan Commitments unless the Majority Term B-1 Loan Lenders
     shall have concurred with such waiver or modification."

          Section 3.17.  Certain Tax Considerations.  Section 12.19 (a) shall be
amended by adding after the words "Any Term B Loan Lender" in the first sentence
thereof the following: "or Term B-1 Loan Lender"

          Section 3.18.  Additional Schedule and Exhibit.  The Credit Agreement
shall be amended by attaching thereto and making a part thereof Schedule XIII
attached hereto and Exhibit A-4 attached hereto.

          Section 4.  Consent to Release of Certain European Collateral. Subject
to the execution and delivery to the Administrative Agent of this Amendment No.
3 by each Lender and each Obligor, but effective as of the date hereof, the
Lenders hereby (a) consent to the release of up to $20,000,000 of collateral
security covering assets of the Obligors in Europe, other than (i) the shares of
stock of, or other ownership interest in, any Subsidiaries organized outside of
the United States of America, to the extent that the Majority Lenders reasonably
determine (in consultation with PGI) that a Lien on such shares or ownership
interest will not result in adverse tax consequences under Section 956 of the
Code or any violation of law and (ii) any such collateral security granted by
Dutch Holding or Dutch Operating (or, pursuant to Section 9.16(c) of the Credit
Agreement, any Subsidiary of Dutch Operating) securing obligations of Dutch
Holding or Dutch Operating under the Credit Agreement, (b) waive any requirement
in the Credit Agreement or any of the Security Documents requiring delivery,
perfection or other action to create an enforceable Lien with respect to any
collateral security to be released as described in the preceding clause (a) and
(c) authorize the Administrative Agent to execute and deliver such instruments
of release as shall be necessary to effect the foregoing.

          Section 5.  Security Agreement.  Effective as of the Term B-1 Loan
Closing Date, PGI, the Domestic Non-Borrower Guarantors and the Administrative
Agent agree that the Security Agreement shall be amended by replacing the amount
"U.S. $450,000,000" in the third
<PAGE>

                                     -24-

paragraph thereof with the amount "U.S. $500,000,000" and, for avoidance of
doubt, that the "Credit Agreement" referred to in the Security Agreement shall
mean the Credit Agreement as amended hereby.

          Section 6.  Representations and Warranties.  Each Obligor represents
and warrants to the Lenders and the Administrative Agent that the
representations and warranties set forth in Section 8 of the Credit Agreement as
amended hereby are true and complete on the date hereof as if made on and as of
the date hereof and as if each reference in said Section 8 to "this Agreement"
include reference to this Amendment No. 3.

          Section 7.  Miscellaneous.  Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 3 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 3 by signing any such counterpart. This
Amendment No. 3 shall be governed by, and construed in accordance with, the law
of the State of New York.
<PAGE>

                                     -25-

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to
be duly executed and delivered as of the day and year first above written.

                                 THE BORROWERS
                                 -------------

POLYMER GROUP, INC.                      PGI NONWOVENS B.

      /S/ Jerry Zucher                         /S/ Jerry Zucker
By ------------------------------        By ________________________________
   Jerry Zucker                               Jerry Zucker
Title: President                           Title: President


CHICOPEE HOLDINGS B.V.                   FABRENE INC.
(incorporated in the State
of Delaware under the name
Chicopee Holdings (Netherlands)
B.V. Corporation)
     /S/ Jerry Zucker                         /S/ Jerry zucker
By ------------------------------        By ________________________________
   Jerry Zucker                               Jerry Zucker
Title:  President                           Title: President
<PAGE>

                                     -26-


                       DOMESTIC NON-BORROWER GUARANTORS
                       --------------------------------


FIBERTECH GROUP, INC.                       CHICOPEE, INC.


By  /s/ James G. Boyd                       By  /s/ James G. Boyd
   --------------------------------            ---------------------------------
        James G. Boyd                               James G. Boyd
Title:  Executive Vice President and CFO     Title: Executive Vice President
                                                    and CFO


PGI POLYMER, INC.                           CHICOPEE HOLDINGS, INC.


By  /s/ James G. Boyd                       By  /s/ James G. Boyd
   --------------------------------            ---------------------------------
        James G. Boyd                               James G. Boyd
Title:  Executive Vice President and CFO     Title: Executive Vice President
                                                    and CFO

TECHNETICS GROUP, INC.                      FABRENE GROUP, L.L.C.


By  /s/ James G. Boyd                       By  /s/ James G. Boyd
   --------------------------------            ---------------------------------
        James G. Boyd                               James G. Boyd
Title:  Executive Vice President and CFO     Title: Executive Vice President
                                                    and CFO


FABRENE CORP.                               FIBERGOL CORPORATION


By  /s/ James G. Boyd                       By  /s/ James G. Boyd
   --------------------------------            ---------------------------------
        James G. Boyd                               James G. Boyd
Title:  Executive Vice President and CFO     Title: Executive Vice President
                                                    and CFO

<PAGE>

                                     -27-

FABRENE GROUP, INC.                         PNA CORP.

By  /s/ Jerry Zucker                        By  /s/ Jerry Zucker
   --------------------------------            ---------------------------------
   Jerry Zucker                                Jerry Zucker
Title: President                            Title: President


FNA POLYMER CORP.


By  /s/ Jerry Zucker
   --------------------------------
   Jerry Zucker
Title:  President
<PAGE>

                                     -28-


                                    LENDERS
                                    -------

THE CHASE MANHATTAN BANK              THE CHASE MANHATTAN
as Lender and Administrative Agent     BANK OF CANADA

By /s/ Robert T. Sacks                By /s/ Christine Chan    /s/ Arun K. Berry
   -------------------                   ------------------    -----------------
    Robert T. Sacks                      Title: Vice President  Vice President
 Title: Managing Director


THE BANK OF NOVA SCOTIA               THE BANK OF NOVA SCOTIA,
                                      as Canadian Dollar Lender

By /s/ William E. Zarrett             By /s/ William E. Zarrett
   ----------------------                ----------------------
  Title: Senior Relationship          Title: Senior Relationship
         Manager                             Manager

BHF-BANK AKTIENGESELLSCHAFT           FIRST UNION NATIONAL BANK


By /s/ Michael T. Pellerito           By /s/ John Jones
   ------------------------              --------------
  Title: AVP                           Title: Vice President

By /s/ Dan Dobrjanskyj
   -------------------
  Title: Assistant Vice
         President


CIBC INC.                             BALANCED HIGH YIELD FUND I LTD.,
                                      By: BHF-Bank Aktiengesellschaft,
                                      acting through its New York Branch
                                      as Attorney-in-Fact

By                                    By /s/ Michael T. Pellerito
   -------------------                   ------------------------
  Title:                               Title: AVP

                                      By /s/ Dan Dobrjanskyj
                                         -------------------
                                       Title: Assistant Vice President
<PAGE>

                                     -29-


CANADIAN IMPERIAL BANK                        COMPAGNIE FINANCIERE DE
OF COMMERCE                                    CIC ET DE L'UNION
                                               EUROPEENNE


By /s/ Gerald Girardi                         By /s/ Brian O'Leary
   -----------------------                       -------------------------
 Title: Executive Director                     Title: Vice President
        CIBC Oppenheimer Corp.,
         as agent                             By /s/ Sean Mounier
                                                 -------------------------
                                               Title: First Vice President


CREDIT LYONNAIS ATLANTA                       CREDIT LYONNAIS CANADA
AGENCY

By /s/ David M. Carusa                        By
   ----------------------                        -------------------------
 Title: Vice President                        Title:
         and Manager
                                              By _________________________
                                               Title:

COOPERATIEVE CENTRALE                         THE ROYAL BANK OF
RAIFFEISEN-BOERENLEENBANK                     SCOTLAND PLC
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH

By /s/ Michael V.M. Van Der Voort             By /s/ Scott  Barton
   ------------------------------                -------------------------
 Title: Vice President                         Title: Vice President

By /s/ R.P. Michlin
   ------------------------------
 Title:
<PAGE>

                                     -30-

WACHOVIA BANK, N.A.                           BANK OF SCOTLAND


By /s/ David S. Bellski                       By /s/ Annie Chin Tat
   -----------------------                       --------------------------
 Title: Vice President                         Title: Senior Vice President


BANK AUSTRIA CREDITANSTALT                    DG BANK DEUTSCHE
 CORPORATE FINANCE, INC.                      GENOSSENSCHAFTSBANK AG


By /s/ Clifford Belle                         By /s/ Sabine Wendt
   -----------------------                       --------------------------
 Title: Vice President                         Title: Asst. Vice President

By /s/ D. Zine                                By /s/ Wolfgang Bollmann
   -----------------------                       --------------------------
 Title: Vice President                         Title: Senior Vice President


MERITA BANK PLC,                              NATIONAL CITY BANK
 NEW YORK BRANCH


By /s/ A. Maffe                               By /s/ Lisa B. Lin
   -----------------------                       --------------------------
 Title: VP                                     Title: VP

By /s/ C. Abriz
   -----------------------
 Title: VP


ERSTE BANK                                    THE DAI-ICHI KANGYO
                                               BANK, LIMITED


By /s/ Arcinee Hovanessian                    By /s/ Michelle A. Fox
   -----------------------                       -----------------------------
 Title: Vice President                         Title: Assistant Vice President

By /s/ John S. Runnion
   -------------------------
 Title: First Vice President
<PAGE>

                                    - 31 -

THE FIRST NATIONAL                         ROYAL BANK OF CANADA
 BANK OF CHICAGO


By /s/ James F. Gable                      By /s/ J. Milford
   ----------------------                     --------------------
 Title: Customer Service Officer            Title: Sr. Manager


ING HIGH INCOME PRINCIPAL                  ROYAL BANK OF CANADA,
 PRESERVATION FUND HOLDINGS, LDC            as Canadian Dollar Lender
By: ING Capital Advisors LLC,
     as Investment Advisor

By /s/ Michael D. Hatley                   By /s/ J. Milford
   ----------------------------               ------------------------
 Title: Managing Director                   Title: Sr. Manager

                                           By _____________________
                                            Title:


OAK HILL SECURITIES FUND, L.P.,            MERRILL LYNCH PRIME RATE PORTFOLIO
By: Oak Hill Securities GenPar, L.P.,       By: Merrill Lynch Asset
        its General Partner                  Management L.P.,
 By: Oak Hill Securities MPG, Inc.,          as Investment Advisor
        its General Partner


By ____________________                    By /s/ Colleen M. Cunniffe
                                              ----------------------------
 Title:                                     Title: Authorized Signatory


ARCHIMEDES FUNDING II, LTD.                KZH CYPRESSTREE-1 LLC
By: ING Capital Advisors LLC
     as Collateral Manager


By /s/ Michael D. Hatley                   By _____________________
   --------------------------
 Title: Managing Director                   Title:


MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.

By /s/ Colleen M. Cunniffee
   -------------------------
  Title: Authorized Signatory

ARCHIMEDES FUNDING, LLC

By ING Capital Advisors LLC
    as Collateral Manager

By /s/ Michael D. Hatley
   --------------------------
  Title: Managing Director
<PAGE>

                                    - 32 -

KZH CRESCENT LLC                        KZH CRESCENT-2 LLC


By /s/ V. Conway                       By /s/ V. Conway
   ---------------------                  ----------------------
 Title: Agent                           Title: Agent


MORGAN STANLEY DEAN WITTER              EATON VANCE SENIOR INCOME TRUST
PRIME INCOME TRUST                       By: Eaton Vance Management,
                                          as Investment Adviser

By /s/ Buford Fennerty                  By /s/ Scott H. Page
   ---------------------                   ----------------------
 Title: Vice President                   Title: Vice President


PILGRIM PRIME RATE TRUST                VAN KAMPEN CLO I, LTD.
 By: Pilgrim Investments, Inc.,          By: Van Kampen Management Inc.
  as its investment manager               as Collateral Manager

By /s/ Howard Tiffen                    By /s/ Jeffrey W. Maillet
   ---------------------                   ----------------------
 Title: Senior Vice President            Title: Senior Vice President
                                          & Director

By /s/ Jeffrey A. Bakalar
   ---------------------
 Title: Vice President

SENIOR DEBT PORTFOLIO                   EATON VANCE INSTITUTIONAL
By: Boston Management and Research      SENIOR LOAN FUND
as Investment Advisor                    By: Eaton Vance Management,
                                          as Investment Adviser

By /s/ Scott H. Page                     By /s/ Scott H. Page
   ---------------------                   ----------------------
 Title: Vice President                    Title: Vice President

KZH ING-2 LLC                            KZH PAMCO LLC


By /s/ V. Conway                         By /s/ V. Conway
   ---------------------                    ----------------------
 Title: Authorized Agent                  Title: Authorized Agent

KZH CYPRESSTREE-1 LLC


By /s/ V. Conway
   ---------------------
 Title: Authorized Agent

<PAGE>

                                    - 33 -

CYPRESSTREE INVESTMENT PARTNERS II LTD.,     DELANO COMPANY
 By: CypressTree Investment Management        By: Pacific Investment Management
  Company, Inc.,                               Company as its investment advisor
  as Portfolio Manager
                                              By:   PIMCO Management Inc., a
                                                     general partner


By  /s/ Peter K. Merrill                      By /s/ Mohan V. Phansalkar
  ------------------------                       --------------------------
  Title: Managing Director                       Mohan V. Phansalkar
                                               Title: Senior Vice President


CYPRESSTREE INSTITUTIONAL FUND, LLC          SUNTRUST BANK INC.
 By: CypressTree Investment Management
  Company, Inc., its Managing Member

By  /s/ Peter K. Merrill                      By
  ------------------------                       --------------------------
  Title: Managing Director                       Title:


ABN AMRO BANK, N.V.                          FIRSTAR BANK, N.A.


By                                           By /s/ Mark A. Whitson
  ------------------------                     -----------------------
 Title:                                       Title: Vice President

By _______________________
 Title:                                 BALANCED HIGH YIELD FUND II LTD.,
                                         By: BHF-Bank Aktiengesellschaft,
SEQUILS I, LTD.                          acting through its New York Branch
                                         as Attorney-in-Fact
By:    TCW Advisors, Inc., as its
       Collateral Manager                By /s/ Michael Dot
                                           --------------------------
By:    /s/ Mark L. Gold                    Title: AVP
       -----------------
Title: Managing Director                 By /s/ A. Henry
                                           --------------------------
By:    /s/ Jonathan P. Insoll              Title: AVP
       ----------------------
Title: Vice President

CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC.
As:    Attorney-in-Fact and on behalf of First
       Allmerica Financial Life Insurance Company
       as Portfolio Manager

By:    /s/ Peter K. Merrill
       ---------------------
Title: Managing Director

Sub-Allocation: $1,000,000


NORTH AMERICAN SENIOR FLOATING RATE FUND
By:    Cypress Tree Investment Management Company, Inc.,
       as Portfolio Manager

By:    /s/ Peter K. Merrill
       ---------------------
Title: Managing Director

Sub-Allocation: $1,000,000


CYPRESS TREE INVESTMENT FUND, LLC
By:    Cypress Tree Investment Management Company, Inc.,
       its Managing Member

By:    /s/ Peter K. Merrill
       ---------------------
Title: Managing Director

Sub-Allocation: $500,000



<PAGE>

                                                                   SCHEDULE XIII

                           TERM B-1 LOAN COMMITMENTS
                           -------------------------
<TABLE>
<CAPTION>

Lender                                      Term B-1 Loan Commitment
------                                      ------------------------
<S>                                         <C>
CypressTree Investment Management                   $ 5,000,000

Eaton Vance Management                              $ 5,000,000

ING Capital Advisors                                $ 5,000,000

Pacific Investment Management Company               $ 5,000,000

Trust Company of the West                           $ 5,000,000

Van Kampen Management                               $ 5,000,000

Highland Capital Management                         $ 4,000,000

Morgan Stanley Dean Witter                          $ 4,000,000

Pilgrim America Group, Inc.                         $ 4,000,000

First Chicago National Bank                         $ 2,000,000

National City Bank                                  $ 2,000,000

BHF Balanced High Yield Fund                        $ 2,000,000

FirStar Bank                                        $ 2,000,000
                                                    -----------
</TABLE>                                            $50,000,000


<PAGE>

                                                                     EXHIBIT A-4

                          [Form of Term B Loan Note]

                                PROMISSORY NOTE
                                (Term B-1 Loans)


U.S. $______________                                     _________________, 1999
                                                         New York, New York

     FOR VALUE RECEIVED, POLYMER GROUP, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware (the "Maker"), hereby
promises to pay to __________________ (the "Lender") [or registered assigns]/1/,
for account of its respective Applicable Lending Offices provided for by the
Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank at 270 Park Avenue, New York, New York 10017, the principal sum
of _______________ U.S. Dollars (or such lesser amount as shall equal the
aggregate unpaid principal amount of the Term B-1 Loans made by the Lender to
the Maker under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Term B-1 Loan, at such office, in like money and
funds, for the period commencing on the date of such Term B-1 Loan until such
Term B-1 Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.

     [This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the register maintained for such
purpose by or on behalf of PGI as provided by the Credit Agreement.]

     The date, amount, Type, interest rate and duration of Interest Period (if
applicable) of each Term B-1 Loan made by the Lender to the Maker, and each
payment made on account of the principal thereof, shall be recorded by the
Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof (and the
Maker hereby authorizes the Lender to endorse such recording on the schedule
attached hereto), provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Maker to make
a payment when due of any amount owing under the Credit Agreement or hereunder
in respect of the Term B-1 Loans made by the Lender.

     This Note is one of the Term B-1 Loan Notes [(constituting a Registered
Note)] referred to in the Second Amended, Restated and Consolidated Credit
Agreement dated as of July 3, 1997 (as modified and supplemented and in effect
from time to time, the "Credit Agreement") between the Maker, the other
"Borrowers" named therein, the Domestic Non-

____________
/1/  Bracketed language to be inserted into Registered Notes.
<PAGE>

                                     - 2 -

Borrower Guarantors named therein, the lenders named therein (including the
Lender), and The Chase Manhattan Bank, as Administrative Agent, and evidences
Term B-1 Loans made by the Lender to the Maker thereunder. Terms used but not
defined in this Note have the respective meanings assigned to them in the Credit
Agreement.

          The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.

          Except as permitted by Section 12.06(b) of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.

          This Note shall be governed by, and construed in accordance with, the
law of the State of New York.

          The Maker hereby waives presentment, demand, notice of protest or
notice of any other kind with respect to this Note.

                                     POLYMER GROUP, INC.


                                     By_________________________
                                      Title:


<PAGE>


                           SCHEDULE OF TERM B-1 LOANS

          This Note evidences Term B-1 Loans made to the Maker, or Continued or
Converted, under the within-described Credit Agreement, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:


<TABLE>
<CAPTION>
                                                  Amount
    Date       Prin-                               Paid,
    Made,      cipal                   Duration  Prepaid,   Unpaid
  Continued    Amount  Type               of     Continued  Prin-
     or          of     of   Interest  Interest     or      cipal   Notation
  Converted     Loan   Loan    Rate     Period   Converted  Amount  Made by
-------------  ------  ----  --------  --------  ---------  ------  --------
<S>            <C>     <C>   <C>       <C>       <C>        <C>     <C>

</TABLE>