<PAGE>

Exhibit 10.35

              Fifth Amendment dated September 1, 1997 to the Fifth        
              Amended and Restated Credit Agreement.


<PAGE>

    FIFTH AMENDMENT, dated as of September 1, 1997 (the "Amendment"), to the 
Fifth Amended and Restated Credit Agreement dated July 31, 1994 (the "Credit 
Agreement"; terms not otherwise defined herein shall be used herein as 
therein defined), among APPAREL AMERICA, INC., a Delaware corporation (the 
"Borrower"); CONNECTICUT DEVELOPMENT AUTHORITY ("CDA") an assignee of 
Chemical Bank, BINGHAMTON SAVINGS BANK ("BINGHAMTON") an assignee of Chemical 
Bank, and A.I. ASSOCIATES, INC. ("AI") (each a "Bank" and collectively the 
"Banks"); and BINGHAMTON SAVINGS BANK as agent for the Banks (and as 
successor agent to Chemical Bank) (in such capacity, the "Agent").

                             W I T N E S S E T H :
                             - - - - - - - - - -

    WHEREAS, the Borrower has requested that the Credit Agreement be amended 
to reflect changes in certain covenants made by Borrower;

    WHEREAS, the Borrower, the Agent and the Banks have agreed to so amend 
the Credit Agreement on terms set forth below;

    NOW, THEREFORE, in consideration of the premises and for other good and 
valuable consideration, receipt of which is hereby acknowledged, the parties 
hereto hereby agree as follows:

    1.   AMENDMENTS TO SECTION 1.1 OF THE CREDIT AGREEMENT.

    (a)  Section 1.1 of the Credit Agreement is hereby amended by adding 
thereto the following definitions in the proper alphabetical order:

    "AGREEMENT" means the Fifth Amended and Restated Credit Agreement dated 
July 31, 1994, as amended by the Amendment dated January 12, 1996, the Second 
Amendment dated June 1, 1996, the Third Amendment dated October 15, 1996, the 
Fourth Amendment dated June 1, 1997 and the Fifth Amendment dated September 1, 
1997.

    2.   AMENDMENTS TO SECTION 2.2 OF THE CREDIT AGREEMENT.

    (a)  Subsection 2.2 (b)(i) of the Credit Agreement is hereby amended to 
(i) delete the dates June 30, 1997, March 31, 1998 and June 30, 1998, and the 
corresponding payment amounts for said dates, from the payment schedule set 
forth therein, and (ii) substitute the amount "$1,411,743" for the amount 
"$616,916" appearing after the date June 30, 2000.


<PAGE>

    (b)  Subsection 2.2 (b)(ii) of the Credit Agreement is hereby amended to 
(i) delete the dates June 30, 1997, March 31, 1998 and June 30, 1998, and the 
corresponding payment amounts for said dates, from the payment schedule set 
forth therein, and (ii) substitute the amount "$1,208,692" for the amount 
"$677,657" appearing after the date June 30, 2001.

    (c)  Subsection 2.2 (b)(iii) of the Credit Agreement is amended to (i) 
delete the dates June 30, 1997, March 31, 1998 and June 30, 1998, and the 
corresponding payment amounts for said dates, from the payment schedule set 
forth therein, and (ii) substitute the amount "$1,565,141" for the amount 
"$679,625" appearing after the date June 30, 2000.

    The intent of the foregoing amendments to Section 2.2 of the Credit 
Agreement is to remove the requirement of any repayment of principal of the 
Notes for June 30, 1997, March 31, 1998 and June 30, 1998 and to include the 
amounts which would have been payable on such dates to the last payment due.

    3.   AMENDMENTS TO SECTION 2.3 OF THE CREDIT AGREEMENT.

    (a)  Subsection 2.3 (a)(i) 2.3 (a)(ii) and 2.3 (a)(iii) of the Credit 
Agreement are amended to substitute the phrase "and one half percent (1 1/2%)"
at the end of each such subsection with the phrase "percent (1%)".

    (b)  a new Subsection (e) shall be added to Section 2.3, such Subsection 
(e) to read in its entirety as follows:  "(e) notwithstanding anything in 
this Section 2.3 or the Notes to the contrary, interest on each of the CDA 
Note, Binghamton Note and AI Note shall be paid only in respect of $1,000,000 
of principal thereon for the period August 1, 1997 through January 31, 1999 
and any interest in respect of principal in excess of $1,000,000 shall be 
deferred and paid in a lump sum at June 30, 1999.

    4.   AMENDMENTS TO SECTION 8.3 OF THE CREDIT AGREEMENT.

    (a)  Subsection 8.3 (a) of the Credit Agreement is amended by deleting 
the table therein in its entirety and substituting in lieu thereof the 
following table:

                    Period                 Minimum Ebdit
                    ------                 -------------

               1994 Fiscal Year            $1,750,000
               1995 Fiscal Year             2,250,000
               1996 Fiscal Year             2,000,000
               1998 Fiscal Year             1,850,000
               1999 Fiscal Year             1,850,000
               2000 Fiscal Year             1,850,000
               2001 Fiscal Year             1,850,000

<PAGE>

    (b)  Subsection 8.3 (b) of the Credit Agreement is hereby amended by 
substituting the number appearing in Subsection (i) to read "a deficit of not 
greater that $5,050,000," substituting the number appearing in Subsection 
(ii) to read "a deficit of not greater than $3,550,000," substituting the 
number appearing in (iii) to read "a deficit of not greater than $1,100,000" 
and substituting the number appearing in (iv) to read "a deficit of not 
greater than $3,600,000."

    5.   BORROWER'S CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.  
The Borrower, by signing below, represents that it has the power and 
authority, and the legal right, to make, deliver and perform all terms and 
obligations set forth in this Amendment and that the Borrower has taken all 
necessary corporate action to authorize the terms and obligations set forth 
in this Amendment.  No consent or authorization of, filing with or other act 
by or in respect of, any Governmental Authority or any other person in 
required in connection with the execution, delivery, performance, validity or 
enforceability of this Amendment.  This Amendment has been duly executed and 
delivered on behalf of the Borrower.  This Amendment constitutes a legal, 
valid and binding obligation of the Borrower, enforceable against it in 
accordance with its terms, except as enforceability may be limited by 
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws 
affecting the enforcement of creditors' rights generally and by general 
equitable principles (whether enforcement is sought by proceedings in equity 
or at law).

    6.   SCOPE.  This Amendment is to be narrowly construed.  Except as 
expressly amended herein, all of the covenants and provisions of the Credit 
Agreement are and shall continue to be in full force and effect.

    7.   COUNTERPARTS.  This Amendment may be simultaneously executed in 
several counterparts, each of which shall be an original and all of which 
shall constitute but one and the same instrument.

    IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be 
duly executed by their duly authorized officers as of the day and year first 
above written.


Address:                                  APPAREL AMERICA, INC.
1175 State Street
New Haven, Connecticut
  06501                                   By: /s/ Frederick M. D'Amato
Telecopy No.:                                ---------------------------
(203) 772-2512                             Name:  Frederick M. D'Amato
Attn:  Burton I. Koffman                   Title: Vice President-Finance
       President


<PAGE>


with a copy to:
Shustak Jalil & Heller
545 Madison Avenue
New York, New York 10022
Telecopy No.: (212) 688-6151
Attn: James P. Jalil, Esq.


Address:                                  BINGHAMTON SAVINGS BANK, AS
58-68 Exchange Street                      AGENT AND BANK
Binghamton, NY 13902
Telecopy No.: (607) 772-6287
Attn: Glenn Small                         By:
                                             ---------------------------
                                           Name:  John B. Westcott
                                           Title: Vice President


with a copy to:
Howard Rittberg, Esq.
Levene, Gouldin & Thompson
450 Plaza Drive
Vestal, NY 13850


Address:                                  A.I. ASSOCIATES, INC., AS BANK
300 Plaza Drive
Vestal, New York 13850
Telecopy No.:                             By: /s/ Milton Koffman
  (607) 797-7103                             ---------------------------
Attn: Milton Koffman                        Name:  Milton Koffman
      President                             Title: President


Address:                                  CONNECTICUT DEVELOPMENT
999 West Street                            AUTHORITY, AS BANK
Rocky Hill, CT 06067
Telecopy No.:
  (860) 258-7866                          By:
                                             ------------------------------
                                           Name:    Patti A. Champagne
                                           Title: Assistant Vice President


with a copy to:
William G. Rock, Esq.
Shipman & Goodwin
One American Row
Hartford, CT 06103


<PAGE>


with a copy to:
Shustak Jalil & Heller
545 Madison Avenue
New York, New York 10022
Telecopy No.: (212) 688-6151
Attn: James P. Jalil, Esq.


Address:                                  BINGHAMTON SAVINGS BANK, AS
58-68 Exchange Street                      AGENT AND BANK
Binghamton, NY 13902
Telecopy No.: (607) 772-6287
Attn: Glenn Small                         By:
                                             ---------------------------
                                           Name:  John B. Westcott
                                           Title: Vice President


with a copy to:
Howard Rittberg, Esq.
Levene, Gouldin & Thompson
450 Plaza Drive
Vestal, NY 13850


Address:                                  A.I. ASSOCIATES, INC., AS BANK
300 Plaza Drive
Vestal, New York 13850
Telecopy No.:                             By:
  (607) 797-7103                             ---------------------------
Attn: Milton Koffman                        Name:  Milton Koffman
      President                             Title: President


Address:                                  CONNECTICUT DEVELOPMENT
999 West Street                            AUTHORITY, AS BANK
Rocky Hill, CT 06067
Telecopy No.:
  (860) 258-7866                          By:  /s/ Patti A. Champagne
                                             ------------------------------
                                           Name:    Patti A. Champagne
                                           Title: Assistant Vice President


with a copy to:
William G. Rock, Esq.
Shipman & Goodwin
One American Row
Hartford, CT 06103


<PAGE>


with a copy to:
Shustak Jalil & Heller
545 Madison Avenue
New York, New York 10022
Telecopy No.: (212) 688-6151
Attn: James P. Jalil, Esq.


Address:                                  BINGHAMTON SAVINGS BANK, AS
58-68 Exchange Street                      AGENT AND BANK
Binghamton, NY 13902
Telecopy No.: (607) 772-6287
Attn: Glenn Small                         By: /s/ John B. Westcott
                                             ---------------------------
                                           Name:  John B. Westcott
                                           Title: Vice President


with a copy to:
Howard Rittberg, Esq.
Levene, Gouldin & Thompson
450 Plaza Drive
Vestal, NY 13850


Address:                                  A.I. ASSOCIATES, INC., AS BANK
300 Plaza Drive
Vestal, New York 13850
Telecopy No.:                             By:
  (607) 797-7103                             ---------------------------
Attn: Milton Koffman                        Name:  Milton Koffman
      President                             Title: President


Address:                                  CONNECTICUT DEVELOPMENT
999 West Street                            AUTHORITY, AS BANK
Rocky Hill, CT 06067
Telecopy No.:
  (860) 258-7866                          By:
                                             ------------------------------
                                           Name:    Patti A. Champagne
                                           Title: Assistant Vice President


with a copy to:
William G. Rock, Esq.
Shipman & Goodwin
One American Row
Hartford, CT 06103