EMPLOYMENT AGREEMENT
  
  
       THIS EMPLOYMENT AGREEMENT is made between SIGNAL
  APPAREL COMPANY, INC., an Indiana corporation, with its
  principal offices at 200-A Manufacturers Road, Chattanooga,
  Tennessee (the "Company") and BRUCE KREBS (the "Employee").
  
                              RECITALS:
                                   
       The Company and the Employee have reached an
  understanding with respect to the employment of the Employee
  by the Company.   The parties desire to set forth their
  understanding with respect to such employment fully and
  completely in writing.
  
       NOW, THEREFORE, the parties agree as follows:
  
       1.   Employment.  The Company shall employ the
  Employee, and the Employee shall work for the Company upon
  the terms and conditions set forth herein.
  
       2.   Exclusive Agreement.  During the term of this
  Agreement, the Employee shall devote his full time and best
  effort to the business of the Company.
  
       3.   Employment Term.  Unless earlier terminated in
  accordance with the terms of this Agreement, the Employee s
  term of employment by the Company (the "Employment Term")
  shall be for a period of three (3) years commencing August
  1, 1995.
  
       4.   Confidential Information.  The Employee
  acknowledges that any use of the Company s Confidential
  Information (defined below) by the Employee other than for
  the sole benefit of the Company would be wrongful and cause
  irreparable harm to the Company.  Accordingly, the Employee
  shall not, at any time during or subsequent to his
  employment by the Company, without the express written
  consent of the Company, publish, disclose or divulge to any
  person, firm or corporation, or use, directly or indirectly,
  for his own benefit or for the benefit of any person, firm
  or corporation, for use other than for the Company, any
  property, trade secrets, or Confidential Information
  (defined below) of the Company or its affiliates. 
  "Confidential Information" includes, but is not limited to
  all data, reports, interpretations, forecasts, records,
  statements (written and oral) and documents of any kind
  relating to the Company s costs and financial information,
  manufacturing methods or processes, market studies,
  products, existing and potential customers, pricing methods
  and strategies, new product plans and sources of supply.  In
  addition, all other information disclosed to the Employee or
  which the Employee shall obtain during such employment with
  the Company which the Employee has a reasonable basis to
  believe to be confidential, or which the Employee has a
  reasonable basis to believe the Company treats as
  confidential, shall be presumed to be Confidential
  Information.
  
       5.   Salary and Expenses.  The Company shall pay the
  Employee a salary of Three Hundred Thousand ($300,000.00)
  per year payable in accordance with the normal payroll
  practices of the Company.  The Company shall also reimburse
  the Employee for all reasonable, legitimate and documented
  business expenses incurred by him, on behalf of the Company,
  upon submission of accounts in satisfactory form, subject to
  such limitations as the Company may impose in its discretion
  from time to time.
  
       6.   Additional Benefits.  In addition to the
  compensation described in Section 5, the Employee shall be
  entitled during the Employment Term to receive the following
  additional benefits:
  
            (a)  Health Insurance.  The Company will provide
  the Employee with health insurance coverage consistent with
  the coverage provided to other employees of the Company from
  time to time.
  
            (b)  Retirement Plans.  The Employee will be
  eligible to participate in the Company s 401(k) retirement
  plan and such other retirement plans as may be established
  by the Company from time to time.
  
            (c)  Holidays and Vacations.  The Employee shall
  be entitled to such paid holidays as may be designated by
  the Company.  In addition, the Employee shall be entitled to
  three weeks of paid vacation for each year during which time
  his compensation shall be paid in full.  Notwithstanding any
  other provisions of this Agreement, in the event Employee is
  terminated from the Company for any reason, Employee will be
  entitled to a payment reflecting Employee's unused accrued
  vacation through such date of termination.
  
            (d)  Sick Leave.  The Employee shall be entitled
  to sick leave in accordance with Company practices.
  
            (e)  Stock Options.  Effective August 10, 1995,
  the Company agrees to grant to the Employee options to
  purchase 100,000 shares of common stock which will be
  exercisable one year from the date of grant and will be
  governed by the terms of the Company's 1985 Stock Option
  Plan.
  
            (f)  Bonus.  The Employee has the following bonus
  plan in effect for the three year term of this employment
  agreement: 
  
       Employee is eligible to receive a year end bonus based
  upon the pre-tax earnings of the Company for each fiscal
  year, if any.  This bonus will equal 10% of the Company's
  pre-tax earnings up to $5 million and 5% of the Company's
  pre-tax earnings in excess of $5 million.
  
       Bonus payments payable pursuant to this Section shall
  be made in a lump sum payment within two weeks of the
  finalization of the Company's year end audit.
  
       Notwithstanding the foregoing, Employee must be
  employed with the Company on December 31 of any given year
  in order to be eligible to receive the above bonus for that
  year.  In the event Employee is not so employed, the
  following provisions shall apply:
  
       (1)  If Employee is terminated for cause by the
              Company, or if Employee voluntarily terminates
              Employee's employment with the Company prior to
              December 31 of any given year (except as described
              under the circumstances in Section 7(d)), Employee
              shall receive no bonus for that year or any
              subsequent year;
  
       (2)  If Employee is terminated by the Company without
              cause, prior to December 31 of any given year or
              if Employee exercises Employee's rights under
              Section 7(d), whether or not Employee is in breach
              of this Agreement or if this Agreement is
              terminated prior to December 31 upon the death or
              disability of Employee as provided in Section
              7(a), Employee shall receive only a prorata
              portion of any bonus earned pursuant to this
              Section 6 which prorata portion shall be based
              upon the percentage of 365 calendar year days for
              which Employee is employed during said calendar
              year.  Any bonus due pursuant to this subsection
              (2) shall be paid as provided in this Section 6.
  
       Any direct or indirect payments made by the Company to
  or on behalf of the Employee determined by the Company s
  accountants to be reportable for tax purposes shall be
  treated as compensation to the Employee.
  
       7.   Termination of Employment.
  
       (a)  The Employee s employment pursuant to this
  Agreement shall terminate upon the death of the Employee or
  upon his inability, by reason of a mental or physical
  condition, to perform his duties hereunder for an
  uninterrupted period of sixty (60) days ("Disability"), and
  may be terminated for "cause" (as defined below) by the
  Company at any time during the Term immediately upon written
  notice of termination (except as provided otherwise below)
  given by the Company to the Employee describing such cause. 
  For purposes of this Agreement, "cause" for termination
  shall be deemed to exist if:  (i) the Employee is convicted
  of a felony which involves an intentional act of the
  Employee; (ii) the Employee engages in dishonesty or fraud;
  or (iii) the Employee breaches any of his material
  obligations as President and Chief Operating Officer of the
  Company.
  
       Any written notice of termination for cause pursuant to
  this Section shall be a written notice which (a) indicates
  the specific termination provision relied upon, (b) sets
  forth in reasonable detail the facts and circumstances
  claimed to provide a basis for termination of Employee's
  employment, and (c) if the date of termination is other than
  the date of receipt of such notice, specifies the
  termination date.  In the event that Employee's employment
  is terminated pursuant to subsection (iii) above, Employee
  shall have a period of thirty (30) days to cure the breach
  of Employee's obligations under this Agreement as described
  in the Notice of Termination.  In the event that Employee
  cures such breach within said thirty (30) day period, the
  notice of termination shall be considered rescinded.  In the
  event that Employee fails to cure such breach, then this
  Agreement will terminate without further notice to Employee
  as set forth in the notice of termination, and the
  provisions of 7(b) shall be applicable.  Employee shall not
  have the opportunity to cure any termination for cause
  pursuant to subsections (i) and (ii) above.  
  
            (b)  In the event (i) the Employee s employment
  under this Agreement is terminated for cause as provided
  above, or (ii) the Employee voluntary terminates his
  employment with the Company, other than pursuant to Section
  7(d), prior to the end of the Employment Term, the Company
  shall promptly pay to the Employee (or to the Employee s
  legal representatives) the amount of any compensation
  attributable to periods prior to such termination, plus the
  amount of any reimbursable expenses.  No other payments
  shall be due Employee.  
  
            (c)  In the event the Employee s employment is
  terminated without cause, whether or not Employee is in
  breach of this Agreement, or the Employee loses his
  employment for any other reason other than pursuant to
  Section 7(b), including but not limited to bankruptcy,
  closure, reorganization, buyout, merger, consolidation or
  for any other reason, the Employee is automatically entitled
  to severance payments equal only to one year's salary as
  provided in Section 5 above and continuation of existing
  health care benefits for one year.  No other payments shall
  be due Employee except any bonus payments which may be due
  pursuant to Section 6(f).  Said severance payments shall be
  paid in the same manner and on the same schedule (i.e.
  monthly, weekly, etc.) as Employee was being paid on the
  date of termination.  To the extent possible under the
  Company's Stock Option Plan, all stock options shall
  automatically vest and become immediately exercisable under
  this provision.  Severance payments being made pursuant to
  this Section shall survive the death of Employee.
  
            (d)  Notwithstanding the provisions of Section
  7(b), in the event of a merger, consolidation, buyout,
  reorganization or any other similar occurrence, Employee
  shall have the option of terminating Employee's employment
  with the Company and receiving the salary and benefits as
  provided in Section 7(c) above.  In the event Employee
  exercises this option prior to December 31 of any given
  year, the provisions of Section 6(f)(2) shall apply.  Such
  option shall be exercised by written notice from Employee to
  the Company which Notice must be given within thirty (30)
  days of the definitive closing date of any such occurrence.
  
       8.   Duty of the Employee upon Termination.  The
  Employee shall, upon termination of this Agreement, return
  to the Company all of the Company s records of any type and
  all literature, supplies, letters, written or printed forms,
  and/or memorandum pertaining to the Company s business.
  
       9.   Covenants on Termination. 
  
            (a)  During the Employment Term and for a period
  of one (1) year thereafter, the Employee shall not, directly
  or indirectly, on Employee's own behalf or on behalf of any
  other person, corporation, partnership or any other entity,
  whether as an employee, officer, director, proprietor,
  partner, investor, consultant, advisor, agent or in any
  other capacity, induce or attempt to induce any customer of
  the Company to reduce its business with the Company, or
  solicit or attempt to solicit any employees of the Company
  to leave the employ of the Company, nor shall Employee
  affiliate with any party engaging in the above actions.
  
            (b)  The Employee acknowledges that the
  restrictions contained in this Section are reasonable and
  necessary to protect the business and interests of the
  Company and that any violation of these restrictions will
  cause substantial and irreparable injury to the Company. 
  Therefore, notwithstanding the provisions of Section 13
  below, the Employee agrees that the Company is entitled, in
  addition to any other remedies, to preliminary and permanent
  injunctive relief to secure specific performance, and to
  prevent a breach or contemplated breach of this Agreement.
  
       10.  Severability.  In the event any clause or
  provision of this Agreement shall be held to be invalid or
  unenforceable, the same shall not affect the validity or
  enforceability of any other provision herein, and this
  Agreement shall remain in full force and effect in all other
  respects.  If a claim of invalidity or unenforceability of
  any provision of this Agreement is predicated upon the
  length of the terms of any covenant or the area covered
  thereby, such provision shall not be deemed to be invalid or
  unenforceable; rather, such provision shall be deemed to be
  modified to the maximum area or the maximum duration as any
  court of competent jurisdiction shall deem reasonable, valid
  and enforceable.
  
       11.  Entire Agreement.  The parties understand and
  agree that this Employment Agreement is the entire Agreement
  between the parties regarding the terms and conditions of
  the Employee s employment and there are no other agreements. 
  The terms of this Agreement may not be varied, modified,
  supplemented or in any other way changed by extraneous
  verbal or written representations by the Company or its
  agents to the Employee, unless by amendment to this
  Agreement executed in writing by both parties.
  
       12.  Governing Law.  The Agreement shall be governed
  by, construed and enforced in accordance with the laws of
  the state of Tennessee.
  
       13.  Arbitration.  Each party agrees not to bring suit
  against the other party in the courts of any jurisdiction in
  connection with any dispute which might be the subject of a
  civil action arising from the interpretation or application
  of this Agreement.  Each party agrees that any such dispute
  shall be finally resolved by submission to compulsory
  commercial arbitration to be held in Chattanooga, Tennessee
  according to the American Arbitration Association rules, by
  one or several arbitrators appointed. The parties agree to
  be bound by the decision of the arbitration and that a
  judgment of any court of competent jurisdiction may be
  rendered upon the award made pursuant to said submission to
  arbitration.
  
       14.  Survival.  The Covenants of Paragraphs 4, 9, 10,
  11 and 13 shall survive the termination of this Agreement.
  
       15.  Notice.  All notices, demands, requests, consents,
  reports, approvals, or other communications which may be or
  are required to be given, served, or sent pursuant to this
  Agreement shall be in writing and shall be mailed by first
  class, registered or certified mail, return receipt
  requested, postage prepaid, or transmitted by telegram or
  hand delivery, addressed as first set forth above, or such
  other address as a party may subsequently specify in
  writing.
  
       IN WITNESS WHEREOF, the parties have executed this
  Agreement this 27th day of November, 1995.
  
                           SIGNAL APPAREL COMPANY, INC.
  
  
  Dated: 11/27/95          By:  /s/William H. Watts
         --------------         ---------------------------
                                Its: Exec. V. P. & CFO
  
                           
  
  Dated: 11/27/95          /s/Bruce Krebs
         --------------    --------------------------------
                           BRUCE KREBS