SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                   FORM 10-K/A
                                 Amendment No. 1

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 (FEE REQUIRED)

                   For the Fiscal Year Ended December 31, 1998

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                For the transition period from _______ to _______
                           Commission File No. 1-2782

                          SIGNAL APPAREL COMPANY, INC.
             (Exact name of Registrant as specified in its charter)

         Indiana                                                62-0641635      
(State of Incorporation)                                     (I.R.S. Employer   
                                                          Identification Number)

 34 Englehard Avenue, Avenel, New Jersey                           07001   
(Address of principal executive offices)                        (zip code) 
                                                                 
Registrant's  telephone  number,  including area code (732) 382-2882  
Securities registered pursuant to Section 12(b) of the Act:

                                                     Name of each exchange
              Title of each class                     on which registered
              -------------------                     -------------------
     Common Stock: Par value $.01 a share           New York Stock Exchange

Indicate  by a check  mark  whether  the  registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirement for the past 90 days.                          Yes _X_ No ___

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

State the aggregate  market value of the voting stock held by  nonaffiliates  of
the  registrant:  $16,139,878,  calculated by using the closing price on the New
York  Stock  Exchange  on April 26,  1999 of the  Company's  Common  stock,  and
excluding  common  shares owned  beneficially  by directors  and officers of the
Company,  and by certain other entities,  who may be deemed to be  "affiliates",
certain of whom disclaim such status.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                 Class                    Outstanding as of April 26, 1999
                 -----                    --------------------------------
     Common Stock, $.01 par value                 44,771,977 shares



<PAGE>


6

The registrant hereby amends the following items, financial statements, exhibits
or other  portions of its Annual Report on Form 10-K for the year ended December
31, 1998, which was filed with the Commission on April 15, 1999:

Part III, Item 10:

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Directors

     The following is a list of the names, ages, positions held with the Company
and business experience during the past five years of all nominees for director:

<TABLE>
<CAPTION>
                                                                                                  Year First 
                                                                                                   Became A 
Name and Address                      Age     Business  Experience and  Directorships              Director
----------------                      ---     ---------------------------------------             ----------
<S>                                   <C>     <C>                                                    <C> 
Henry L. Aaron                        64      Senior  Vice   President  of  Atlanta   National       1998
c/o Cohen Pollock Merlin                      League  Baseball  Club,   Inc.,   since  October
   Axelrod & Tanenbaum                        1998.   Vice   President  of  Atlanta   National
2100 Riveredge Parkway                        League  Baseball Club,  Inc.,  from 1976 through
Suite 300                                     October 1998.
Atlanta, GA  30328

Zvi Ben-Haim                          39      President and Chief Executive  Officer of Tahiti       1999
Signal Apparel Company, Inc.                  Apparel,   Inc.,  a  designer  and  marketer  of
500 7th Avenue, 7th Floor                     swimwear,  body wear and active  wear for ladies
New York, NY  10018                           and girls,  from 1992 until its  acquisition  by
                                              the  Company  in  March  1999.   Executive  Vice 
                                              President and Director of the Company, President 
                                              and CEO of the Company's Tahiti Apparel Division 
                                              and  President of the Company's  Signal  Branded 
                                              Division, since March 1999.                      
                                              
Barry F. Cohen                        53      Executive    Vice   President   of   Parametrics       1998
Parametrics Technology Corp.                  Technology  Corporation,   a  computer  software
128 Technology Drive                          company,   since  January   1998;   Senior  Vice
Waltham, MA  02154                            President  of  Computer  Vision,  Inc.,  1993 to
                                              January 1998.

Jacob I. Feigenbaum                   50      President  of Miracle  Suit by Swim Shaper since       1994
c/o Miracle Suit                              February  1996;  President  and  owner of Sea Q.
1411 Broadway, 30th Floor                     America,  August  1994  to  1996;  President  of
New York, NY  10018                           Robby Len Swimwear  division of Apparel America,
                                              1980 to 1994.
</TABLE>


                                        2
<PAGE>



<TABLE>
<CAPTION>
                                                                                                  Year First 
                                                                                                   Became A 
Name and Address                      Age     Business  Experience and  Directorships              Director
----------------                      ---     ---------------------------------------             ----------
<S>                                   <C>     <C>                                                   <C> 
Paul R. Greenwood                     51      Managing  General Partner of Walsh,  Greenwood &       1990
One East Putnam Avenue                        Co.,  a   broker-dealer   engaged  in  effecting
Greenwich, CT  06830                          transactions  in  securities  for others and for
                                              its own account.

Michael Harary                        43      Senior Vice President of Tahiti  Apparel,  Inc.,      Nominee
Signal Apparel Company, Inc.                  a designer and  marketer of swimwear,  body wear        for
500 7th Avenue, 7th Floor                     and active wear for ladies and girls,  from 1992     election
New York, NY  10018                           until its  acquisition  by the  Company in March        at
                                              1999.  Executive Vice President of the Company's      Annual
                                              Tahiti  Apparel   Division  and  Executive  Vice      Meeting
                                              President  of  the  Company's   Signal   Branded 
                                              Division since March 1999.                       
                                              


Thomas A. McFall                      44      Chief   Executive   Officer   since  June  1998.       1997
Signal Apparel Company, Inc.                  Chairman,  Weatherly Financial Companies,  since
34 Englehard Avenue                           1984 (currently inactive).
Avenel, NJ  07001

John W. Prutch                        46      President  of the Company  since  October  1997;       1997
1088 National Parkway                         President,   GIDI  Holdings,   Inc.,   imprinted
Schaumburg, IL  60173                         activewear  manufacturer,   from  July  1994  to
                                              October  1997;   President,   Merchant   Capital
                                              Group, Ltd., 1984 to January 1993.

Stephen Walsh                         53      Chairman  of  the  Board  of   Directors   since       1990
3333 New Hyde Park Road                       September  1997;  Chief  Executive  Officer June
North Hills, NY  11040                        1998  to  January  1999.   General   Partner  of
                                              Walsh, Greenwood & Co., broker-dealer engaged in
                                              effecting  transactions in securities for others
                                              and for its own account.                        
</TABLE>



                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                                                                  Year First 
                                                                                                   Became A 
Name and Address                      Age     Business  Experience and  Directorships              Director
----------------                      ---     ---------------------------------------             ----------
<S>                                   <C>     <C>                                                    <C> 
Howard N. Weinberg                    38      Executive  Vice  President  and Chief  Financial       1998
34 Englehard Avenue                           Officer of the  Company  since  September  1998.
Avenel, NJ  07001                             Associate   Attorney,   Skadden,   Arps,  Slate,
                                              Meagher & Flom LLP, 1997 through September 1998. 
                                              Co-Owner  of   Louise's   Trattoria,   Inc.,   a 
                                              privately held restaurant company,  1989 through 
                                              1997.                                            
</TABLE>

     The information set forth above with respect to the principal occupation or
employment of each nominee  during the past five years has been furnished to the
Company by the respective nominee.

     Pursuant to an  agreement  among the Company  and certain  shareholders  (a
predecessor to WGI, LLC, FS Signal Associates, L.P. and FS Signal Associates II,
L.P.), FS Signal Associates,  L.P. and FS Signal Associates II, L.P.,  together,
have the right until 2001 to nominate two  directors to be included in the slate
of nominees. As of the date of this Report,  neither FS Signal Associates,  L.P.
nor FS Signal  Associates  II, L.P. has exercised  this right by nominating  any
individuals for election to the Board of Directors.

     WGI, LLC also has the right,  under the terms of the Credit Agreement dated
as of May 8, 1998  between the Company and WGI,  LLC,  until such time as all of
the Company's  indebtedness to WGI, LLC under the terms of the agreement is paid
in full, to nominate two directors to be included in the slate of nominees.  The
nomination of Messrs. Walsh and Greenwood for election to the Board of Directors
satisfies this requirement.

     Mr. Ben-Haim was appointed as a director of the Company and was employed as
Executive Vice  President of the Company  pursuant to the terms of an Employment
Agreement (as described herein) entered into  simultaneously  with the Company's
acquisition  of Tahiti  Apparel,  Inc.  Under the terms of that  agreement,  the
Company  agreed to use its  reasonable  best efforts  (subject to the  fiduciary
duties of its Board of  Directors)  to cause Mr.  Ben-Haim to be  nominated  for
election  as  a  director  of  the  Company  at  its  1999  Annual   Meeting  of
Shareholders.

     The Board of Directors held six meetings in 1998.

Executive Officers

     The following is a list of the names, ages,  positions with the Company and
business  experience during the past five years of the executive officers of the
Company:


                                       4
<PAGE>


Name                   Age        Office and Business Experience
----                   ---        ------------------------------

Zvi Ben-Haim           39         President of Tahiti Apparel, Inc., a designer
                                  and  marketer  of  swimwear,  body  wear  and
                                  active  wear for ladies and girls,  from 1992
                                  until its acquisition by the Company in March
                                  1999.  Executive  Vice President and Director
                                  of  the  Company,  President  and  CEO of the
                                  Company's   Tahiti   Apparel   division   and
                                  President  of the  Company's  Signal  Branded
                                  Division, since March 1999.                  
                                  
Thomas A. McFall       44         Chief  Executive  Officer  since  June  1998. 
                                  Chairman,   Weatherly  Financial   Companies, 
                                  since 1984 (currently inactive).              
                                  
Robert J. Powell       50         Vice   President  of  Licensing  and  General 
                                  Counsel since September 1992; Secretary since 
                                  January 1993.                                 
                                  
John W. Prutch         46         President of the Company  since October 1997.
                                  President,  GIDI  Holdings,  Inc.,  imprinted
                                  activewear  manufacturer,  from  July 1994 to
                                  October  1997;  President,  Merchant  Capital
                                  Group, Ltd., 1984 to January 1993.           
                                  
Stephen Walsh          53         Chairman  of the  Board  of  Directors  since 
                                  September 1997; Chief Executive  Officer from 
                                  June 1998 to January 1999. General Partner of 
                                  Walsh, Greenwood & Co., broker-dealer engaged 
                                  in effecting  transactions  in securities for 
                                  others and for its own account.               
                                  
Howard N. Weinberg     38         Executive Vice President and Chief  Financial 
                                  Officer of the Company since  September 1998. 
                                  Associate  Attorney,  Skadden,  Arps,  Slate, 
                                  Meagher & Flom LLP,  1997  through  September 
                                  1998. Co-Owner of Louise's Trattoria, Inc., a 
                                  privately  held  restaurant   company,   1989 
                                  through 1997.                                 
                                  
Officers  are  elected  annually  and  serve  at the  pleasure  of the  Board of
Directors.  There is no family  relationship  between any of the above executive
officers, directors and nominees for director.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
Securities and Exchange  Commission  thereunder require the Company's  executive
officers  and  directors  and  persons  who own  more  than ten  percent  of the
Company's Common Stock, as well as certain


                                       5
<PAGE>



affiliates  of such  persons,  to file initial  reports of ownership and monthly
transaction  reports  covering any changes in ownership  with the Securities and
Exchange  Commission  and the  New  York  Stock  Exchange.  Executive  officers,
directors and persons owning more than ten percent of the Company's Common Stock
are required by Securities  and Exchange  Commission  regulations to furnish the
Company with copies of all such reports they file. Based solely on its review of
the copies of such reports  received by it and written  representations  that no
other reports were required for those persons,  the Company believes that during
1998 all filing requirements applicable to its executive officers, directors and
owners of more then ten percent of the Company's Common Stock were complied with
except for one filing by Mr.  Paul R.  Greenwood  (a  director  and ten  percent
beneficial  owner) reporting late a purchase of securities by his spouse and one
filing by Mr.  Stephen Walsh (a director,  Chairman of the Board and ten percent
beneficial  owner)  reporting  late ten  purchases of  securities  by two trusts
established for the benefit of his minor children.










                      [This space intentionally left blank]










                                       6
<PAGE>


Part III, Item 11:

EXECUTIVE COMPENSATION

     Set forth below is a summary of the annual and long-term  compensation  for
each of the last  three  fiscal  years  paid to and/or  earned by the  following
Company executives:  (i) Thomas A. McFall,  Co-Chief Executive Officer from June
1998 until January 1999 and Chief  Executive  Officer  since January 1999;  (ii)
Stephen Walsh,  Chief Executive Officer from June 1998 until January 1999; (iii)
David  E.  Houseman,  Chief  Executive  Officer  until  May  1998;  and (iv) the
Company's other four most highly  compensated  executive  officers serving as of
December 31, 1998 (the "Named Executives").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                        Annual Compensation
                                              --------------------------------------
                                                                                                 Long-Term
                                                                                               Compensation
                                                                                                  Awards
                                                                           Other                Securities                All
                                                                          Annual                 Underlying              Other
  Name and Principal Position                 Salary       Bonus       Compensation            Options/SARs           Compensation
                                   Year        ($)        ($)(1)            ($)                   (#)(3)                   (4)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>         <C>            <C>                     <C>                     <C>
David E. Houseman,                 1998       203,620      82,500          37,688(2)              275,000                 6,465
 Chief Executive                   1997        90,805        --           104,226                 300,000                   562
 Officer (until May 1998),         1996          --          --              --                      --                    --
 Chief Operating Officer                                                                                                 
 (until May 1998) and                                                                                                    
 Chief Financial Officer                                                                                                 
 (until September, 1998)                                                                                                 
                                                                                                                         
Stephen Walsh,                     1998          --          --              --                      --                    --
 Chief Executive Officer           1997          --          --              --                      --                    --
 (from June 1998 until             1996          --          --              --                      --                    --
  January 1999)                                                                                                          
                                                                                                                         
Thomas A. McFall                   1998          --        37,500            --                      --                 150,000(4)
 Chief Executive Officer           1997          --          --              --                      --                    --
 (since June 1998) (1)             1996          --          --              --                      --                    --
                                                                                                                         
Robert J. Powell,                  1998       143,654       7,500            --                   350,000                 4,331
  Vice President                   1997       180,418        --              --                   150,000                 4,868
  and Secretary (1)                1996       185,000        --              --                    50,000                 5,645
                                                                                                                         
John W. Prutch,                    1998       155,769      50,000            --                      --                     365
 President (1)                     1997        31,705        --              --                   150,000                    87
                                   1996          --          --              --                      --                    --
                                                                                                                         
Howard N. Weinberg                 1998       135,000        --              --                      --                    --
 Executive Vice President          1997          --          --              --                      --                    --
 and Chief Financial               1996          --          --              --                      --                    --
 Officer (since September 
 1998)(1)
</TABLE>


                                       7
<PAGE>


NOTES TO SUMMARY COMPENSATION TABLE

(1)  Bonus amounts reported in the table for Messrs.  McFall, Powell, Prutch and
     Weinberg do not include  $579,098 of bonuses  earned by such  officers as a
     group for  transactions  completed  during fiscal 1998 but not yet paid and
     not yet allocated among such officers on an individual basis.

(2)  $35,000 of this amount  consisted of certain  educational  tuition payments
     for Mr. Houseman's children.

(3)  Reflects  the number of shares of the  Company's  Common  Stock  subject to
     options granted to the Named Executive Officers for the periods presented.

(4)  In the case of Mr. McFall,  the amount  reported  represents a draw paid to
     Mr. McFall that is offset against  compensation  earned under the agreement
     described   below  in  Part  III,  Item  13  under  the  heading   "Certain
     Relationships   and  Related   Transactions."   For  certain   other  Named
     Executives,  these amounts  include the portion of life insurance  premiums
     paid by the Company  that  represents  term life  insurance  on each of the
     Named  Executives.  In 1998,  these amounts were as follows:  Mr. Houseman,
     $4,094;  Mr. Walsh,  none; Mr. Powell,  $1,312;  Mr. Prutch,  $365; and Mr.
     Weinberg,  none. All other amounts represent Company matching contributions
     to a 401(k) plan  maintained  by the Company for the  accounts of the Named
     Executives.  In 1998, these amounts were as follows: Mr. Houseman,  $2,371;
     Mr. Walsh, none; Mr. Powell,  $3,019;  Mr. Prutch,  none; and Mr. Weinberg,
     none.

     The table below sets forth certain information concerning grants of options
during the year ended December 31, 1998, to the Company's Named Executives.  The
Company's  1985 Stock  Option Plan does not  provide  for the  granting of stock
appreciation  rights,  and the Company has not yet granted any awards  under its
new 1998 Stock Incentive Plan.

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                 Individual Grants      
                            ----------------------------                                      Potential Realizable Value
                                             % of Total                                       at Assumed Annual Rates of
                                               Options                                         Stock Price Appreciation
                                             Granted to      Exercise or                           for Option Term*
                             Options        Employees In      Base Price                      --------------------------
Name                        granted (#)      Fiscal Year      ($/Share)     Expiration Date   5%($)               10%($)
------------------------------------------------------------------------------------------------------------------------
<S>                           <C>               <C>             <C>             <C>            <C>               <C>    
David E. Houseman(1)          275,000           35.26%          1.75            9/17/01         85,200           180,914

Robert J. Powell(2)           350,000           44.87%          1.75            8/17/03        141,304           338,707
</TABLE>

* The dollar gains under these columns result from calculations  assuming 5% and
10% growth rates as required by the Securities  and Exchange  Commission and are
not intended to forecast future price  appreciation of Company Common Stock. The
gains reflect a future value based upon growth at these prescribed rates.

(1)  Options were issued in connection with Mr. Houseman's  severance  agreement
     with the Company,  with all of such options  vesting one year from the date
     of the grant,  May 8, 1998.  The options were issued with an exercise price
     that was equal to the market price on the date of grant.


                                       8
<PAGE>


(2)  Options  were  issued  under the  Company's  1985  Stock  Option  Plan as a
     component  of Mr.  Powell's  compensation.  Options with respect to 200,000
     shares  vest one year  after the date of grant,  options  with  respect  to
     75,000  shares  vest two years  after  the date of grant and the  remaining
     75,000  options vest three years after the date of grant.  The options were
     issued with an exercise  price that was $0.0625  above the market  price on
     the date of grant.

     The following  table provides  information  about options held by the Named
Executives.  The 1985 Stock  Option Plan does not  provide  for the  granting of
stock appreciation  rights, and the Company has not yet granted any awards under
its new 1998 Stock Incentive Plan.



               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                                      Number of
                                                                      Securities                Value of
                                                                      Underlying                Unexercised
                                                                      Unexercised               In-the-Money
                                                                      Options/SARs at           Options/SARs at
                                                                      FY-End (#)                FY-End($)(1)
                         
                         Shares Acquired            Value             Exercisable/              Exercisable/
Name                     on Exercise (#)         Realized ($)         Unexercisable             Unexercisable
----                     ---------------         ------------         -------------             -------------
<S>                            <C>                   <C>              <C>                           <C>
David E. Houseman              --                    --                     0 exer./                --
                                                                      275,000 unexer.               --
                                                                   
Stephen Walsh                  --                    --                     0 exer./                --
                                                                         0 unexer.                  --
                                                                   
Thomas A. McFall               --                    --                     0 exer./                --
                                                                         0 unexer.                  --
                                                                   
Robert J. Powell               --                    --                     0 exer./                --
                                                                      350,000 unexer.               --
                                                                   
John W. Prutch                 --                    --                     0 exer./                --
                                                                      150,000 unexer.               --
                                                                   
Howard N. Weinberg             --                    --                     0 exer./                --
                                                                         0 unexer.                  --
</TABLE>
                                                                  
(1)  Value of unexercised in-the-money options based on a fair market value of a
     share of the  Company's  Common  Stock of $1.375 as of December  31,  1998.
     Based  on  such  value,  none  of the  options  held  by  any of the  Named
     Executives were "in-the-money" at December 31, 1998.


                                       9
<PAGE>


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Jacob I.  Feigenbaum,  Paul R.  Greenwood and Stephen Walsh are the current
members of the Board's  Compensation  Committee.  As previously stated,  Paul R.
Greenwood and Stephen  Walsh are Managers of WGI,  LLC, the Company's  principal
shareholder.

     In  connection  with  the  Company's  1997   Restructuring   Plan  for  its
outstanding  subordinated debt and preferred stock, the Company agreed with WGI,
LLC,  that all funds  advanced to the Company by WGI,  LLC after August 21, 1997
(which  indebtedness was not part of the Restructuring Plan) would be documented
in the form of a new Credit Agreement with interest payable  quarterly at a rate
of 10% per annum and with other terms to be agreed upon  between the Company and
WGI. As of August 10,  1998,  the Company  was  indebted to WGI in an  aggregate
principal amount of $19,360,000 pursuant to such advances.

     On August 10, 1998, the Company's Board of Directors  approved a new Credit
Agreement  between the Company and WGI, to be  effective  as of May 8, 1998 (the
"WGI  Credit  Agreement"),  pursuant  to which WGI will lend the  Company  up to
$25,000,000  on a  revolving  basis for a  three-year  term  ending May 8, 2001.
Additional material terms of the WGI Credit Agreement are as follows:

o    Maximum  funding of  $25,000,000,  available in  increments  of $100,000 in
     excess of the minimum funding of $100,000.

o    Secured by a security  interest in all of the Company's  assets (except for
     the assets of its  Heritage  division and certain  former  plant  locations
     which were held for sale),  subordinate  to the  security  interests of the
     Company's senior lender.

o    Funds  borrowed  may be used  for any  purpose  approved  by the  Company's
     directors and executive officers, including repayment of any other existing
     indebtedness of the Company.

o    During the term of the WGI Credit  Agreement,  WGI, LLC is entitled to have
     two  designees  nominated  by the  Company  for  election  to its  Board of
     Directors at the Company's  Annual Meeting of Shareholders;  Messrs.  Walsh
     and  Greenwood  are the Board  nominees  designated by WGI, LLC pursuant to
     this provision.

     Pursuant to the WGI Credit Agreement, WGI will receive warrants to purchase
up to 5,000,000  shares of the Company's  Common Stock at $1.75 per share,  with
the following additional terms:

     (1)  the warrants vest at the rate of 200,000  warrants for each $1,000,000
          increase in the largest  balance owed at any one time over the life of
          the credit agreement (as of December 31, 1998, the largest outstanding
          balance



                                       10
<PAGE>



          to date has been  $19,985,000,  which  means that  warrants to acquire
          3,997,000  shares of Common  Stock  would have been  vested as of such
          date)

     (2)  the  warrants  have  registration  rights no more  favorable  than the
          equivalent  provisions in the currently outstanding warrants issued to
          principal shareholders of the Company, except that such rights include
          three demand registrations; and

     (3)  the warrants  contain  antidilution  provisions which require that the
          number  of  shares  subject  to such  warrants  shall be  adjusted  in
          connection with any future issuance of the Company's  Common Stock (or
          of other securities  exercisable for or convertible into Common Stock)
          such the  aggregate  number of shares  issued or  issuable  subject to
          these  Warrants  (assuming  eventual  vesting as to the full 5,000,000
          shares) will always represent ten percent (10%) of the total number of
          shares of the Company's Common Stock on a fully diluted basis.

In compliance with the rules of the New York Stock Exchange, these warrants were
subject to approval by the  Company's  shareholders,  which was  obtained at the
1998 Annual Meeting.


     As of March 31, 1999, the Company was indebted to WGI, LLC in the principal
amount of $19,460,000 pursuant to this Credit Agreement.

EMPLOYMENT AGREEMENTS

     David E. Houseman was employed as the Company's Chief Executive Officer and
Chief  Operating  Officer through May 1998, and as the Company's Chief Financial
Officer through his  resignation in September  1998.  Pursuant to the terms of a
severance  agreement  between the Company and Mr.  Houseman,  Mr.  Houseman will
receive  severance  payments in the aggregate  amount of $100,000,  with $60,000
having been paid upon execution and the remainder  payable in four equal monthly
installments,   together  with  continuation  of  his  health  benefits  through
September  1999 and  payments  for unused  vacation  time and  certain  expenses
totaling less than $20,000.  Mr. Houseman also was permitted to retain an option
to purchase  275,000  shares of the  Company's  Common  Stock at $1.75 per share
which  was  granted  effective  May 8,  1998.  Under  Mr.  Houseman's  severance
agreement,  such option will vest in full on May 8, 1999 and may be exercised by
Mr. Houseman through September 17, 2001.

     John W. Prutch is employed as the Company's President under the terms of an
employment  agreement extending through December 31, 1999. Pursuant to the terms
of his employment  agreement Mr. Prutch's base salary is $150,000 with the right
to receive an annual bonus. As a further  inducement to employment,  the Company
granted Mr. Prutch  options  pursuant to the Company's 1985 Stock Option Plan to
purchase  150,000  shares of the Company's


                                       11
<PAGE>


Common  Stock at an exercise  price of $2.375 per share,  subject to  adjustment
($.625 above the market price on the date of grant),  with such options  vesting
at the rate of  100,000  shares  two  years  after  the  date of  grant  and the
remaining  50,000  shares three years after the date of grant.  All such options
expire five years from the date of grant.  Additionally,  Mr. Prutch is entitled
to  participate  in  all  other  incentive  bonus,  stock  option,  savings  and
retirement  programs and benefit programs maintained for the Company's executive
officers  from  time to time.  In the  event  that Mr.  Prutch's  employment  is
terminated  for cause or, under certain  circumstances,  Mr. Prutch  voluntarily
terminates  his  employment,  the  Company  shall pay Mr.  Prutch  (or his legal
representative) only those amounts of compensation attributable to periods prior
to the  termination.  If the  termination is for cause,  all  outstanding  stock
options held by Mr. Prutch shall expire.  If Mr. Prutch  voluntarily  terminates
his  employment,  all options vested as of the date of termination  shall expire
ninety  days  after  the date of  termination.  In the event  that Mr.  Prutch's
employment is terminated without cause (as defined in his employment  agreement)
then  he  will  be  entitled  to  payments  equal  to one  year's  base  salary.
Furthermore,  all unvested  options shall become  immediately  exercisable.  Any
vested  Incentive  Stock  Options  will  expire  three  months  from the date of
termination,  and any vested  Non-Incentive  Stock  Options will expire one year
from the date of termination.

         In addition to Mr.  Prutch's  employment  agreement with the Company in
his capacity as President,  both John W. Prutch and Thomas A. McFall are parties
to separate  agreements with the Company involving  financial  advisory services
provided by Messrs.  Prutch and McFall,  as described below in Part III, Item 13
under the heading "Certain Relationships and Related Transactions."











                      [This space intentionally left blank]











                                       12
<PAGE>


Part III, Item 12:

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth certain  information  regarding  beneficial
ownership of the  Company's  equity  securities  as of April 26,  1999,  by each
shareholder  that the  Company  knows to own  beneficially  more  than 5% of the
issued and  outstanding  shares of the Company's  Common Stock,  director of the
Company,  nominee for director,  Named  Executive (as defined herein) and by the
directors and Named Executives of the Company as a group.

<TABLE>
<CAPTION>
                                                                      Amount and Nature of
Name and Address of Beneficial Owner           Title of Class        Beneficial Ownership(1)       Percent of Class
------------------------------------           --------------        -----------------------       ----------------
<S>                                            <C>                          <C>                         <C>  
FS  Signal  Associates,   L.P.;  FS  Signal    Common Stock                 11,940,002                  26.5%
Associates II, L.P.; FS Signal, Inc.; and      $.01 par value
Kevin S. Penn, as a group
65 E. 55th St., 32nd Floor
New York, New York 10022 (2)

Kevin S. Penn                                  Common Stock                 11,940,002                  26.5%
65 E. 55th St., 32nd Floor                     $.01 par value
New York, New York 10022 (2)

FS Signal, Inc.                                Common Stock $.01            11,640,002                  26.0%
65 E. 55th St., 32nd Floor                     par value
New York, New York 10022(2)(3)


FS Signal Associates, L.P.                     Common Stock                  4,645,013                  10.4%
c/o Kenneth Musen                              $.01 par value
157 Church Street, Box 426
New Haven, Connecticut 06502 (2)(4)

FS Signal Associates II, L.P.                  Common Stock                  6,994,989                  15.6%
c/o Kenneth Musen                              $.01 par value
157 Church Street, Box 426
New Haven, Connecticut 06502 (2)(5)

Walsh Greenwood & Co.; Stephen Walsh;  Paul    Common Stock                 25,325,849                  47.5%
R. Greenwood; and WGI, LLC, as a group         $.01 par value
One East Putnam Avenue
Greenwich, Connecticut 06830 (6)               Series H                         443.16                   100%
                                               Preferred Stock
                                               $100,000 stated
                                               value

Walsh Greenwood & Co.                          Common Stock                    788,800                  1.8%
One East Putnam Avenue                         $.01 par value
Greenwich, Connecticut 06830 (6)(7)
</TABLE>


                                       13
<PAGE>


<TABLE>
<CAPTION>
                                                                      Amount and Nature of
Name and Address of Beneficial Owner           Title of Class        Beneficial Ownership(1)       Percent of Class
------------------------------------           --------------        -----------------------       ----------------
<S>                                            <C>                         <C>                          <C>  
WGI, LLC                                       Common Stock                24,518,649                   46.0%
One East Putnam Avenue                         $.01 par value
Greenwich, Connecticut 06830 (6)(7)
                                               Series H                        443.16                    100%
                                               Preferred Stock
                                               $100,000 stated
                                               value

Ming-Yiu Chan                                  Common Stock                 3,656,666                    8.2%
c/o Manley, Ltd., 8/F                          $.01 par value
HK Spinners International Building
818 Cheung Sha Wan Road
Kowloon, Hong Kong (8)

Henry L. Aaron (9)                             Common Stock                    75,000                      *
                                               $.01 par value

Barry F. Cohen                                 Common Stock                      --                        --
                                               $.01 par value

Zvi Ben-Haim                                   Common Stock                 2,506,667                    5.6%
                                               $.01 par value

Jacob I. Feigenbaum (10)                       Common Stock                    10,000                      *
                                               $.01 par value

Paul R. Greenwood (6)(7)                       Common Stock                25,320,849                   47.5%
                                               $.01 par value

                                               Series H                        443.16                    100%
                                               Preferred Stock
                                               $100,000 stated
                                               value

Michael Harary                                 Common Stock                   885,557                    2.0%
                                               $.01 par value

Thomas A. McFall (11)                          Common Stock $.01              769,793                    1.7%
                                               par value

John W. Prutch (12)                            Common Stock                   769,793                    1.7%
                                               $.01 par value

Stephen Walsh (6)(7)                           Common Stock                25,312,449                   47.5%
                                               $.01 par value

                                               Series H                        443.16                    100%
                                               Preferred Stock
                                               $100,000 stated
                                               value
</TABLE>


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                      Amount and Nature of
Name and Address of Beneficial Owner           Title of Class        Beneficial Ownership(1)       Percent of Class
------------------------------------           --------------        -----------------------       ----------------
<S>                                            <C>                         <C>                          <C>  
Howard N. Weinberg                             Common Stock                     --                        --
                                               $.01 par value

Robert J. Powell                               Common Stock                     --                        --
                                                $.01 par value

David E. Houseman (13)                         Common Stock                   280,000                     *
                                               $.01 par value

All directors and executive                    Common Stock                30,341,659                   58.4%
officers as a group [11 individuals] (14)      $.01 par value

                                               Series H                        443.16                    100%
                                               Preferred Stock
                                               $100,000 stated
                                               value
</TABLE>

----------
* Less than 1%


NOTES TO TABLE OF BENEFICIAL OWNERSHIP

(1)  As of April 26,  1999,  the Company had issued and  outstanding  44,771,977
     shares of Common Stock and 443.16  shares of Series H Preferred  Stock.  In
     general,  a person is deemed to be a  "beneficial  owner" of a security  if
     that person has or shares "voting  power," which includes the power to vote
     or direct  the  voting  of such  security,  or  "investment  power,"  which
     includes  the power to  dispose  of or to direct  the  disposition  of such
     security,  or if a person has the right to acquire  either  voting power or
     investment  power over such  security  through the exercise of an option or
     the conversion of another security within 60 days. More than one person may
     be a beneficial  owner of the same security,  and a person may be deemed to
     be a beneficial owner of securities as to which he has no personal economic
     interest or which he may not vote.  In the case of persons who hold options
     or warrants to purchase shares of Common Stock that are exercisable  either
     immediately or within 60 days of April 26, 1999, the shares of Common Stock
     represented  thereby  have been  treated as  outstanding  for  purposes  of
     calculating  the ownership  totals and  percentages  (and the percentage of
     voting power) for only the persons  holding such options and warrants,  and
     have not otherwise been treated as outstanding shares.

(2)  FS Signal  Associates,  L.P. ("FS Signal");  FS Signal  Associates II, L.P.
     ("FS Signal II"); FS Signal, Inc. ("FSSI"); and Kevin S. Penn ("Penn") have
     filed a report,  as a group,  on  Schedule  13D  disclosing  their  various
     relationships. Such persons may be deemed to be a group for purposes of the
     beneficial  ownership of the  securities  disclosed in the table,  although
     they disclaim  membership in a group. The 11,940,002 shares of Common Stock
     include (i)  4,645,013  shares of Common Stock held  directly by FS Signal;
     (ii)  6,994,989  shares of Common Stock held  directly by FS Signal II; and
     (iii)  warrants held directly by Penn to acquire  300,000  shares of Common
     Stock.  The  reporting  persons may be deemed to be members of a group and,
     accordingly,  could each be deemed to have beneficial  ownership (by virtue
     of Rule 13(d)-5) of all shares of Common Stock held directly by the various
     members of the group. Except as disclosed herein, no other entity or person
     that may be  deemed to be a member of the  group  holds  direct  beneficial
     ownership of such 


                                       15
<PAGE>


     Common Stock.  Penn is the President of FSSI,  which is the general partner
     of both FS Signal  and FS Signal  II.  Both FS Signal  and FS Signal II are
     limited  partnerships.   Pursuant  to  both  the  bylaws  of  FSSI  and  an
     understanding  among the  limited  partners  of FS Signal and FS Signal II,
     Penn, as President of FSSI, has the sole voting and  investment  power over
     the securities held by both limited partnerships.

(3)  As the  general  partner of both FS Signal  and FS Signal  II,  FSSI may be
     deemed to be the beneficial  owner of (i) 4,645,013  shares of Common Stock
     held directly by FS Signal and (ii)  6,994,989  shares of Common Stock held
     directly by FS Signal II. Kevin S. Penn is the President of FSSI.  Pursuant
     to both the bylaws of FSSI and an understanding  among the limited partners
     of FS Signal and FS Signal II, Penn,  as  President  of FSSI,  has the sole
     voting  and  investment  power  over the  securities  held by both  limited
     partnerships.

(4)  FS Signal,  a Connecticut  limited  partnership,  owns  directly  4,645,013
     shares of Common  Stock.  Kevin S. Penn, in his capacity as President of FS
     Signal,  Inc.,  the  general  partner  of FS  Signal,  may be deemed to own
     beneficially all shares of Common Stock held by FS Signal.

(5)  FS Signal II, a Connecticut  limited  partnership,  owns directly 6,994,989
     shares of Common Stock.  Kevin S. Penn, in his capacity as the President of
     FS Signal,  Inc., the general partner of FS Signal II, may be deemed to own
     beneficially all shares of Common Stock held by FS Signal II.

(6)  Walsh Greenwood & Co., a New York limited partnership ("Walsh  Greenwood"),
     Walsh  Greenwood's  sole  general  partners,  Stephen  Walsh  and  Paul  R.
     Greenwood,  and WGI,LLC,  a  Connecticut  limited  liability  company whose
     Managers  are  Stephen  Walsh and Paul R.  Greenwood  ("WGI")  have filed a
     report, as a group, on Schedule 13D disclosing their various relationships.
     Such  persons may be deemed to be a group for  purposes  of the  beneficial
     ownership of the securities disclosed in the table,  although they disclaim
     membership in a group.  The  25,325,849  shares of Common Stock include (i)
     788,800  shares of Common Stock held directly by Walsh  Greenwood on behalf
     of certain  managed  accounts (as to which Walsh Greenwood has voting power
     and  investment  power but does not have any pecuniary  interest  therein);
     (ii) 16,021,649  shares of Common Stock owned directly by WGI; (iii) 12,400
     shares of Common  Stock  owned by two trusts  for the  benefit of the minor
     children of Stephen Walsh, as to which Paul R. Greenwood serves as trustee;
     (iv) 1,000  shares of Common  Stock owned by Mr.  Greenwood's  spouse;  (v)
     5,000  shares  of  Common  Stock  owned  by Mr.  Walsh's  spouse;  and (vi)
     presently  exercisable  warrants to acquire a total of 8,497,000  shares of
     Common Stock held by WGI. All 443.16 shares of Series H Preferred Stock are
     held directly by WGI.

(7)  Walsh Greenwood has the sole power to vote and dispose of 788,800 shares of
     Common Stock (all of which shares are held by Walsh  Greenwood on behalf of
     certain  managed  accounts and as to which Walsh Greenwood has voting power
     and investment power but does not have any pecuniary interest therein). WGI
     has (i) the sole  power to vote and  dispose  of the  16,021,649  shares of
     Common  Stock  it owns  directly;  (ii) the sole  power to  dispose  of the
     presently  exercisable  warrants to acquire a total of 8,497,000  shares of
     Common Stock,  which warrants are  exercisable by WGI's  Managers,  Stephen
     Walsh and Paul R.  Greenwood;  and (iii) the sole power to vote and dispose
     of the 443.16  shares of Series H  Preferred  Stock that it owns  directly.
     Both Messrs. Walsh and Greenwood, in their individual capacities as general
     partners of Walsh  Greenwood and as Managers of WGI, may be deemed to share
     the power to vote and direct the  disposition of the shares of Common Stock
     and Series H Preferred Stock beneficially owned by Walsh Greenwood and WGI.
     Paul R. Greenwood,  in his capacity as trustee,  has sole power to vote and
     to direct the  disposition of the 12,400 shares of Common Stock held in two
     trusts for the benefit of Mr. Walsh's minor children (but Mr. Greenwood has
     no financial  interest in such shares).  Under S.E.C.  rules, Mr. Greenwood
     may be deemed to share  voting and  investment  power  with  respect to the
     1,000 shares of Common Stock held by his wife,  and Mr. Walsh may be deemed
     to share  voting and  investment  power with respect to the 5,000 shares of
     Common  Stock  held by his  wife;  however,  Messrs.  Greenwood  and  Walsh
     disclaim any beneficial ownership with respect to such shares.

(8)  Beneficial  ownership  reported  for  Ming-Yiu  Chan  consists of 3,656,666
     shares of Common Stock issued to Mr. Chan in connection  with the Company's
     recent  acquisition  of  substantially  all of the assets and 



                                       16
<PAGE>


     business of Tahiti  Apparel,  Inc. To date,  the Company has not received a
     report of beneficial ownership on Schedule 13D from Mr. Chan.

(9)  Beneficial  ownership  reported  for Mr.  Aaron  consists  of  warrants  to
     purchase  75,000  shares of Common Stock which were  granted in  connection
     with a licensing transaction between the Company and Mr. Aaron prior to Mr.
     Aaron becoming a director.  These Warrants  became  exercisable on December
     31, 1998.  Mr. Aaron also holds  warrants to purchase an additional  75,000
     shares   (granted  in  connection  with  the  same  license)  which  become
     exercisable on December 31, 1999.

(10) Beneficial  ownership  reported  for Mr.  Feigenbaum  consists of presently
     exercisable warrants to purchase 10,000 shares of Common Stock.

(11) Beneficial   ownership  reported  for  Mr.  McFall  consists  of  presently
     exercisable warrants to purchase 769,793 shares of Common Stock.

(12) Beneficial   ownership  reported  for  Mr.  Prutch  consists  of  presently
     exercisable warrants to purchase 769,793 shares of Common Stock.

(13) Beneficial ownership reported for Mr. Houseman includes options to purchase
     275,000 shares of Common Stock which become exercisable as of May 8, 1999.

(14) This figure  includes  shares held by certain  entities for which  indirect
     beneficial  ownership  may be attributed  to Messrs.  Walsh and  Greenwood,
     directors  of the Company,  as  discussed  in Notes (6) and (7) above.  The
     figure includes warrants to acquire  10,121,586 shares of Common Stock. All
     such warrants are exercisable either immediately or within 60 days of April
     26, 1999 and,  consequently,  have been  treated as  outstanding  shares of
     Common Stock for  calculations  of share ownership and voting power for the
     group of directors and executive officers. See Note (1) above.


Part III, Item 13:

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In  addition to the  information  presented  below,  see also  discussion  under
heading  "Compensation  Committee Interlocks and Insider  Participation" in Part
III, Item 11.

     Effective May 9, 1997,  the Company  contracted  with  Weatherly  Financial
("Weatherly")  for  Weatherly to act as  financial  advisor to the Company on an
exclusive  basis with respect to evaluating,  pricing,  negotiating  and closing
mergers and  acquisitions and other  investments and arranging  financing on the
Company's  behalf.  Weatherly was to be compensated  for these services  through
prescribed fees and, in addition,  Weatherly was granted Warrants, effective May
9, 1997, to purchase  805,000 shares of the Company's  Common Stock at $2.50 per
share.  These warrants were to vest upon the  achievement of certain  objectives
with respect to the Company's  business  performance  and were part of a complex
overall arrangement that also included additional warrant opportunities.

     All of the parties to the Weatherly  Agreement  anticipated  that Thomas A.
McFall and John W. Prutch, in their capacities as associates of Weatherly, would
play a significant role in performing the services under the agreement and would
receive a significant  portion of the  compensation  payable under the Weatherly
Agreement. When it later employed Mr. McFall as


                                       17
<PAGE>


its CEO and Mr.  Prutch  as its  President,  the  Company  replaced  the  former
arrangement with Weatherly with an agreement, approved by the Board of Directors
on August 10, 1998 to be  effective  as of May 8, 1998,  directly  with  Messrs.
McFall and Prutch. Under the terms of the new agreement, the warrants previously
issued to Weatherly  have been assigned 50% to Mr. McFall and 50% to Mr. Prutch,
the  exercise  price of these  warrants  has been  reset to $1.75 per share (the
closing market price for the Common Stock on May 8, 1998).

     Each of  Messrs.  McFall  and  Prutch  also  have  been  issued  additional
warrants,  with a term of 10 years for the purchase of up to 1,902,273 shares of
Common Stock at an exercise  price of $1.75 per share.  All of the warrants held
by Messrs.  McFall and Prutch  (including those originally  issued to Weatherly)
now will be subject to a new vesting schedule as follows:

o    Warrants to purchase  33.4% of the total  number of shares of Common  Stock
     (769,793  shares for each of  Messrs.  McFall  and  Prutch)  will be vested
     immediately upon obtaining shareholder approval.

o    Warrants  to  purchase  the  remaining  shares  will  vest  in  incremental
     installments of 22.2% each, based on achievement by the Company  (including
     its subsidiaries) of each of the following goals:

          Goal 1:

          $4.0 million in annual  pre-tax  earnings or an average  daily closing
          price of at least $2.75 per share for the Company's  Common Stock over
          any  period  of  120  consecutive   calendar  days  (Approx.   511,660
          additional shares vest for each of Messrs. McFall and Prutch)

          Goal 2:

          $5.0 million in annual  pre-tax  earnings or an average  daily closing
          price of at least $4.00 per share for the Company's  Common Stock over
          any  period  of  120  consecutive   calendar  days  (Approx.   511,660
          additional shares vest for each of Messrs. McFall and Prutch)

          Goal 3:

          $6.0 million in annual  pre-tax  earnings or an average  daily closing
          price of at least $5.00 per share for the Company's  Common Stock over
          any  period  of  120  consecutive   calendar  days  (Approx.   511,660
          additional shares vest for each of Messrs. McFall and Prutch)

o    More than one of the preceding  goals may be met  simultaneously,  provided
     that the threshold of the higher goal is met.


                                       18
<PAGE>


The  Warrants   contain   customary   antidilution   provisions   and  piggyback
registration  rights  and,  subject to certain  exceptions,  Messrs.  McFall and
Prutch may not dispose of the Common Stock issuable  under the Warrants  without
the prior  consent of WGI,  LLC. The new  3,804,546  warrants  issued to Messrs.
McFall and Prutch  after they became  directors  of the Company  were subject to
approval by the  Company's  shareholders,  which  approval  was  obtained at the
Company's Annual Meeting of Shareholders on January 27, 1999.

     The  new  agreement   also   provides  that  Messrs.   McFall  and  Prutch,
collectively,  will  receive  a  success  fee in  connection  with  identifying,
negotiating and closing any Acquisition Transaction (defined in the agreement as
any  transaction  involving a sale or purchase  of a target  company,  a merger,
joint  venture,  or any other  acquisition of all or any portion of the stock or
assets of any  other  company),  equal to three  percent  (3%) of the  Aggregate
Consideration  (as  defined  in  the  agreement)  paid  in  connection  with  an
Acquisition Transaction.  

     The  new  agreement   also   provides   that  Messrs.   McFall  and  Prutch
(collectively)  will  receive a success fee equal to three  percent  (3%) of the
proceeds of any financing  transactions  which they  participate  in developing,
negotiating  and closing with third  parties for the benefit of the Company.  If
the  financing  transaction  raises  cash  for the  Company  (regardless  of the
Company's use of the proceeds),  then this fee will be payable  entirely in cash
upon the closing of the transaction. If a Financing occurs in connection with an
Acquisition  Transaction,  however, and a portion of the Aggregate Consideration
paid by the Company in connection with the Acquisition  Transaction  consists of
Common  Stock,  then the  agreement  provides  that a portion of the  applicable
success fee may be paid to Messrs.  McFall and Prutch in the form of  additional
shares  of  Common  Stock.  (The  agreement  defines a  "Financing"  broadly  as
including  any   combination  of  committed   senior  term  or  revolving  debt,
subordinated debt,  preferred or common equity or equivalents,  trade financing,
debt guarantees,  any relief or assumption of debt or debt guarantees,  any sale
and leaseback or other leasing arrangement, any restructuring,  earnout or other
contingent payment, or any other debt or equity financing vehicle, but excluding
the Company's existing financing with its senior lender and any stock options or
warrants outstanding on May 8, 1998). In this situation,  the agreement provides
that Messrs.  McFall and Prutch (collectively) would be entitled to receive both
the  acquisition  success fee (equal to 3% of the  Aggregate  Consideration  (as
defined) payable in the Acquisition  Transaction) and the financing  success fee
(equal to 3% of the applicable Financing). Under these circumstances,  a portion
of the  financing  success fee would be payable to Messrs.  McFall and Prutch in
the form of  additional  shares of the  Company's  Common  Stock,  determined as
follows:

     (A)  If the Financing raises sufficient cash to pay the cash portion of the
          Aggregate  Consideration for the Acquisition Transaction PLUS at least
          some portion of the  financing  success fee, then up to one half (1/2)
          of the 3% financing  success fee collectively  paid to Messrs.  McFall
          and Prutch will be paid in cash,  with the remainder of such fee being
          paid in shares of the  Company's  Common  Stock  (valued as  described
          below).  The agreement also provides that, under these 


                                       19
<PAGE>


          circumstances,  either Mr.  McFall or Mr.  Prutch  individually  could
          elect to receive a portion of his respective financing success fee (up
          to 100% of the entire fee) in shares of Common Stock rather than cash.

     (B)  If the Financing  does not raise cash in excess of the cash portion of
          the Aggregate Consideration for the Acquisition Transaction,  then all
          of the 3%  financing  success fee would be paid to Messrs.  McFall and
          Prutch in the form of shares of the Company's Common Stock.

The number of shares of the  Company's  Common  Stock  issuable  in payment of a
given dollar amount of fees due under either (A) or (B) above will be determined
by valuing the Common Stock at its closing  market price on the day  immediately
prior to the closing of the Financing in question.  Thus,  the precise number of
shares that would be issuable  under the terms of the  agreement in payment of a
given dollar amount of fees will depend upon the  then-current  market price for
the Company's Common Stock.

     Under this  provision of the agreement  regarding  financing  transactions,
Messrs.  McFall and Prutch each received a cash payment of $50,000 in connection
with  the  Company's  private  placement  of  $5,000,000  of  its 5%  Series  G1
Convertible Preferred Stock in September 1998.

     All cash payments to Messrs. McFall and Prutch called for performance under
the terms of this  agreement will be subject to offset against an annual draw of
$150,000 which they each receive from the Company.

     The agreement  also  provides that Messrs.  McFall and Prutch will abide by
certain restrictions  concerning the use of the Company's  confidential business
information and provides that,  subject to the fiduciary  duties of its Board of
Directors,  the Company  will use its best efforts to cause  Messrs.  McFall and
Prutch to be  nominated  for election as directors of the Company at each annual
meeting during the term of the agreement.

     Henry  Aaron,  a director of the Company,  is a principal  of  Henry-Aaron,
Inc., a  corporation  that holds  various  licenses  from Major League  Baseball
Properties.  Pursuant to an agreement between the Company and Henry-Aaron, Inc.,
the Company is  authorized  to  manufacture,  market and sell  various  products
bearing  the logos and  trademarks  of Major  League  Baseball  pursuant  to the
license held directly by  Henry-Aaron,  Inc. In connection with the execution of
this  agreement,  the  Company  granted  Henry Aaron and  another  principal  of
Henry-Aaron, Inc. warrants to purchase a total of 200,000 shares of Common Stock
at $1.75 per share,  effective May 8, 1998,  and vesting as to 100,000 shares on
December 31, 1998 and as to the remaining  100,000  shares on December 31, 1999;
all of such warrants  expire  December 31, 2003. Mr. Aaron holds 150,000 of such
warrants.  In  addition  to  paying  royalties  due  to  Major  League  Baseball
Properties under the arrangement with  Henry-Aaron,  Inc., the Company also pays
an override to Henry-Aaron, Inc. on its sales of Major League Baseball products.
These payments to Henry-Aaron,  Inc. totaled $270,000 in 1997,  $167,326 in 1998
and $69,610 through the first three months of 1999.


                                       20
<PAGE>


                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  Amendment  to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                        SIGNAL APPAREL COMPANY, INC.



                                        By: /s/ Robert J. Powell
                                            ------------------------------------
                                            Robert J. Powell
                                            Vice President and
                                            Secretary
Date: April 30, 1999