January 31, 1997






Signal Apparel Company, Inc.
Manufacturer's Road
Chattanooga, Tennessee

     Re:  THIRD INTERIM EXTENSION

Gentlemen:

     This will serve to modify the letter agreement

dated September 11, 1996 ("Second Interim Extension

Agreement") between Joan Vass Inc. ("Vass") and you

("Signal") pursuant to which the June 1, 1992 License

Agreement ("License Agreement") between Vass and

Signal, as extended by March 29, 1996 Interim Extension

Agreement ("First Interim Extension Agreement"), was

agreed to be extended further beyond its May 31, 1996

termination date, as follows:

     1.   Paragraph 2 of the First Interim Extension

Agreement is modified so that the Term of the License

Agreement shall be deemed extended to August 30, 1997

and shall be applicable to the Fall 1997 Collection

(the "Second Extended Collection").

     2.   Subparagraph a of Paragraph 2 of the First

Interim Extension Agreement is amended to provide for

the following payment obligations due on and after the

date hereof, in place of the payment obligations set

forth therein:

<TABLE>
<CAPTION>
DATE OF PAYMENT               OBLIGATION TO BE PAID
<S>                           <C>
No later than the due         Payment of third party
dates reflected on the        expenses (as determined
invoices                      and approved by Vass) for
                              Vass' Fall 1997 Fashion
                              Show to be held the first
                              week in April 1997, up to
                              a maximum of $70,000
                              ("Fashion Show
                              Expenses").  (Signal
                              hereby indemnifies Vass
                              from liability for non-
                              payment of such Fashion
                              Show Expenses.)
                              
February 28, 1997             Payment of Royalty on Net
                              Sales of u.s.a. garments
                              in the month of January
                              1997
                              
March 1, 1997                 Payment of the sum of
                              $62,500
                              
March 30, 1997                Payments of Royalty on
                              Net Sales of u.s.a.
                              garments between December
                              1, 1996 and February 28,
                              1997 in excess of the
                              payments scheduled to be
                              made January 30, 1997 and
                              February 28, 1997
                              
April 30, 1997                Payment of Royalty on Net
                              Sales of u.s.a. garments
                              in the month of March
                              1997
                              
May 30, 1997                  Payment of Royalty on Net
                              Sales of u.s.a. garments
                              in the month of April
                              1997
                              
June 1, 1997                  Payment of the sum of
                              $62,500
                              
June 30, 1997                 Payment of Royalty on Net
                              Sales of u.s.a. garments
                              between March 1, 1997 and
                              May 30, 1997, in excess
                              of the payments scheduled
                              to be made April 30, 1997
                              and May 30, 1997
                              
July 30, 1997                 Payment of Royalty on Net
                              Sales of u.s.a. garments
                              in the month of June 1997
                              
August 30, 1997               Payment of Royalty on Net
                              Sales of u.s.a. garments
                              in the month of July 1997
                              
September 30, 1997            Payment of Royalty on Net
                              Sales of u.s.a. garments
                              between June 1, 1997 and
                              August 30, 1997, in
                              excess of the payments
                              scheduled to be made
                              July 30, 1997 and
                              August 30, 1997
                              
October 30, 1997              Payment of Royalty on Net
                              Sales during the
                              "Disposal Period" (as
                              defined in the License
                              Agreement) of u.s.a.
                              garments in the month of
                              September 1997
                              
November 30, 1997             Payment of Royalty on Net
                              Sales during the Disposal
                              Period of u.s.a. garments
                              in the month of October
                              1997
                              
December 30, 1997             Payment of Royalty on Net
                              Sales during the
                              "Disposal Period" of
                              u.s.a. garments between
                              September 1, 1997 and
                              November 30, 1997, in
                              excess of the payments
                              scheduled to be made
                              September 30, 1997 and
                              October 30, 1997
                              
</TABLE>

     3.   Paragraph 3 of the First Interim Extension

Agreement is hereby revised to read as follows:


          "3.  The parties recognize that in order that
prototypes of Joan Vass u.s.a. garments for the Second
Extended Collection be available to permit Signal to
manufacture sales samples for selling in a timely
fashion, it is necessary that Vass periodically work on
the development of the Second Extended Collection
prototypes at Signal's Heritage facility in Marion,
South Carolina.  Vass agrees to undertake the
development of the prototypes subject to this letter
agreement upon the following conditions:

                           
               "a.  Signal acknowledges that Vass'
designs for the Second Extended Collection are and at
all times shall be and remain the property of Vass.

               "b.  All prototypes, patterns and
specification sheets for garments for the Second
Extended Collection developed by Vass and Signal
(Heritage) shall at all times be and remain the
property of Vass.  Upon the termination of the License
Agreement, the same shall be delivered to Vass at its
offices in New York within five (5) days of Vass'
written demand therefore.  Vass shall be responsible
for the expense of shipping and shall have the option
to credit Signal for such shipping expense and the
direct expense of preparation of prototypes, patterns
and specification sheets against the amounts due and to
come due to it as Royalties under the License
Agreement, which direct expenses shall be the
responsibility of Vass if the above option is exercised
by Vass.

               "c.  The provisions of Section 4.5(a)
and (o) of the License Agreement shall not be
applicable during the period covered by this Agreement
except that Signal shall continue the program of
cooperative advertising of u.s.a. garments for the
Second Extended Collection customarily offered by it
during the Term of the License Agreement to Signal
customers.

               "d.  So long as Signal is in compliance
with the License Agreement and the terms of this letter
agreement, Signal shall be entitled to offer for sale
and accept any orders for the Fall 1997 Collection
garments without further approval of Vass.

               "e.  Upon termination of the License
Agreement, (i) Vass shall have the option to purchase
all samples manufactured by Signal for the Second
Extended Collection, at Signal's (Heritage's) direct
cost; (ii) Vass shall have the option to purchase at
Signal's (Heritage's) cost all inventoried yarns and
other materials and accessories, allocated to u.s.a.
garments and (iii) Vass shall also have the option to
assume any yarn contracts held by Signal (Heritage)
allocated to u.s.a. garments.

          "Such options shall be exercised by Vass by
written notice following the termination of the License
Agreement given within twenty (20) days after receipt
of notice from Signal (Heritage) of the (a) inventory
of samples available for Vass' purchase and Signal's
(Heritage's) cost, (b) inventory of yarn, other
materials and accessories available for Vass' purchase
and Signal's (Heritage's) cost and (c) a description of
the yarn contracts held by Heritage which Vass may
assume.  Vass shall also have the option to make any
payment required to be made by credit against the
amounts due and to come due to it as Royalties under
the License Agreement."

     4.   The first sentence of Paragraph 4 of the

First Interim Extension Agreement as modified to read

as follows:


          "The applicability of the provisions of
Section 9 of the License Agreement are conditioned upon
timely compliance by Signal with the provisions of
Section 4.2 of the License Agreement governing the
payment of Royalties during the Disposal Period."

     5.   The provisions of Paragraph 6 of the Second

Interim Extension Agreement shall continue in full

force and effect.

     6.   The terms and provisions of the License

Agreement as modified by the First Interim Extension

Agreement, the Second Interim Extension Agreement and

as further modified by the provisions of this Third

Interim Extension Agreement are hereby ratified,

affirmed and approved.


     Please signify your consent to and approval of the

foregoing by signing at the foot hereof.

                              Very truly yours,

                              JOAN VASS, INC.



                              By /s/ Joan Vass
                                 ---------------------
                                 Joan Vass, President

Consented to and Agreed

SIGNAL APPAREL COMPANY, INC.



By /s/ Robert J. Powell
   --------------------------
     Vice President