SEVERANCE AGREEMENT

     This severance agreement (the "Agreement") is made as 
of this 5th day of November, 1995, by and between Signal 
Apparel Company, Inc. ("Signal"), and Marvin Winkler 
("Winkler") Sherri Winkler and MW Holdings, L.P. 
(collectively, the "Winkler Parties").
     WHEREAS, the parties wish to enter into an agreement 
terminating the employment of Winkler by Signal.
     NOW THEREFORE, in consideration of the promises and 
covenants contained in this Agreement, the Parties agree as 
follows:
     1.   Resignation of Winkler. Winkler hereby resigns 
from his position as Chairman of the Board and Chief 
Executive Officer of Signal and from any and all other 
offices, positions and duties which he now holds with 
Signal, or with any subsidiary or division thereof, 
including, but not limited to positions, duties, and 
responsibilities he may now hold with AMW, Inc. and The 
Shirt Shed, Inc.
     2.   Status of Employment Agreements, Mutual Release.  
The Signal Employment Agreement dated April 1, 1995, 
("Signal Employment Agreement") and the AMW Employment 
Agreement, February 16, 1993 (collectively, the "Employment 
Agreements"), and all rights and liabilities thereunder, are 
of no force and effect and each party releases the other 
from any claim they may have by virtue of the Employment 
Agreements or any other duties arising out of the employmennt
relationship other than as expressly reserved by this agreement,
and provided that Signal expressly does not release Winkler from
claims for indemnification or contribution brought by any third
party, as set forth in Secion 11 of this Agreement.
     3.   Severance Payment.  Signal shall pay Winkler's 
ordinary salary as it would have been otherwise due Through 
January 15, 1996 under Section 2 of the Signal Employment 
Agreement.  Winkler shall not be entitled to any future 
salary, severance or other payments hereunder except as 
specifically provided for herein.
     4.   Payments With Respect to Claimed Commissions.  
Signal shall pay to Winkler $60,000, constituting the unpaid 
portion of all commissions claimed by Winkler for sales 
completed prior to the purchase of American Marketing Works, 
Inc. by Signal, as follows: 6 installments of $10,000 per 
month shall be paid on the first business day of each month 
commencing December 1, 1995 and ending on May 1, 1996.
     5.   Payment on Purchase Note(s).  Signal shall pay to 
Winkler, Sherri Winkler and MW Holdings, L.P. $44,600 in the 
aggregate, which the parties hereto agree shall constitute 
all of the unpaid interest owing on the Purchase Notes as of 
the date of this Agreement, in seven equal monthly 
installments of $5,575 on the first business day of each 
month commencing on December 1, 1995 and ending on June 1, 
1996 and one installment of $5,602.67 on July 1, 1996.
     6.   Insurance.  Signal shall pay the premium on all 
health insurance policies that it currently provides for the 
benefit of Winkler until March 31, 1996.
     7.   Expenses.  Subject to Signal's prior approval, it 
shall reimburse Winkler for reasonable freight expenses 
incurred in connection with transporting his furniture and 
other household furnishings by Armstrong Relocation Services 
to California, and for the cost of coach airplane tickets to 
California for Winkler, Sherri Winkler and their children.
     8.   Return of Property.  Winkler shall return all 
Signal property in his possession or under his control; 
provided, however, Winkler may elect, on or before November 
15, 1995, to purchase the desk and chair and other furniture in
his possession and which he uses (which are owned by Signal) by
paying to Signal the sum of $1,000.
     9.   Conversion of Purchase Notes.  Signal hereby 
grants to Winkler, MW Holdings, L.P. and Sherri Winkler, and 
Winkler hereby exercises (and agrees to cause Sherri Winkler 
and MW Holdings, L.P. to immediately exercise) the right to 
convert the preferred stock of Signal received upon 
conversion of the Purchase Notes (as defined in that certain 
Stock Purchase Agreement dated October 5, 1994 among Signal, 
Winkler, Sherri Winkler, MW Holdings, L.P. and other parties 
names therein into One Million (1,000,000) shares of Common 
Stock.  When Signal next files a registration statement 
under the Securities Act of 1933, it will use its best 
efforts to include thereunder such One Million (1,000,000) 
shares.  If such registration does not occur within one year 
from the date hereof, Signal shall thereafter use its reasonable
best efforts to register such shares by including them in any
registration which Signal may file thereafter and pay to Winkler
interest calculated at the rate of 7% per annum on the value of
such One Million (1,000,000) shares as have not been registered, 
with such value based on the closing price of Signal's 
common stock on the New York Stock Exchange on the date of 
the execution of this Agreement (or if it does not trade on 
such date, on the next trading day) ("Value"). Such interest 
shall be paid quarterly, one-half in cash and one-half in 
Common Shares of Signal stock based on such Value, until 
such shares are registered, disposed of by Winkler, or until 
the right to register such shares hereunder expires, which 
shall be such time as Winkler can sell or transfer such shares
without registration.
     10.  The Steele Litigation.  Signal shall provide for 
representation of Winkler in connection with the Steele 
Litigation and shall indemnify him against any judgment 
entered against him in that action to the full extent 
required by Signal's certificate of incorporation, its by-
laws, and the laws of the State of Indiana (collectively 
"Signal's Indemnity Obligation").  Winkler shall assist 
Signal in the defense of the Steele Litigation in any 
reasonable manner requested by Signal, including but not 
limited to the following:
          a.   Winkler shall provide Signal with any 
documents in his possession which will be of assistance in 
defending the Steele Litigation; and
          b.   Winkler shall, if requested by Signal, 
testify in the Steele Litigation and shall make himself 
available to Signal for witness preparation sessions.
     11.  Releases. Winkler hereby unequivocally releases, 
acquits, covenants not to sue and forever discharges Signal 
and its officers, directors, employees, agents, attorneys, 
shareholders, heirs, assigns, successors, trustees, parents, 
subsidiaries, operating divisions, affiliated companies, and 
all others in the world (collectively, the "Signal 
Releasees") of and from all manner of action and actions, 
cause and causes of action, claims, whether known or 
unknown, suits, debts, wages, sums of money, accounts, 
bills, contracts, torts, controversies, agreements, damages, 
judgments, expenses, attorney's fees, executions, claims 
arising under any federal law and the laws of any state 
(statutory, regulatory and common law) and the laws, 
ordinances, statutes and common laws of all cities and other 
states and provinces in the United States and the World; 
provided, however, Winkler does not release Signal and its 
officers, directors and employees or its agents, attorneys, or
shareholders from any such claim arising from the acquisition of
AMW, Inc., nor any claims for indemnification or contribution
arising from any claims brought by any third party, nor any
release of rights and obligations arising under this agreement or
in the future.  Included specifically within this General Release
is any claim that Winkler was forced to resign or was
constructively discharged.  
     Winkler agrees that he will not bring or attempt to 
bring any other action against any Signal Releasee for any 
matter arising out of his employment or resignation from 
employment in any court or before any administrative agency.
     Signal hereby unequivocally releases, acquits, 
covenants not to sue and forever discharges Winkler and his 
heirs, assigns or trustees and all others in the world 
(collectively, the "Winkler Releasees") of and from all 
manner of action and actions, cause and causes of action, 
claims, whether known or unknown, suits, debts, wages, sums 
of money, accounts, bills, contracts, torts, controversies, 
agreements, damages, judgments, expenses, attorney's fees, 
executions, claims arising under any federal law and the 
laws of any state (statutory, regulatory and common law) and 
the laws, ordinances, statutes and common laws of all cities 
and other states and provinces in the United States and the 
World; provided, however, that Signal does not release the 
Winkler Releasees from any such liability arising from the 
acquisition of AMW, nor from any such liability resulting 
from claims for indemnification or contribution brought by 
any third party, except to the extent required by Signal's 
indemnity obligations, based upon his actions as an officer 
or director of Signal, nor from any liability as may be incurred
by Winkler in connection with the rights and obligations created
by this agreement or in the future.
     Signal agrees that it will not bring or attempt to 
bring any other action against any Winkler Releasee for any 
matter arising out of his employment by Signal or 
resignation from such employment in any court or before any 
administrative agency.
     12.  Confidentiality.  The parties agree to maintain 
this Agreement (including the exhibits hereto), its terms 
and the negotiations related hereto in confidence, without 
any disclosure to third parties except that a disclosure may 
be made:
          a.   by any Party to the extent necessary in a 
proceeding to enforce the Agreement;
          b.   by any Party to the extent required by law; 
and
          c.   by any Party on obtaining the prior written 
consent of all other Parties.
     The parties acknowledge that this Agreement will be 
filed as an exhibit to Signal's next Quarterly Report on 
Form 10-Q; and the parties agree that, unless otherwise 
required by law, Annex A hereto shall be the only public 
statement made concerning this Agreement and the termination 
of Winkler's employment.
     Furthermore, in accordance with Section 7 of the Signal 
Employment Agreement, the Winkler Parties shall not, without 
prior written consent of Signal, communicate or divulge any 
confidential information to anyone other than Signal and 
those designated by it.  For purposes of this provision, the 
term confidential information includes all secret or 
confidential information, knowledge or data relating to 
Signal which shall not be or become public knowledge (other 
than by acts by Winkler or representatives of Winkler in 
violation of this Agreement.
     13.  Choice of Law and Venue.  This Agreement shall be 
deemed to be a contract entered into pursuant to the laws of 
the State of New York which shall, in all respects, be 
governed, construed, applied and enforced in accordance with 
the substantive laws of the State of New York without 
reference to conflict of law principles.  Any controversies 
arising out of this Agreement shall be resolved in the 
courts located in the Southern District of New York and the
parties hereto submit to the jurisdiction thereof.
     14.  Use of Settlement Agreement.  This Agreement shall 
not be construed, considered or used as an admission of 
liability or fault on the part of any Party, which liability 
or fault all Parties expressly deny.  Moreover, this 
Agreement should not be construed as to release any claims 
that Signal or the Winkler Parties may have against any 
third party.
     15.  Necessary Documents.  The Parties agree to enter 
into and execute such further documents or instruments as 
may be necessary and appropriate to effectuate this 
Agreement.
     16.  Power and Authority to Execute.  Each Party hereto 
represents and warrants that it has the full power and 
authority to execute, deliver and perform this Agreement, 
that each individual signing on behalf of a party has been 
duly authorized by that party to execute this Agreement on 
its behalf and that no claims being released under the terms 
of this Agreement have been assigned, sold or otherwise 
transferred to any other entity.
     17.  Successors-In-Interest Bound.  This Agreement 
shall be binding upon and shall insure to the benefit of, 
the Parties and their respective officers, directors, 
affiliates, attorneys, administrators, agents, 
representatives, successors and assigns.
     18.  Advice of Counsel.  Each of the Parties has had 
the benefit of the advice of counsel of its own choice in 
the negotiating, drafting and execution of this Agreement, 
and the language in all parts of this Agreement is a product 
of the efforts of all counsel.  Accordingly, neither the 
entire Agreement nor any provision contained herein shall be 
deemed to have been proposed or drafted by any party or 
constructed against an party.  This Agreement shall be 
construed as a whole according to its plain meaning.
     19.  Entire Agreement of the Parties.  This Agreement 
and the documents annexed hereto constitute the entire 
agreement and understanding among the Parties with respect 
to the subject matter hereof.  This Agreement supersedes all 
prior agreements and understandings, both written and oral, 
concerning such matters.  Moreover, each party represents 
and warrants that it has entered into this Agreement wholly 
upon its own volition, judgment, belief and knowledge and 
without any duress or reliance upon any statement or 
representation of another party except those representations 
and warranties expressed in this Agreement.
     20.  Execution in Counterparts.  This Agreement may be 
executed in any number of counterparts, each of which shall 
be an original, but all of which when taken together shall 
constitutes one and the same instrument.  This Agreement 
shall be of no force and effect until executed by all 
Parties hereto.
     21.  Validity of Agreement.  Each Party represents and 
warrants that this Agreement is a legal, valid and binding 
obligation, enforceable in accordance with its terms and 
that there are no laws, rules or regulations that prohibit 
its enforceability.
     22.  No Waiver.  No waiver of any right under this 
Agreement shall be deemed effective unless contained in a 
writing executed by the Party charged with such waiver, and 
no waiver of any breach of failure perform shall be deemed 
to be a waiver of any future breach or failure to perform or 
of any other provision of this Agreement.  This Agreement 
may not be amended except in a document signed by the Party 
to be charged.
     23.  Headings.  The headings contained herein are for 
reference only and are not a part of this Agreement and 
shall not be used in connection with the interpretation of 
this Agreement.





     IN WITNESS WHEREOF, the Parties hereto have executed 
this Agreement as of this 5th day of November, 1995.

Date:     November 5, 1995
                         

                         SIGNAL APPAREL COMPANY, INC.
                         By:/s/Bruce Krebs
                            -------------------------

                         MW HOLDINGS, L.P.
                         By:/s/Sherri Winkler
                            -------------------------


                         /s/Marvin Winkler
                         ----------------------------
                         MARVIN WINKLER



                         /s/Sherri Winkler
                         ----------------------------
                         SHERRI WINKLER


19527V.01!






                           Annex A
                              
                              
                        PRESS RELEASE
                              
                              
SIGNAL APPAREL COMPANY, INC.       Contact:
200 Manufacturers Road             Robert Powell
                                   Executive Vice President
                                   (615) 755-6601

Signal  Apparel  Company, Inc. and  Marvin  Winkler  jointly

announced  today  Mr. Winkler's decision  to  step  down  as

Chairman  of  the Board and Chief Executive Officer  of  the

Company.   Mr. Winkler will remain a substantial shareholder

in the Company.



      In announcing the decision, Mr. Winkler stated that he

had  established  several  key Company  objectives  when  he

joined  the  company in late 1994.  First  and  foremost  of

these objectives was the rebuilding of the Signal management

team  in  order  to  position the  Company  for  growth  and

profitability.  "With the addition of Bruce Krebs in August,

1995  as President and Chief Operating Officer and with  key

management  changes  in the Operations,  Sales,  Design  and

Merchandising  areas, Signal has one of the  top  management

teams in the active apparel industry," stated Mr. Winkler in

announcing  his  decision.   "The Company  has  successfully

consolidated its operations, boosted operating efficiencies,

cut  unnecessary  overhead, and  developed  many  new  major

licensing initiatives.  It is time to let Bruce Krebs manage

the  company  and implement the strategic plans  which  have

been developed by the new management team over the last  six

months," added Winkler.



Mr.   Winkler  is  planning  to  pursue  several   different

opportunities,  and  an  announcement  in  this  regard   is

anticipated in the coming month.



Signal  Apparel Company, Inc. is engaged in the  manufacture

and  marketing  of apparel.  The Company's Common  Stock  is

traded on the New York Stock Exchange under the symbol SIA.