BNY FINANCIAL CORPORATION
A WHOLLY OWNED SUBSIDIARY OF THE BANK OF NEW YORK
NEW YORK'S FIRST BANK - FOUNDED 1784 BY ALEXANDER
HAMILTON

     1290 AVENUE OF THE AMERICAS, NEW YORK, N.Y. 10104
     212-408-7000

March 25, 1998

Signal Apparel Company, Inc.
P.O. Box 4296
200A Manufacturers Road
Chattanooga, Tennessee 37405
Attention: Mr. Jim Elkins, Controller

Re: Your letter of 3/24/98/Request for 12/31/97
covenant waivers

Gentlemen:

By your recent letter, you have requested us to waive
your compliance with the
following financial covenants set forth in the Amended
and Restated Factoring
Agreement between us, bearing the effective date of
5/23/91, as restated as of October
31, 1997 (as amended and supplemented, herein, the
"Agreement"), to the extent
herein described - namely, Paragraphs 11(a) (iii)
[pertaining to minimum Working
Capital for you and the Other Client (with all
initially capitalized terms not defined
herein to have the meaning set forth in the
Agreement); herein, the "Minimum Working
Capital Covenant"] and 11 (a) (iv) [pertaining to
minimum Cumulative Pre-Tax
Operating Earnings for you and other Client (herein,
the "Minimum Cumulative Pre-Tax
Operating Earnings Covenant") ].  You have quested
that we waive compliance with the
Minimum Working Capital Covenant as of 12/31/97 (the
"Waiver Date") and with the
Minimum Cumulative Pre-Tax Operating Earnings Covenant
for the calendar year
ended on such Waiver Date, to the extent and as more
fully specifically described in
this letter.

Subject to the matters set forth in the paragraph
which immediately follows, we hereby
waive compliance with: (a) the Minimum Working Capital
Covenant, to the extent such
non-compliance arose solely as a result of your
failure to have as at the Waiver Date,
minimum Working Capital for you and the Other Client
of not less than
($38,000,000.00), provided that such minimum Working
Capital as of such Waiver Date
was not less than ($42,284,000.00); and (b) the
Minimum Cumulative pre-Tax
Operating Earnings Covenant, to the extent such non-
compliance arose solely as a
result of your failure to have for the calendar year
ended on such Waiver Date,
minimum Working Capital for you and the Other Client
of not less than
($25,000,000.00), provided that such minimum
Cumulative Pre-Tax Operating Earnings
for such calendar year did not exceed
($29,388,000.00).

The limited waiver herein set forth shall not,
however, become effective until we shall
have received back an copy of this Amendment duly
executed by you, and you have
signed below also confirming our entitlement to charge
and receive a fee in connection
with the matters herein set forth in the amount of
$10,000, for which fee we shall be
entitled to immediately charge your account (s).

Except to the limited extent set forth herein: (a) no
waiver of any other term, condition,
covenant, agreement or any other aspect of the
Agreement is intended or implied; and
(b) and except for the specific period of time and
circumstances covered by this letter,
no other aspect of the Minimum Working Capital
Covenant and/or the Minimum
Cumulative Pre-Tax Operating Earnings Covenant is or
shall be deemed waived,
including without limitation for any other period or
circumstance, and no such additional
waiver is intended or implied.  This waiver is
therefore limited exclusively to the specific
purposes and time period(s) for which it is given.

If the foregoing is in accordance with your
understanding, would you kindly sign below
to so indicate.

     Very truly yours,

     BNY FINANCIAL CORPORATION



     By        /s/ Wayne Miller
      --------------------------------
     Title:   V.P.

AGREED
Signal Apparel Company, Inc.


By     /s/ David E. Houseman
--------------------------------------
Title:  Chief Executive Officer