PROMISSORY NOTE  
  
$20,000,000                                  New York, New York  
                                             August, 1995  
  
     FOR VALUE RECEIVED, each of the undersigned, SIGNAL 
APPAREL COMPANY, INC., an Indiana corporation ("Signal"), THE
SHIRT SHED, INC., a Delaware corporation ("SSI") and AMERICAN
MARKETING WORKS, INC. ("AMW"), hereby jointly and severally 
unconditionally promises to pay on the Maturity Date to the order
of WALSH GREENWOOD & CO. (the "Lender"), at its office located at
One East Putnam Avenue, Greenwich, Connecticut 06830, in lawful
money of the United States of America and in immediately
available funds, the principal amount of the lesser of (a) TWENTY
MILLION DOLLARS ($20,000,000) and (b) the aggregate unpaid
principal amount of all Loans made pursuant to Section 2.1 of the
Credit Agreement referred to below, and to pay interest in like
money at such office on the unpaid principal amount hereof from
time to time on the dates and in the manner as provided in
Section 2.5 of the Credit Agreement, at the rate which is the
lesser of (a) the applicable rate per annum set forth in Section
2.5 of the Credit Agreement, and (b) the maximum rate of interest
which may be charged or collected by the Lender under applicable
law, until paid in full (both before and after judgment).  
  
     The holder of this Note is authorized to, and so long as it 
holds this Note shall, record the date and amount of each Loan 
made by the Lender pursuant to Section 2.1 of the Credit 
Agreement, the date and amount of each payment of prepayment of
principal thereof, and any such recordation shall constitute
prima facie evidence of the accuracy of the information so 
recorded; provided that failure of the Lender to make any such
recordation (or any error in such recordation) shall not affect 
the joint and several obligations of the undersigned under this
Note or under the Credit Agreement. 

     This Note is the Replacement Note referred to in the First
Amendment to Credit Agreement, dated as of August 10, 1995 (which 
together with the Credit Agreement, dated as of March 31, 1995, 
and as subsequently amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the undersigned 
and the Lender, is entitled to the benefits thereof, is secured
as provided therein and is subject to optional prepayment in 
whole or in part as provided therein.  Terms used herein which
are defined in the Credit Agreement shall have such defined  
meanings unless otherwise defined herein or unless the context
otherwise requires. 

     Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then
remaining unpaid on this Note shall become, or may be declared to 
be, immediately due and payable, all as provided therein. The
Borrower expressly waives diligence, presentment, protest, demand 
and other notices of any kind.  


     This Note shall be governed by, and construed and 
interpreted in accordance with, the laws of the State of New
York.
  
SIGNAL APPAREL COMPANY, INC.    
  
By: /s/William Watts
   ---------------------------
Name: William Watts 
Title: Chief Financial Officer  
  
  
THE SHIRT SHED, INC.            

By: /s/William Watts
   ---------------------------
Name: William Watts  
Title: Chief Financial Officer  
  
  
AMERICAN MARKETING WORKS, INC.  
  
By: /s/William Watts
   ---------------------------
Name: William Watts  
Title: Vice President - Finance
  
  
  
THIS NOTE IS SUBJECT IN ITS ENTIRETY TO THE INTERCREDITOR
AGREEMENT DATED AS OF THE DATE HEREOF AMONG THE MAKER, WALSH
GREENWOOD & CO., BNY FINANCIAL CORPORATION AND GREYROCK CAPITAL
GROUP, INC., AND NO PAYMENTS MAY BE RECEIVED BY WALSH GREENWOOD & 
CO. OR ANY HOLDER HEREOF UNLESS EXPLICITLY PERMITTED THEREBY.  
  
16058V.01!