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

April 14, 1997


Signal Apparel Company, Inc. ("Signal")
P. O. Box 4296
200 Manufacturers Road
Chattanooga, TN 37405

The Shirt Shed, Inc. (Shirt Shed")
570 South Miami Street
Wabash, IN 46992

     Re:  Our Factoring Agreement with Signal bearing the
          effective date of May 23, 1991 as amended and
          supplemented (the "Signal Agreement") Factoring
          Agreement with Shirt Shed bearing the effective date of
          July 25, 1991 as amended and supplemented (the "Shirt
          Shed Agreement") (the Signal Agreement and the Shirt
          Shed Agreement herein collectively, the "Agreements")

Gentlemen:

          We refer to each and both of the above mentioned
Agreements between ourselves on the one hand and Signal and Shirt
Shed on the other hand, and in particular to the covenants
appearing therein in subparagraphs 11 (a) (iii) thereof (herein
the "Tangible Net Worth Covenant"), 11 (a) (iv) thereof (herein
the "Working Capital Covenant") and 11 (a) (v) thereof (herein
the "Pre-Tax Operating Earnings Covenant"; together with the
Working Capital Covenant and the Tangible Net Worth covenant,
herein collectively the "Covenants").

          We hereby waive any default under the above Agreements
to the extent arising out of the failure of Signal and/or Shirt
Shed to be in compliance with the above specified Covenants as of
March 31, 1997.

          Except to the limited extent set forth herein:  (a) no
waiver of any other term condition, covenant, agreement or any
other aspect of any of the Agreements is intended or implied; and
(b) except for the specific period of time and circumstances
covered by this letter, no other aspect of the Covenants referred
to in this letter is waived, including without limitation for any
other period or circumstance, and no such additional waiver is
intended or implied.  This limited 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/ William H. Watts
    ------------------------
    Title: CFO

AGREED:
Shirt Shed, Inc.

By: /s/ William H. Watts
    ------------------------
    Title: CFO