May 13, 1998

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

Re:      Your letter of 5/4/98; Request for a 3/31/98 Covenant Waiver


Gentlemen:

By your recent letter,  you have requested us to waive your  compliance with one
of the  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,  Paragraph  11(a)(iv)  thereof,  pertaining to
minimum  Cumulative  Pre-Tax  Operating  Earnings  for you and the Other  Client
(herein, the "Minimum Cumulative Pre-Tax Operating Earnings Covenant"). You have
requested that we waive compliance with the Minimum Cumulative Pre-Tax Operating
Earnings  Covenant for your fiscal  quarter ended on March 31, 1998 (the "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 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 your fiscal  quarter  ended on such Waiver Date,  losses for
you and the Other Client of not in excess of a negative $3,000,000.00,  provided
however,  that such  losses for such  fiscal  quarter  did not exceed a negative
$3,854,000.00.





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 $5,000, 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  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:  VP

Agreed:

SIGNAL APPAREL COMPANY, INC.


By  __________________________________