Registration Rights Agreement

Registration Rights Agreement

by Signal Apparel Co
April 6th, 1999

                          REGISTRATION RIGHTS AGREEMENT

     This Registration  Rights Agreement (this  "Agreement") is made and entered
into as of March 16,  1999,  among  Signal  Apparel  Company,  Inc.,  an Indiana
corporation  (the  "Company"),  Tahiti Apparel,  Inc., a New Jersey  Corporation
("Tahiti"),  and the individual  stockholders of Tahiti, Ming-Yiu Chan ("Chan"),
Zvi Ben-Haim ("Ben-Haim") and Michael Harary ("Harary").  Tahiti, Chan, Ben-Haim
and  Harary  are each  referred  to herein as a  "Seller"  and are  collectively
referred to herein as the "Sellers."

     This  Agreement  is made  pursuant  to the  Asset  Purchase  Agreement,  as
amended,  dated as of the date hereof  among the  Company  and the Sellers  (the
"Purchase Agreement").

     The Company and the Sellers hereby agree as follows:

     1. Definitions.

     Capitalized  terms used and not  otherwise  defined  herein  shall have the
meanings given such terms in the Purchase Agreement.  As used in this Agreement,
the following terms shall have the following meanings:

     "Advice" shall have meaning set forth in Section 3(o).

     "Affiliate"  means,  with  respect to any  Person,  any other  Person  that
directly or indirectly controls or is controlled by or under common control with
such Person.  For the  purposes of this  definition,  "control,"  when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the  direction  of the  management  and policies of such Person,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms of  "affiliated,"  controlling"  and  "controlled"  have  meanings
correlative to the foregoing.

     "Business  Day"  means any day  except  Saturday,  Sunday and any day which
shall be a legal holiday or a day on which banking  institutions in the State of
New York generally are authorized or required by law or other government actions
to close.

     "Closing Date" shall have the meaning set forth in the Purchase Agreement.

     "Commission" means the Securities and Exchange Commission.

     "Common Stock" means the Company's Common Stock, par value $.01 per share.

     "Effective Date" means the date any such registration statement referred to
in Section 2 is declared effective by the Commission.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.




     "Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.

     "Indemnified Party" shall have the meaning set forth in Section 2.

     "Indemnifying Party" shall have the meaning set forth in Section 2.

     "Losses" shall have the meaning set forth in Section 2.

     "Person"  means  an  individual  or  a  corporation,   partnership,  trust,
incorporated or  unincorporated  association,  joint venture,  limited liability
company, joint stock company,  government (or an agency or political subdivision
thereof) or other entity of any kind.

     "Preferred Stock" means the shares of Series I Preferred,  no par value, of
the Company issued to the Sellers pursuant to the Purchase Agreement.

     "Proceeding"  means an action,  claim,  suit,  investigation  or proceeding
(including,  without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

     "Prospectus"  means the prospectus  included in the Registration  Statement
(including,  without  limitation,  a prospectus  that  includes any  information
previously omitted from a prospectus filed as part of an effective  registration
statement in reliance upon Rule 430A  promulgated  under the Securities Act), as
amended or supplemented by any prospectus supplement,  with respect to the terms
of the  offering of any  portion of the  Registrable  Securities  covered by the
Registration  Statement,  and  all  other  amendments  and  supplements  to  the
Prospectus,  including post-effective  amendments, and all material incorporated
by reference in such Prospectus.

     "Registrable  Securities"  means the shares of Common Stock to be issued on
the Closing Date to Tahiti  pursuant to the Purchase  Agreement  (including  any
shares to be held in escrow pursuant to Section 2.06 of the Purchase Agreement).

     "Registration  Statement" means the registration statements contemplated by
Section  2(a),   including  (in  each  case)  the  Prospectus,   amendments  and
supplements to such  registration  statement or  Prospectus,  including pre- and
post-effective  amendments,  all exhibits thereto, and all material incorporated
by reference in such registration statement.

     "Rule 144" means Rule 144  promulgated  by the  Commission  pursuant to the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
rule or regulation  hereafter adopted by the Commission having substantially the
same effect as such Rule.


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     "Rule 158" means Rule 158  promulgated  by the  Commission  pursuant to the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
rule or regulation  hereafter adopted by the Commission having substantially the
same effect as such Rule.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Special  Counsel" means any special counsel to the Holders,  for which the
Holders will be reimbursed by the Company pursuant to Section 4.

     "Underwritten  Registration or Underwritten  Offering" means a registration
in connection  with which  securities of the Company are sold to an  underwriter
for reoffering to the public pursuant to an effective registration statement.

     2. Piggy-Back Rights.

     (a) If,  at any  time  prior  to ten  years  from  the  Closing  Date  (the
"Registration  Period") the Company  proposes to register any of its  securities
under the Securities  Act (other than (i)  securities  issued or issuable to the
holders of the  Company's  Series G1  Convertible  Preferred  Stock or Series G2
Convertible  Preferred  Stock,  (ii) securities to be issued pursuant to a stock
option or other employee  benefit or similar plan or (iii) in connection  with a
transaction  contemplated  by Rule 145 under the  Securities  Act),  the Company
shall, promptly give written notice (the "Registration Notice") to Holder of the
Company's  intention  to effect  such  registration.  If,  within 15 days  after
receipt of such  Registration  Notice,  Holder submits a written  request to the
Company  specifying  the number of shares of Common  Stock  which it received or
will receive (as  applicable)  under the  Purchase  Agreement or upon any agreed
exchange of Preferred  Stock for Common Stock , (the  "Registrable  Shares") the
Company shall include the Registrable Shares in such registration  statement. If
the  offering  by the  Company  of the  Company's  securities  pursuant  to such
registration   statement  is  to  be  made  by  or  through  an  underwriter  or
underwriters,  the Company shall not be required to include  Registrable  Shares
therein if and to the extent that the underwriter  managing the offering advises
the Company in writing that such inclusion  would  materially  adversely  affect
such offering and, in such event, the Company may delay the effectiveness of the
registration  of, or cause Holder to delay the sale of, the  Registrable  Shares
for a period of not more than 60 days after  completion of the  distribution  of
securities being underwritten on behalf of the Company (but in no event for more
than 180 days after the registration  statement first becomes effective,  and in
no event beyond the  termination  of any similar "lock up" period  applicable to
sales by other  officers and  directors of the Company in  connection  with such
offering) and the Company shall  thereupon  promptly file such  supplements  and
post-effective  amendments  and take such  other  steps as may be  necessary  to
permit Holder to make its proposed offering  following the end of such period of
delay.

     (b) In  connection  with any  offering  of  shares  of  Registrable  Shares
registered  pursuant to this  Agreement  the Company (i) shall furnish to Holder
such number of copies of each registration  statement,  each prospectus and each
preliminary  prospectus,  and of each amendment and supplement to any thereof as
Holder may  reasonably  request in order to effect the  offering and sale of the
Registrable Shares to be offered and sold, but only while the


                                       3




Company shall be required under the provisions  hereof to cause the registration
statement  to remain  current and (ii) take such action as shall be necessary to
qualify the shares covered by such registration statement under such blue sky or
other  state  securities  laws for  offer  and  sale as  Holder  shall  request;
provided,  however,  that the  Company  shall not be  obligated  to qualify as a
foreign  corporation to do business under the laws of any  jurisdiction in which
it shall not then be  qualified  or to file any  general  consent  to service of
process  in any  jurisdiction  in which such a consent  has not been  previously
filed. To the extent the Company shall enter into an underwriting agreement (the
"Agreement")  with  a  managing  underwriter  or  underwriters  selected  by  it
containing   representations,   warranties,   indemnities  and  agreements  then
customarily  included by an issuer in  underwriting  agreements  with respect to
secondary  distributions,  Holder agrees as a condition to participation in such
offering to make such representations and warranties with respect to information
as to it as a selling stockholder, and as to its holdings, which is furnished in
writing  to  the  underwriter  for  use  in the  registration  statement  as are
customary and appropriate. In connection with any offering of Registrable Shares
registered  pursuant  to  this  Agreement,  the  Company  shall  furnish  to the
underwriter,  at the Company's  expense,  unlegended  certificates  representing
ownership  of the  Registrable  Shares  being  sold  in  such  denominations  as
requested  and  instruct  any transfer  agent and  registrar of the  Registrable
Shares to release  any stop  transfer  orders with  respect to such  Registrable
Shares .

     (c) In  connection  with any  registration  pursuant to this  Agreement all
expenses of registration  shall be borne by the Company (unless  contrary to the
federal securities laws or the laws of any state where the Registrable Shares is
to be offered),  provided,  however,  in connection with any such  registration,
Holder  shall  be  obligated  to pay any and all  underwriter's  and/or  brokers
commissions, to the extent that such commissions would not have been so incurred
in the  absence  of the  registration  of  such  Registrable  Shares.  Under  no
circumstances  shall the Company have any liability for any fees and expenses of
underwriters,  counsel,  accountants  or other agents of Holder  relating to the
Registrable  Shares with respect to any  registration  statement  filed pursuant
hereto,  including  but not limited to any  out-of-pocket  expenses,  securities
liability insurance policies, the costs of any investigations by or on behalf of
Holder of the  accuracy  and  completeness  of such  registration  statement  or
related to the  furnishing  of  information  by Holder in  connection  with such
registration statement.

     (d) For a period  until the  earlier of (i) one (1) year from and after the
effective date of any registration  statement filed pursuant hereto in which any
of the Registrable  Shares is included (provided that such one-year period shall
be extended by the length of any period during which the Holder's right to offer
is delayed pursuant to Section 2(a) or Section 2(j)(v) hereof) and (ii) the sale
of the Registrable  Shares subject to such registration  statement,  the Company
shall from time to time amend or supplement the  registration  statement and the
prospectus used in connection  therewith as may be necessary to permit such sale
and disposition and to the extent  necessary in order to keep such  registration
statement  effective and such  prospectus  current under the Act so that neither
the registration  statement nor the prospectus  contains any untrue statement as
to any material  fact,  omits any  statements  necessary to make the  statements
contained therein not misleading.


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     (e) In the case of any offering registered pursuant to this Agreement,  the
Company agrees to indemnify and hold harmless Holder and each controlling person
of Holder  within  the  meaning of Section  15 of the  Securities  Act,  and the
directors and officers of Holder, against any and all losses, claims, damages or
liabilities to which they or any of them may become subject under the Securities
Act or any other statute or common law or otherwise, and to reimburse them, from
time to time upon request,  for any legal or other expenses  reasonably incurred
by them in connection with  investigating  any claims and defending any actions,
insofar as any such losses, claims, damages,  liabilities or actions shall arise
out of or shall be based upon any untrue  statement or alleged untrue  statement
contained in the registration statement relating to the sale of such Registrable
Shares in any  preliminary  prospectus or in any prospectus or in any supplement
or amendment  to any of the  foregoing  of a material  fact,  or the omission or
alleged  omission  to state  therein a material  fact  required  to be stated or
necessary to make the statements  therein,  in light of the circumstances  under
which  they  were   made,   not   misleading,   provided,   however,   that  the
indemnification  agreement  contained in this paragraph  shall not apply to such
losses, claims,  damages,  liabilities or actions which shall arise from (i) the
sale of  Registrable  Shares if such losses,  claims,  damages,  liabilities  or
actions  shall arise out of or shall be based upon any such untrue  statement or
alleged  untrue  statement,  or any such omission or alleged  omission,  if such
statement or omission  shall have been made in reliance  upon and in  conformity
with information  furnished in writing to the Company by Holder specifically for
use in connection  with the  preparation  of the  registration  statement or any
preliminary  prospectus or prospectus contained in the registration statement or
any amendment thereof or supplement  thereto; or (ii) if the Common Stock is not
then  listed on a national  securities  exchange,  any actual or alleged  untrue
statement  of a material  fact or any actual or alleged  omission  of a material
fact  required  to be  stated in any  preliminary  prospectus  if  Holder  sells
Securities  to a Person to whom there was not sent or given,  at or prior to the
written  confirmation  of such sale,  a copy of the final  prospectus  or of the
final prospectus as then amended or supplemented,  whichever is most recent,  if
the  Company  had  previously   furnished   copies  thereof  to  Holder  or  its
representatives  and such final  prospectus,  as then  amended or  supplemented,
corrected  any  such  misstatement  or  omission;   or  (iii)  the  use  of  any
preliminary,  final or summary  prospectus  by or on behalf of Holder  after the
Company has notified Holder that such prospectus contains an untrue statement of
a material fact or omits to state a material fact required to be stated therein,
in the light of the circumstances under which they were made, not misleading; or
(iv) the use of any final  prospectus,  as  amended  or  supplemented,  by or on
behalf of Holder  after such time as the  obligation  of the Company  under this
Agreement to keep the related  registration  statement effective has expired; or
(v) any violation of any federal or state  securities laws, rules or regulations
committed  by Holder  (other than any  violation  that arises out of or is based
upon the circumstances described above and as to which Holder would otherwise be
entitled to indemnification hereunder).

     (f) In  connection  with any  registration  statement  in which  Holder  is
participating,  Holder  will  indemnify,  to the extent  permitted  by law,  the
Company,  controlling  persons of the Company under Section 15 of the Securities
Act and its directors and officers against any and all losses, claims,  damages,
liabilities  and expenses  resulting,  and to reimburse  them, from time to time
upon request,  for any legal or other  expenses  reasonably  incurred by them in
connection with  investigating  any claims and defending any actions,  solely by
reason of (i) any untrue


                                       5




statement  of a material  fact or any omission of a material  fact  necessary to
make the statements therein not misleading, in the registration statement or any
prospectus or preliminary prospectus or any amendment or supplement thereto, but
only to the extent that such untrue  statement is contained in, or such omission
is omitted from,  information  so furnished to the Company by Holder in writing;
(ii) the use of any  prospectus  by or on behalf of Holder (x) after the Company
has  notified  Holder that such  prospectus  contains an untrue  statement  of a
material fact or omits to state a material  fact required to be stated  therein,
in light of the circumstances  under which they were made, not misleading or (y)
after  such  time  as  the  obligation  of  the  Company  to  keep  the  related
registration  statement  effective and current has expired;  (iii) if the Common
Stock is not then listed on a national securities exchange,  the failure to send
or deliver to a party to whom Holder  sells the  Securities,  at or prior to the
written  confirmation  of sale, a copy of the final  prospectus  or of the final
prospectus  as then amended or  supplemented,  whichever is most recent,  if the
Company   had   previously   furnished   copies   thereof   to   Holder  or  its
representatives;  or (iv)  any  violation  by  Holder  of any  federal  or state
securities law or rule or regulation  thereunder  (other than any violation that
arises out of or is based upon the circumstances described above and as to which
Holder is entitled to indemnification hereunder).

     (g) Each party  indemnified under paragraph (e) or (f) of Section 2 of this
Agreement  shall,  promptly after receipt of notice of the  commencement  of any
action  against  such  indemnified  party in respect of which  indemnity  may be
sought hereunder,  notify the indemnifying  party in writing of the commencement
thereof.  The  omission of any  indemnified  party to so notify an  indemnifying
party of any such  action  shall not  relieve  the  indemnifying  party from any
liability in respect of such action which it may have to such indemnified  party
on account of the  indemnity  agreement  contained  in  paragraph  (e) or (f) of
Section 2 of this  Agreement,  unless the  indemnifying  party was prejudiced by
such  omission,  and in no event shall relieve the  indemnifying  party from any
other  liability which it may have to such  indemnified  party. In case any such
action  shall be brought  against any  indemnified  party and it shall notify an
indemnifying party of the commencement  thereof, the indemnifying party shall be
entitled to participate  therein and, to the extent that it may desire to assume
the defense thereof through counsel  satisfactory to the indemnified  party, and
after  notice  from  the  indemnifying  party to such  indemnified  party of its
election so to assume the defense thereof,  the indemnifying  party shall not be
liable to such indemnified party under paragraph (e) or (f) of Section 2 of this
Agreement  for  any  legal  or  other  expenses  subsequently  incurred  by such
indemnified party in connection with the defense thereof,  other than reasonable
costs of investigation (unless such indemnified party reasonably objects to such
assumption  on the grounds that (i) there may be defenses  available to it which
are  different  from or in  addition to such  indemnifying  party or (ii) in the
opinion of counsel  to the  indemnifying  party,  there is another  conflict  of
interest between it and such indemnifying  party, in which event the indemnified
party shall be reimbursed by the indemnifying party for the expenses incurred in
connection with retaining one separate legal counsel).

     (h) Nothing in paragraph  (e) or (f) of Section 2 of this  Agreement  shall
prevent the indemnified party from retaining counsel of its own choosing, at its
own expense, to defend or cooperate in the defense or investigation of any claim
in respect of which  indemnification  is available  hereunder.  No  indemnifying
party will consent to entry of any judgment or enter into


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any  settlement  which does not  include as an  unconditional  term  thereof the
giving by the claimant or plaintiff to such indemnified  party of a release from
all liability in respect to such claim or litigation.

     (i) If  recovery  is not  available  under  the  foregoing  indemnification
provisions, for any reason other than as specified therein, the parties entitled
to  indemnification  by the terms thereof shall be entitled to contribution  for
any losses, claims,  damages, or liabilities,  joint or several, and expenses to
which they may become  subject,  in such proportion as is appropriate to reflect
the relative fault of the parties entitled to indemnification,  on the one hand,
and the indemnifying parties, on the other, in connection with the matter out of
which such losses,  claims,  damages,  liabilities  or expenses  arise or result
from. In determining the amount of contribution to which the respective  parties
are entitled,  there shall be  considered  the parties'  relative  knowledge and
access to information concerning the matter with respect to which the action was
asserted,  the opportunity to correct and prevent any statement or omission, and
any other equitable considerations appropriate under the circumstances.

     (j) Notwithstanding the foregoing, Holder shall furnish to the Company such
information  regarding  Holder,  its  intended  method  of  distribution  of the
Securities  and such  other  information  as the  Company  may from time to time
reasonably  request for purposes of  preparation of any  registration  statement
pursuant  to  this  Agreement  and  to  maintain  the   effectiveness   of  such
registration statement.

          (i) At least five business days prior to any disposition of Securities
     (other than pursuant to an  underwritten  offering) by Holder,  Holder will
     orally advise the Company (and promptly  confirm such advice in writing) of
     the dates on which such  disposition is expected to commence and terminate,
     the number of Securities expected to be sold, the method of disposition and
     such other  information as the Company may  reasonably  request in order to
     supplement  the  prospectus  contained  in the  registration  statement  in
     accordance with the rules and regulations of the Commission. Promptly after
     receiving  such  advice,  the Company  will,  if  necessary,  (x) prepare a
     supplement to the prospectus  based upon such advice and file the same with
     the Commission pursuant to Rule 424(b) under the Securities Act and (y), if
     necessary,  qualify the  Securities to be sold under the securities or blue
     sky  laws of  such  jurisdiction  in the  United  States  as  Holder  shall
     reasonably  request  (subject to the proviso of Section (b) of Section 2 of
     this Agreement).

          (ii) Holder  agrees that,  upon receipt of any notice from the Company
     of any event of the kind  described  in  Section  (d) of  Section 2 of this
     Agreement,  Holder will forthwith discontinue disposition of the Securities
     pursuant  to such  registration  statement  until  receipt of copies of the
     supplemented or amended prospectus  contemplated by Section (d), and, if so
     directed  by the  Company,  will  deliver to the  Company all copies of the
     prospectus covering the Securities in its possession at the time of receipt
     of such notice.

          (iii) Holder  shall,  at any time it is engaged in a  distribution  of
     Securities, comply with all applicable requirements of Regulation M (or any
     successor  provisions  then in  force)  promulgated  under  the  Securities
     Exchange Act of 1934 (the "Exchange Act") and (x) will


                                       7




     not engage in any stabilization  activity in connection with the securities
     of the Company in  contravention  of such rules,  (y) will  distribute  the
     Securities solely in the manner described in the registration statement and
     (z) will not bid for or purchase any  securities  of the Company or attempt
     to induce any person to purchase any  securities  of the Company other than
     as permitted under the Exchange Act.

          (iv) Holder shall provide such information and materials,  execute all
     such  documents  and take all  such  other  actions  as the  Company  shall
     reasonably  request  in order to permit  the  Company  to  comply  with all
     applicable  requirements of law and to effect the  registration of Holder's
     Securities.

          (v) If Securities  are  registered for sale pursuant to Rule 415 under
     the  Securities  Act,  Holder shall cease any  distribution  of such shares
     under the  registration  statement  upon the request of the Company if: (x)
     such   distribution   would  require  the  public  disclosure  of  material
     non-public information concerning any transaction or negotiations involving
     the Company or any of its  affiliates  that, in the good faith  judgment of
     the  Company's  Board of Directors (or the  executive  committee  thereof),
     would materially interfere with such transaction or negotiations,  (y) such
     distribution  would otherwise require  premature  disclosure of information
     that; in the good faith judgment of the Company's Board of Directors, would
     materially  adversely affect or otherwise be materially  detrimental to the
     Company or (z) the Company proposes to file a registration  statement under
     the  Securities  Act for the  offering and sale of  securities  for its own
     account in an underwritten  offering and the managing  underwriter therefor
     shall  advise the  Company in writing  that in its  opinion  the  continued
     distribution  of the  Securities  would  materially  adversely  affect  the
     success of the offering of the securities proposed to be registered for the
     account of the Company.  The Company shall  promptly  notify Holder at such
     time as (i) such transactions or negotiations have been otherwise  publicly
     disclosed or terminated, (ii) such non-public information has been publicly
     disclosed or counsel to the Company has determined  that such disclosure is
     not  required  due to  subsequent  events or (iii) the  completion  of such
     underwritten offering.

     3. Demand Rights.

     During the Registration  Period (and subject to the further limitations set
forth  below),  the first of Ben-Haim  or Harary to provide a Demand  Notice (as
defined  below) in any year shall have the right  (which right is in addition to
the registration  rights under Section 2 hereof),  exercisable by written notice
to the Company (the "Demand Notice") to have the Company  prepare,  file and use
its reasonable efforts to have declared effective a registration  statement (the
"Demand  Registration  Statement"),  and  such  other  documents,   including  a
prospectus,  as may be  necessary  to comply  with the  Securities  Act so as to
permit a public  offering  and sale of such  number  of  Registrable  Securities
requested to be  registered in the Demand  Notice.  Promptly upon receipt of the
Demand  Notice,  the  Company  shall  give  notice to each  other  Holder of the
Registrable  Securities and shall include in the Demand  Registration  Statement
all shares of the  Registrable  Securities as to which such other Holders demand
registration.  Subsections  (b),  (c),  (d),  (e), (f), (g), (h), (i) and (j) of
Section 2 hereof shall be applicable to the Demand Registration  Statement.  The
Company shall be required to effect a


                                       8




total of only one such  registration  pursuant to this Section 3 for all Holders
(collectively)  each year during a period (the  "Demand  Period")  ending on the
earlier of (A) the fifth  (5th)  anniversary  of the  Closing  Date and (B) with
respect to either Ben-Haim or Harary individually,  the first date on which such
Seller is no longer  employed by the Company  under the terms of the  Employment
Agreement  entered into by the Company with such Seller pursuant to the Purchase
Agreement.  In addition, the Company shall be required (upon receipt of a Demand
Notice as specified  above) to effect one  additional  registration  pursuant to
this  Section 3 for all Holders  (collectively)  between the  expiration  of the
Demand Period and the expiration of the Registration Period.

     4. Rule 144.

     As long as any Holder owns Shares, the Company covenants to timely file (or
obtain  extensions  in respect  thereof  and file  within the  applicable  grace
period)  all reports  required to be filed by the Company  after the date hereof
pursuant to Section  13(a) or l5(d) of the Exchange Act and to promptly  furnish
the Holders with true and complete  copies of all such  filings.  As long as any
Holder owns Shares,  if the Company is not required to file reports  pursuant to
Section  13(a) or l5(d) of the Exchange  Act, it will prepare and furnish to the
Holders and make publicly  available in accordance with Rule 144(c)  promulgated
under the Securities  Act annual and quarterly  financial  statements,  together
with a  discussion  and  analysis  of such  financial  statements  in  form  and
substance  substantially similar to those that would otherwise be required to be
included in reports  required by Section  13(a) or 15(d) of the Exchange Act, as
well as any other  information  required  thereby,  in the time period that such
filings would have been required to have been made under the Exchange Act.

     5. Miscellaneous.

     (a)  Remedies.  In the event of a breach by the Company or by a Holder,  of
any of their  obligations under this Agreement,  each Holder or the Company,  as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific  performance of its rights under this  Agreement.  The Company and each
Holder agree that monetary damages would not provide  adequate  compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement  and  hereby  further  agrees  that,  in the event of any  action  for
specific  performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

     (b) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended,  modified or supplemented,  and
waivers or consents to departures  from the provisions  hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
at least two-thirds of the then outstanding  Registrable  Securities;  provided,
however,  that, for the purposes of this sentence,  Registrable  Securities that
are owned,  directly or  indirectly,  by the  Company,  or an  Affiliate  of the
Company  (other  than  Ben-Haim  or  Harary,  should  either  of them be  deemed
Affiliates  of the  Company)  are not deemed  outstanding.  Notwithstanding  the
foregoing, a waiver or consent to depart from


                                       9




the provisions  hereof with respect to a matter that relates  exclusively to the
rights of Holders and that does not directly or indirectly  affect the rights of
other Holders may be given by Holders of at least a majority of the  Registrable
Securities to which such waiver or consent relates; provided,  however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.

     (c)  Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and  effective on the earlier of (i) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified in this Section  prior to 7:00 p.m.  (New York City
time) on a Business Day,  (ii) the Business Day after the date of  transmission,
if such notice or  communication  is delivered  via  facsimile at the  facsimile
telephone number  specified in the Purchase  Agreement later than 7:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m.  (New York City time) on
such date,  (iii) the Business  Day  following  the date of mailing,  if sent by
nationally  recognized  overnight  courier service or (iv) actual receipt by the
party to whom such  notice is required to be given to each Holder at its address
set forth under its name on Schedule 1 attached  hereto or such other address as
may be  designated  in writing  hereafter,  in the same manner,  by such Person.
Copies of notices shall be sent as indicated on Schedule 1.

     (d)  Successors and Assigns.  This Agreement  shall inure to the benefit of
and be binding upon the successors and permitted  assigns of each of the parties
and shall  inure to the benefit of each  Holder.  The Company may not assign its
rights or  obligations  hereunder  without  the prior  written  consent  of each
Holder.  Each Purchaser may assign its rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.

     (e)  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of which when so executed  shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any  signature  is  delivered  by  facsimile  transmission,  such
signature shall create a valid binding  obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.

     (f)  Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of New York,  without regard to principles
of conflicts of law.

     (g) Cumulative  Remedies.  The remedies  provided herein are cumulative and
not exclusive of any remedies provided by law.

     (h) Severability.  If any term, provision,  covenant or restriction of this
Agreement is held by a court of competent  jurisdiction to be invalid,  illegal,
void or  unenforceable,  the remainder of the terms,  provisions,  covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected,  impaired or  invalidated,  and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to


                                       10




achieve the same or substantially  the same result as that  contemplated by such
term, provision,  covenant or restriction.  It is hereby stipulated and declared
to be the  intention of the parties that they would have  executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

     (i)  Headings.  The  headings  in this  Agreement  are for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

     (j) Shares Held by The Company and its Affiliates.  Whenever the consent or
approval of Holders of a  specified  percentage  of  Registrable  Securities  is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees  or successors or assigns  thereof if such
Holder is deemed to be an  Affiliate  solely by reason of its  holdings  of such
Registrable  Securities or because he or she is a director or executive  officer
of the  Company)  shall not be counted in  determining  whether  such consent or
approval was given by the Holders of such required percentage.


                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGE TO FOLLOW]


                                       11




     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date set forth above.


                                        SIGNAL APPAREL COMPANY, INC.

                                        By:  /s/ Thomas A. McFall
                                             ----------------------------------
                                        Name:  Thomas A. McFall
                                        Title: CEO



                                        TAHITI APPAREL, INC.

                                        By:  /s/ Zvi Ben-Haim
                                             ----------------------------------
                                        Name:  Zvi Ben-Haim
                                        Title: President


                                        /s/ Zvi Ben-Haim
                                        ---------------------------------------
                                        Zvi Ben-Haim


                                        /s/ Michael Harary
                                        ---------------------------------------
                                        Michael Harary


                                        /s/ Ming-Yiu Chan,
                                        By Robert T. Lincoln, Attorney-in-Fact

                                        ---------------------------------------
                                        Ming-Yiu Chan


                                       12