Signal Apparel Company, Inc. (NYSE:SIA) announced today that it has reached an agreement in principle with its primary investors to payoff a minimum of $70 million of senior debt and convert that debt along with $31.5 million of debt held by these investors and other debt holders into preferred equity. This would result in the conversion of $101 million of debt into equity. The debt to equity portion of the plan, which is subject to shareholder approval, will be presented to the Company’s shareholders for their approval at the Company’s 2000 Annual Meeting. The Annual Meeting will be scheduled as soon as possible. The plan is to be executed in two steps.

As a first step, WGI, LLC, would immediately payoff a minimum of $70 million of the Company’s indebtedness to its senior lender resulting in an equivalent non-cash interest bearing loan from WGI, LLC to the Company. As a second step, the plan calls for this indebtedness to WGI, LLC, along with other indebtedness of the Company, to be converted into preferred equity after the Company’s annual meeting.

The second step also provides that WGI, LLC would convert the remainder of its outstanding $26.5 million of debt from the Company into an equivalent amount of preferred equity. Dividends on the WGI, LLC preferred stock would be payable at a 10% rate and would be paid in kind for a minimum of one year. The payment in kind would continue after the passage of one year until the Company has generated sufficient cash flow to begin the payments in cash.

Also as part of the second step, the Company announced an agreement in principle with an institutional investment group holding a $5 million debenture to convert $2.5 million of the debenture into preferred equity. The remaining $2.5 of the debenture would be purchased by WGI, LLC who would convert this indebtedness into preferred equity.

The entire transaction would result in approximately $7.2 million annualized reduction in the Company’s cash debt service costs providing a significant positive impact on the Company’s cash flow requirements.

Thomas A. McFall, Vice Chairman, stated, “This plan represents the most significant step taken to date in the Company’s continuing focus on improving its balance sheet and increasing shareholders’ equity. Upon completion, this plan would put the Company in a much stronger position to execute its overall strategic plan. We obviously appreciate the confidence exhibited by our principal investors and the Company’s other debt holders in the strategic direction of Signal that this plan reflects. The Company is committed to further increasing shareholders’ equity through additional acquisitions and the successful execution of its business plan.”

The Company has submitted its plan to the NYSE as part of the Company’s effort to return to qualification to the on-going listing standards of the Exchange. The plan would result in a dramatic positive impact to “Shareholders’ Equity”, which is one of the requirements for continued listing.

Statements contained in this release that are not based on historical fact are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The risk factors and cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the Company’s 10-K filing and other filings with the Securities and Exchange Commission.