UNITED STATES OF AMERICA
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 2001
                                       OR

     [ ] TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE  SECURITIES
EXCHANGE  ACT  OF  1934  For  the  transition   period  from ____ to ____

Commission File Number:  333-58059

                             Cluett American Corp.
             (Exact Name of Registrant as Specified in Its Charter)
 Delaware                                              22-2397044
(State or Other Jurisdiction of                       (I.R.S. Employer
Incorporation or Organization)                        Identification No.)

                     48 West 38th Street New York, NY     10018
               (Address of Principal Executive Offices) (Zip Code)

        Registrant's Telephone Number, Including Area Code 212-984-8900

Securities registered pursuant to Section 12(b) of the Act:

Title of Each class               Name of each exchange on which registered
None                              None
-----------------------           ----------------------------------------

Securities registered pursuant to Section 12(g) of the Act:

                                  None
                                  --------------------------------------
                                  (Title of Class)

     Indicate  by check  mark  whether  registrant  (1) has  filed  all  reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
Yes  X    No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (section 229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
form 10-K or any amendment to this Form 10-K.
[  ]

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be filed by  Sections  12, 13 or 15 (d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
Yes X No

     The aggregate  market value of the voting stock held by any  non-affiliates
of the  registrant  is zero as of December  31,  2001.  All common  stock of the
registrant  is owned by Cluett  American  Group,  Inc.,  which is a wholly owned
subsidiary of Cluett American Investment Corp.


<PAGE>


                                TABLE OF CONTENTS


PART I

Item 1.           Business

Item 2.           Properties

Item 3.           Legal Proceedings

Item 4.           Submission of Matters to a Vote of Security Holders


PART II

Item 5.           Market for Registrant's Common Equity and Related Stockholder
                  Matters

Item 6.           Selected Financial Data

Item 7.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operation

Item 7A.          Quantitative and Qualitative Disclosures about Market Risk

Item 8.           Financial Statements and Supplementary Data

Item 9.           Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosures


PART III

Item 10.          Directors and Executive Officers of the Registrant

Item 11.          Executive Compensation

Item 12.          Security Ownership of Certain Beneficial Owners and Management

Item 13.          Certain Relationships and Related Transactions


PART IV

Item 14.         Exhibits, Financial Statement Schedules, and Reports on
                 Form 8-K.


SIGNATURES

EXHIBIT INDEX









                                       2
<PAGE>




                                     PART I

Item 1.  Business

     Cluett American Corp. and its subsidiaries (the "Company") are wholly owned
subsidiaries of Cluett American Investment Corp.  ("Holdings").  The Company was
organized in 1982 and primarily  designs,  manufactures and markets socks in the
United States,  as well as licenses its  proprietary  trademarks and trade names
domestically  and  internationally.  The Company filed  voluntary  petitions for
relief under the provisions of Chapter 11 of the Federal Bankruptcy Code on July
17,  1995.   The  Company   emerged  from   bankruptcy   and   consummated   its
recapitalization and refinancing on May 18, 1998.

Description of Business

    Based on net sales, the Company believes it is one of the leading designers,
manufacturers  and  marketers  of men's  socks in the  United  States  and has a
significant  market presence in women's and children's socks.  While the Company
serves most channels of  distribution,  its primary  focus is on department  and
national chain store retailers.  The Company believes its core product offering,
GOLD TOE socks,  provides classic and  contemporary  styles at price points that
represent exceptional value and appeal to a broad consumer base.

    The Company markets its socks using widely recognized  Company-owned  brands
such as GOLD TOE and SILVER TOE.  The Company  primarily  sells its  products to
department  and national chain stores to maintain its brand image and to achieve
the relatively  higher selling prices and higher margins  characterized by sales
to these retail  channels.  Approximately  62.0% of the  Company's net sales are
derived from these core offerings, the demand for which is believed to be stable
and resistant to changing fashion trends.

    Within  certain  territories,  the Company also has  licensed the  exclusive
rights to manufacture and market socks under such widely  recognized brand names
as Kenneth Cole, Nautica,  Jockey, Izod and Izod Club. This diverse portfolio of
Company-owned  and licensed  brand names enables the Company to offer  different
brands with unique value propositions to different channels of distribution.

    The Company owns numerous trademarks,  including ARROW and its related trade
names such as DOVER, TOURNAMENT,  LADY ARROW, FAIRFIELD BY ARROW and FRIDAY'S BY
CLUETT,  which  it  regards  as  valuable  assets.  Because  of the  high  brand
recognition,  the Company is able to license the various  trademarks  to apparel
manufacturers  and  distributors  worldwide.  The  Company has 35  licensees  in
various  countries,  which market,  manufacture and sell apparel and non-apparel
products bearing the ARROW trademark in various channels of distribution.

     The Company conducted its business through two principal segments: the Sock
Group and the Licensing Group.

     The Sock  Group - For the year  ended  December  31,  2001;  the Sock Group
accounted  for 92.1% of the  Company's  net  sales.  The Sock  Group is a market
leader in department store sales of socks. The Sock Group's leading brand,  GOLD
TOE, was  established in 1934 and generates  64.8% of the Sock Group's net sales
with the remaining  sales  generated  through  complementary  private labels and
through other owned and licensed brands such as Nautica,  Jockey,  Kenneth Cole,
Izod and Izod  Club.  The Sock Group  offers a  comprehensive  line of  products
across multiple price points,  ages, genders and styles,  enabling it to provide
its customers  with a full range of their sock needs.  For the fiscal year ended
December  31, 2001,  the Sock Group  realized net sales and EBITDA As Defined of
$174.1 million and $22.7 million,  respectively.  EBITDA, as defined ("EBITDA As
Defined") is defined as operating income before  depreciation and  amortization,
interest  expense,  taxes and restructuring  and impairment  charges.  EBITDA As
Defined should not be considered in isolation or as a substitute for net income,
certain  cash  flows from  operating  activities  and other  income or cash flow
statement  data  prepared in accordance  with  accounting  principles  generally
accepted  in the United  States of America or as a measure of  profitability  or
liquidity.  EBITDA As Defined is not  necessarily  comparable to other similarly
titled captions of other companies due to differences in methods of calculation.


                                       3
<PAGE>



     The Licensing  Group - For the year ended  December 31, 2001, the Licensing
Group  accounted for 7.2% of the Company's net sales.  The Licensing  Group owns
various  trademarks,  including ARROW, and its related trade names, DOVER, KENT,
COLLARMAN,  ARROW "1851," KHAKI'S by ARROW and ARROW AMERICA'S SPORT. Because of
the name  recognition  of its ARROW brand,  which was  established  in 1851, the
Company is able to license the  trademark  for  various  apparel  products  both
domestically and  internationally.  For the fiscal year ended December 31, 2001,
the Licensing  Group realized  licensing fee revenue of $13.6 million and EBITDA
As Defined of $10.2 million.

    For  additional  information  about the  Company's  product  categories  and
reportable segments, see Note 17 - Segment Data of the Notes to the Consolidated
Financial Statements.

Recent Events and Discontinued Operations
     See Item 7 - Management's  Discussion  and Analysis of Financial  Condition
and Results of Operations "Recent Events and Discontinued Operations".

Marketing, Sales & Distribution

    The Sock Group is a  significant  supplier to many  leading  department  and
national  chain store  retailers.  In addition,  the Sock Group is a supplier to
specialty stores, mass merchants and off-price retailers. The Sock Group segment
uses brand names by distribution channel to solidify the perceived value of such
brands and to maintain their integrity.  Consistent with industry practice,  the
Sock Group does not operate under long-term  written supply  agreements with its
customers.  The Sock Group's top ten customers  accounted for 69.1% of its total
net sales in the fiscal year ended December 31, 2001.

    In an effort to maximize  the Sock  Group's  product  exposure  and increase
sales,  the Sock Group works closely with its major  customers to assist them in
managing their entire sock category and to promote the Sock Group's  products to
the consumer.  In addition to frequent personal  consultation with the employees
of these customers, the Sock Group periodically meets with its customers' senior
managers to jointly develop merchandise assortments and plan promotional events.
The Sock Group provides  merchandising  assistance  with store layouts,  fixture
designs,  advertising  and point of sale displays.  In addition,  the Sock Group
provides customers with preprinted, customized advertising materials designed to
increase sales. The Sock Group does not use national brand  advertising  because
it  has  found  the  aforementioned  advertising  techniques  to  be  more  cost
effective.

    As a  supplement  to the Sock Group's  primary  distribution  channels,  the
Company operates nine outlet stores that sell the Sock Group's products directly
to consumers;  these  operations  are referred to as the U.S.  Retail  division.
These stores  generally sell irregular,  discontinued  and off-price  goods. The
stores are  located in factory  outlet  malls and  average  approximately  1,300
square feet per store. For financial reporting  purposes,  the financial results
of the U.S. Retail division are consolidated into the All Other segment.  During
the fiscal year ended  December 31, 2001,  no outlet stores were closed and four
stores were opened.

    The Sock Group  employs  sales people who  generally  have several  years of
industry  experience.  Because the  turnover of sock buyers at retail  stores is
high, many retailers rely on the experience of their key vendors to manage their
business for them.  The Sock Group has developed a  well-respected  expertise in
managing such businesses for its key accounts.  Most sales and sales  management
personnel are compensated with a combination of salary and  discretionary  bonus
based on established goals and objectives.

Raw Materials

    The Sock Group relies on outside  suppliers to meet its raw material  needs.
The Sock Group has  developed  key  relationships  with each of the largest yarn
suppliers in the industry.  Due to its size,  management believes the Sock Group
has developed solid supplier  relationships  and  historically  has been able to
obtain competitive pricing.

    The Sock Group minimizes the effects of seasonal variations in its commodity
yarn prices by securing annual contracts for yarn based on its anticipated needs
for each year.  Sock  manufacturers  in the industry  typically  negotiate  yarn
contracts  in the third  quarter  of the year for the  following  year.  Selling
prices with retailers are then negotiated in January and February based on those
yarn prices.  Historically,  this process has acted as a natural  hedge  against
rising yarn prices. The Sock Group has no long-term purchase commitments for raw
materials.


                                       4
<PAGE>


Manufacturing

    The Sock Group provides its products  through owned  domestic  manufacturing
facilities,   imports  and  sub-contracts  through  domestic  and  international
suppliers.  Substantially  all  production  is  finished  at  Sock  Group  owned
facilities..

    The  Sock  Group's  owned  facilities  are  located  in North  Carolina  and
Pennsylvania.  The Sock Group has begun a process to move its finishing capacity
offshore to facilities  located near Mexico City The  Pennsylvania  facility has
begun ceasing operations which are expected to be completed by the end of 2002.

    Socks are primarily made from cotton,  nylon,  acrylic or wool yarns.  These
yarns  are knit on a  circular  knitting  machine  in a  tube-like  manner  with
additional  courses placed in the construction to form a pocket for the wearer's
heel and toe.  The sock is seamed to close the toe end of the tube,  dyed to the
proper color and packaged for retail store presentation.

    The Sock  Group's  quality  control  program is  designed to assure that its
products  meet  predetermined  quality  standards.  The Sock  Group has  devoted
significant   resources  to  support  its  quality   assurance   efforts.   Each
manufacturing  facility is staffed with a quality  control team that  identifies
and resolves quality issues on both manufactured and sourced product.

Trademarks and License Agreements

The Sock Group

    The Sock Group markets its products  under its own  proprietary  trademarks,
trade  names and  customer-owned  private  labels,  as well as certain  licensed
trademarks  and trade  names.  The Sock Group uses  trademarks,  trade names and
private  labels  as  merchandising  tools to  assist  its  retail  customers  in
coordinating  their product  offerings and  differentiating  their products from
those of other retailers.

    The Sock Group owns various  trademarks  and trade names  including GOLD TOE
and SILVER TOE.  These  trademarks  and trade names  represent  value in product
quality and design.  The Sock Group  regards its  trademarks  and trade names as
valuable assets and rigorously protects them against infringement.

    The Sock Group holds, with the exception of Kenneth Cole, the exclusive sock
licenses for the following trademarks:

TRADEMARK                   TERRITORY                EXPIRATION
---------                   ---------                ----------



Nautica                     U.S. and Canada          12/31/2001 (1)

Jockey                      U.S.                     12/31/2002

Ridgeview                   U.S.                     01/31/2003

Kenneth Cole                U.S.                     12/31/2003 (2)

Izod                        U.S.                     06/30/2004

Izod Club                   U.S.                     06/30/2004

(1)  The original  license expired December 31, 2001;  however,  the license has
     been extended until May 30, 2002, during contract negotiations. The Company
     has a good  relationship  with the licensor and is currently in negotiation
     for a renewal of the license for three to five years.
(2)  The Kenneth Cole sock license is held by the Licensing Group, product sales
     under the Kenneth  Cole  license are  consolidated  into the Sock Group for
     financial reporting purposes only

                                       5
<PAGE>

    The Sock Group is not dependent on any one of these  licensed  product lines
(for the year ended December 31, 2001,  15.5% of the Sock Group's net sales were
derived from licensed  products),  and the loss of any individual  license would
not have a material adverse effect on the Sock Group's overall profitability.

    The Sock Group has  licensed the GOLD TOE  trademark  to three  licensees in
Mexico,  the  Philippines  and the United States for non-sock  related  apparel,
which provide for minimum royalty  payments to be paid to the Sock Group,  which
are consolidated into the Licensing Group for financial reporting purposes.

The Licensing Group

    The  Licensing  Group owns various  trademarks  and trade  names,  including
ARROW.  The ARROW trademark is widely  recognized in the industry and represents
excellence and value in product quality, fashion and design. Because of the name
recognition  of its ARROW brand,  which was  established in 1851, the company is
able to license the ARROW brand and related trademarks for apparel products both
domestically and internationally. The Licensing Group regards its trademarks and
trade  names  as  valuable   assets  and   rigorously   protects   them  against
infringement.

    The  Licensing  Group  licenses  the  ARROW  and  related  trademarks  to 35
licensees for use in territories  within and outside the United States.  Through
licensing  alliances,  the  Licensing  Group  combines its consumer  insight and
design,  marketing  and imaging  skills with the specific  product or geographic
competencies of its licensing  partners to create and build new businesses.  The
Licensing Group's licensing partners,  who are often leaders in their respective
markets, generally contribute the majority of product development costs, provide
the  operational  infrastructure  required to support the  business  and own the
inventory.  The Licensing Group works in close  collaboration with its licensing
partners to ensure that  products are  developed,  marketed and  distributed  to
address the  intended  market  opportunities  and present the  Licensed  Group's
products  consistently.  While  product-licensing  partners may employ their own
designers,  the Licensing Group oversees the design of all their  products.  The
Licensing  Group  also works  closely  with  licensing  partners  to  coordinate
marketing and  distribution  strategies.  For the fiscal year ended December 31,
2001, the Licensing Group had licensing revenue of $13.6 million, which includes
licensing revenue from the GOLD TOE trademark.

    Most of the ARROW license  agreements  provide for a minimum royalty payment
and require the licensee to spend a percentage of net sales on  advertising  and
marketing of products bearing the ARROW  trademark.  The licenses are for three-
or five-year terms,  which, in most cases,  have provisions for renewal terms if
the licensee has not breached the agreement and has met certain sales goals. The
Licensing  Group also has the right to  supervise  the  quality of the  licensed
products.

Seasonality

    The  industries  in which the Company  operates are  cyclical.  Purchases of
apparel  tend to decline  during  recessionary  periods  and also may decline at
other  times.  A recession  in the general  economy or  uncertainties  regarding
future economic prospects could affect  consumer-spending  habits and could have
an  adverse  effect on the  Company's  results  of  operations.  Weak  sales and
resulting  markdown  requests from customers could also have a material  adverse
effect on the Company's business, results of operations and financial condition.

    The Company's business is seasonal,  with higher sales and income during its
third and fourth  quarters.  The third and  fourth  quarters  coincide  with the
Company's two peak retail  selling  seasons:  (i) the first season runs from the
start of the  back-to-school  and fall selling seasons,  beginning in August and
continuing through September;  and (ii) the second season runs from the start of
the Christmas selling season beginning with the weekend  following  Thanksgiving
and continuing through the week after Christmas.



                                       6
<PAGE>



Working Capital

     Working  capital  needs  are  affected   primarily  by  inventory   levels,
outstanding  receivables and trade  payables.  At December 31, 2001, the Company
had  available  for its use with its  syndicate of lenders,  a revolving  credit
facility of $50.0  million and a Tranche C loan of $19.2  million.  On April 12,
2002,  the Senior  Credit  Facility  was  amended,  reducing  the Tranche C loan
commitment from $19.2 million to $17.5 million, and extending the Tranche C loan
due date from December 31, 2002 to May 18, 2004.  Borrowings under the Tranche C
loan are  guaranteed by Vestar  Capital  Partners III,  L.P.  ("Vestar").  These
credit  facilities  are used by the  Company  to cover  fluctuations  in working
capital needs. At December 31, 2001, the Company had  outstanding  borrowings of
$26.7 million under the revolver plus $17.5 million under the Tranche C loan. At
December  31,  2001,  the Company had no open trade  letters of credit  reserved
against these  facilities,  and after  consideration  of $1.0 million of standby
letters of credit,  the Company had  additional  availability  of $24.0  million
(including $1.8 million of availability  under the Tranche C loan).  The Company
had cash of $1.3 million at December 31, 2001.

       Inventory  levels are affected by  anticipated  sales.  It is the general
practice of the Company to offer payment terms of net 30 days to the majority of
its customers from the date of shipment.

Reliance on Certain Customers

The Sock Group

    The Sock Group's ten largest customers  accounted for 69.1% of its net sales
in 2001. The Sock Group has two customers,  which each  individually,  accounted
for greater  than 10.0% of net sales.  Although  the  Company has  long-standing
relationships with these customers,  the Company has no long-term contracts with
any of these  customers.  A  substantial  reduction in sales to these  customers
could have a material  adverse effect on the financial  condition and results of
operations of the Company.

The Licensing Group

     The Licensing  Group's revenues from its five largest  licensees  accounted
for  approximately  59.0% of its  licensing  fee revenue in 2001.  The Licensing
Group has one customer  that  accounted for more than 10.0% of its licensing fee
revenue.  Exposure  regarding the revenue  concentration is mitigated by license
fee revenues being  generated by various  product  categories and from different
geographic locations throughout the world. Although the loss of any one licensee
would impact the financial  results of the Licensing  Group, it would not likely
have a  material  adverse  effect on the  financial  condition  and  results  of
operations of the Company.

Employees

     As of December 31, 2001, the Company  employed 1,382 persons on a full-time
basis and 39 persons on a part-time  basis.  Of the total number of persons,  14
are in the  Licensing  Group and two are in Apparel  On-Line  LLC.  Of the total
employees,  1,132 were engaged in manufacturing and distribution operations, and
the  remainder  was  employed  in  executive,  marketing,  sales and  purchasing
activities, and in the operation of the Company's retail outlet stores.

Competition and Industry Risks

    The sock  industry is highly  competitive  due to its mix of large and small
producers,  the flow of domestic and imported merchandise and the wide diversity
of  retailing   methods.   The  Company   competes  with  numerous   brands  and
manufacturers  of socks,  some of which  may be  significantly  larger  and more
diversified  and have greater  financial and other  resources  than the Company.
Increased  competition from these and future  competitors could reduce sales and
prices, adversely affecting the Company's results of operations.

    The sock industry is cyclical.  Purchases of apparel tend to decline  during
recessionary  or  other  periods  of  uncertainties  regarding  future  economic
prospects,  which  could  affect  consumer-spending  habits  and have an adverse
effect on the Company's results of operations. Weak sales and resulting markdown
requests  from  customers  could  also  have a  material  adverse  effect on the
Company's business, results of operations and financial condition.


                                       7
<PAGE>

    The Sock  Group's  primary  sock  competitors  are:  Sara Lee  (`Hanes'  and
`Champion' brands);  Renfro  (`Fruit-of-the-Loom'  brand);  Royce Hosiery Mills,
Inc. (`Dockers', `9West' and `Levi' brands); Kayser-Roth (`Burlington' and `Hue'
brands);  American Essentials (`Calvin Klein' and `American Essentials' brands);
Mountain High (`Tommy  Hilfiger'  brand) and Hot Sox (`Polo,' `Hot Sox,' `Chaps'
and `Ralph Lauren' brands). The Company believes,  however, that it manufactures
a more  extensive  line of socks for men,  women and  children  and in a broader
price  range than any of its  competitors  allowing  the  capture of  additional
market share.

     The Company has historically  benefited from import restrictions imposed on
foreign  competitors in the apparel  industry.  The extent of import  protection
afforded to domestic  manufacturers such as the Company,  however, has been, and
is likely to remain,  subject to considerable  political  deliberation.  General
Agreements on Trade and Tariffs ("GATT") will eliminate, over a number of years,
restrictions on imports of apparel.  In addition,  on January 1, 1994, the North
American  Free  Trade  Agreement  ("NAFTA")  became  effective.  Each  of  these
agreements  will reduce  import  constraints  previously  imposed on some of the
Company's  competitors  and will increase the  likelihood of  competition on the
basis of price.

Environmental Matters

    The  Company is subject to various  federal,  state and local  environmental
laws and  regulations  concerning,  among other things,  wastewater  discharges,
stormwater flows, air emissions, ozone depletion and solid waste disposal.

    Environmental  regulation applicable to the Company's operations is becoming
increasingly  more stringent.  The Company  continues to incur capital and other
expenditures  each year in order to comply with  current  and future  regulatory
standards.  The  Company  does not  expect;  however,  that the  amount  of such
expenditures in the future will have a material  adverse effect on its financial
condition,  results  of  operations  or  competitive  position.  There can be no
assurance;  however, that future changes in federal, state or local regulations,
interpretations of existing  regulations,  or the discovery of currently unknown
problems or conditions  will not require  substantial  additional  expenditures.
Similarly,  the extent of the Company's liability,  if any, for past failures to
comply with laws, regulations and permits applicable to its operations cannot be
determined.



                                       8
<PAGE>



Item 2.   Properties

Facilities

     The  Company's  principal  executive  offices  are  located at 48 West 38th
Street, New York, NY 10018. The following table summarizes  certain  information
concerning certain of the Company's facilities:

                                                    APPROX.
 LOCATION                 USE                    SQUARE FEET       OWNED/LEASED
 --------                 ---                    -----------       ------------

Sock Group:
  Bally, PA...........Manufacturing(1)               156,000           Owned
  Newton, NC.... .....Manufacturing                   81,600           Owned
  Burlington, NC......Manufacturing                  251,400           Owned
  Mebane, NC..........Distribution                   285,000           Leased
  New York, NY........Showrooms                       11,000           Leased
  Whitsett, NC........Office Space                     9,600           Leased

Licensing Group:
 New York, NY.........Showroom/Administrative         10,000           Leased

Discontinued Operations:
  Enterprise, AL......Manufacturing(1)                50,000           Owned
  Kitchener, Ontario..Manufacturing(1)               145,000           Owned
  Kitchener, Ontario..Distribution(2)                125,000           Leased
  Austell, GA.........Manufacturing/Distribution(1)  593,000           Owned
  Toronto, Ontario....Showroom(2)                      8,100           Leased
  Smyrna, GA..........Administrative(2)               28,486           Leased


(1)      Property held for sale as of December 31, 2001.
(2)      Property held for sub-leasing as of December 31, 2001.


    In addition, the Company operates nine outlet stores on leased premises. The
Company  believes that its existing  facilities  are  adequately  insured,  well
maintained  and in good operating  condition and are otherwise  adequate for its
current and foreseeable level of operations for the next few years.


                                       9
<PAGE>



Item 3.   Legal Proceedings

    From time to time,  the  Company is involved  in various  legal  proceedings
arising  from the  ordinary  course  of its  business  operations.  The  Company
believes  that its potential  liability  with respect to  proceedings  currently
pending is not material in the aggregate to the Company's consolidated financial
position or results of operations.

    In 1999, the Company recognized bankruptcy credits of $573,000. For 2000 and
2001, the Company did not incur any costs or recognize any bankruptcy credits.



Item 4.   Submission of Matters to a Vote of Security Holders

      During the fourth  quarter of 2001,  no matter was  submitted to a vote of
security  holders  of the  Company  by means of the  solicitation  of proxies or
otherwise.



                                     PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

         All of the  Company's  outstanding  common  stock  is  held  by  Cluett
American  Group ("CAG") and there is no  established  public  trading market for
such stock.  The  Company has paid no  dividends  to common  stockholders  since
inception  and does not have any present  intention  to commence  payment of any
cash  dividends.  The Company's  ability to pay such dividends is limited by the
terms of its Senior Credit Facility  agreement and the Indenture relating to its
10 1/8% Senior  Subordinated Notes due 2008 and its 12 1/2% Senior  Exchangeable
Preferred  Stock due 2010.  The  Company  intends to retain  earnings to provide
funds for  operation  and  expansion of the  Company's  businesses  and to repay
outstanding indebtedness.




                                       10
<PAGE>



Item 6.   Selected Financial Data

    The following  table sets forth  summary  historical  financial  data of the
Company for each of the five years in the period ended  December  31, 2001.  The
following statement of operations data set forth below with respect to the years
ended  December  31,  1999,  2000 and 2001,  and the  balance  sheet  data as of
December 31, 2000 and 2001, are derived from, and are referenced to, the audited
consolidated  financial  statements  of the Company  included  elsewhere in this
annual report on Form 10-K.  The  statement of  operations  data set forth below
with  respect to the years ended  December  31,  1997 and 1998,  and the balance
sheet data as of December 31, 1997,  1998 and 1999,  are derived from  financial
statements not included in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>

                                                                            1997        1998        1999        2000        2001
                                                                            ----        ----        ----        ----        ----

                                                                                             (DOLLARS IN MILLIONS)
<S>                                                                      <C>         <C>         <C>         <C>         <C>
Statement of Operations Data: (1)
Net sales .....................................................          $  157.1    $  169.3    $  173.2    $  178.8    $  189.1
Operating income ..............................................              27.0        27.1        34.2        29.1        22.2

Balance Sheet Data: (1)
Total assets ..................................................             187.0       193.5       197.2       151.4       133.3
Total long-term debt, net of current portion (2) ..............                --       235.5       257.0       227.9       226.0
Debt subject to compromise(2)..................................             145.6         --          --          --          --
Redeemable preferred stock (3).................................                --        51.3        58.3        66.2        75.1
Preferred stock (3)............................................              20.0         --          --          --          --

</TABLE>




(1)        Statement  of  Operations  Data and  Balance  Sheet  Data  have  been
           restated to reflect the Company's continuing operations including the
           Sock Group, the Licensing Group and all other (Latin America, Apparel
           On-Line LLC,  Cluett American  Receivables  LLC, U.S. Retail division
           and  unallocated   corporate   overhead  charges)  and  excludes  the
           Company's discontinued Shirt Group operation.  See Item 1. -Business,
           "Recent Events and Discontinued Operations" and Note 3. -Discontinued
           Operations of the Notes to the Consolidated Financial Statements.

(2)        The Company filed voluntary petitions for relief under the provisions
           of Chapter 11 of the Federal  Bankruptcy  Code on July 17, 1995.  The
           Company's  recapitalization  and refinancing  were consummated on May
           18, 1998.

(3)        In connection with the recapitalization and refinancing,  the Company
           issued 500,000 shares of 12-1/2% senior exchangeable  preferred stock
           due 2010 and  received  $48.1  million.  Each  preferred  share has a
           liquidation value of $100. See Note 4 - Redeemable Preferred Stock of
           the Notes to the Consolidated Financial Statements.






                                       11
<PAGE>



Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Overview

    The Company was organized in 1982 and primarily  designs,  manufactures  and
markets  socks  in the  United  States,  as well  as  licenses  its  proprietary
trademarks and trade names domestically and internationally. Based on net sales,
the  Company  believes  it is one of the leading  designers,  manufacturers  and
marketers  of men's  socks in the  United  States and has a  significant  market
presence in women's and children's socks. While the Company serves most channels
of  distribution,  its primary focus is on department  and national  chain store
retailers.  The Company  believes  its core  product  offering,  GOLD TOE socks,
provides  classic  and  contemporary  styles  at  price  points  that  represent
exceptional value and appeal to a broad consumer base. The Company owns numerous
trademarks,  including  ARROW  and  its  related  trade  names  such  as  DOVER,
TOURNAMENT,  LADY ARROW,  FAIRFIELD  BY ARROW and  FRIDAY'S BY CLUETT,  which it
regards as valuable assets.  Because of the high brand recognition,  the Company
is  able  to  license  the  various  trademarks  to  apparel  manufacturers  and
distributors worldwide. The Company has 35 licensees in various countries, which
market,  manufacture and sell apparel and non-apparel products bearing the ARROW
trademark in various channels of distribution.

Critical Accounting Policies

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and the disclosure of contingent  assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses  during  the  reporting  period.  Management  bases its  estimates  and
judgments  on  historical  experience  and on  various  other  factors  that are
believed to be reasonable under the circumstances, the results of which form the
basis for making  judgments  about the carrying values of assets and liabilities
that are not readily  apparent  from other  sources.  Management  evaluates  its
estimates and  judgments on an on-going  basis.  Actual  results may differ from
these estimates under different assumptions or conditions.  The Company believes
that the following  discussion  addresses the Company's most critical accounting
policies,  which are  those  that are most  important  to the  portrayal  of the
Company's  financial  condition  and  results  and  require   management's  most
difficult,  subjective and complex  judgments,  often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.

     Discontinued  Operations.  The Company's financial  statements are prepared
using  discontinued  operations  accounting for the discontinued shirt segment's
manufacturing  and  distribution   operations.   Under  discontinued  operations
accounting, the Company accrued estimates of its expected liabilities related to
discontinued  operations through their eventual  discharge.  There are primarily
three remaining areas, (i) asset impairment  related to the disposal of property
held for sale,  (ii) leases and (iii)  medical costs for  terminated  employees,
which continue to require significant  judgment and estimates on the part of the
Company's management.

     In assessing impairment of long-lived assets held for sale, the Company has
estimated  the net  realizable  value of such assets based on  information  from
various  external  sources  regarding  possible  selling prices for such assets.
These  estimates  could change based on changes in market  conditions,  interest
rates and other factors.

     The Company's accrual for lease liabilities could be materially affected by
its ability to secure subleases and the  creditworthiness  of sublessees.  These
factors are  significantly  dependent  on the general  health of the economy and
resultant demand for commercial property.

     In estimating future  liabilities  expected to be incurred for self-insured
health  costs  for  certain   terminated   employees,   the  Company  considered
information from outside  consultants and past historical  experience.  Should a
greater amount of claims occur  compared to what was estimated,  or costs of the
medical profession  increase beyond what was anticipated,  reserves recorded may
not be sufficient and additional costs to the consolidated  financial statements
could be required.

     While the Company believes its current estimates of discontinued operations
liabilities  are  adequate;  it is possible that future events could require the
Company to make significant adjustments for revisions to these estimates.


                                       12
<PAGE>


     Restructuring  and Impairment  Charges.  Our financial  statements  include
restructuring  and  impairment  charges  related to the Sock  Group's  announced
restructuring  plans to  optimize  plant  capacity  and  maximize  supply  chain
opportunities.  These  charges are  comprised  primarily of special  termination
benefits  (paid from the pension plan see Note 11 - Employee  Benefit  Plan) and
impairment of fixed assets. The Company consulted with actuaries to estimate the
special  termination  benefits that are determined based on salary and length of
service. In assessing impairment of long-lived assets, the Company has estimated
the net  realizable  value of such  assets  based on  information  from  various
external  sources  regarding  possible  selling  prices for such  assets.  These
estimates could change based on changes in market conditions, interest rates and
other factors.

     Inventory  Obsolescence.  The Company  identifies  slow moving and obsolete
inventory and estimates  appropriate  loss  provisions  equal to the  difference
between the cost of inventory and the estimated market value based upon aging of
the  inventory  and  assumptions  about  future  demand and  market  conditions.
Historically,  these  write-downs have not been  significant,  as the Company is
generally able to sell such inventory in alternate  channels of distribution for
prices  above  costs.  If actual  future  demand or market  conditions  are less
favorable than those projected by management,  additional inventory  write-downs
may be required.

     Allowance  for Doubtful  Accounts.  The Company  maintains  allowances  for
doubtful accounts for estimated customer allowance  deductions related to retail
sales  conditions  and  estimated  losses  resulting  from the  inability of its
customers to make required  payments.  The losses are estimated using historical
experience, relative aging of accounts receivable and current market information
regarding specific customers' inability to meet its financial obligations (e.g.,
bankruptcy  filing).  If the  amount  of  allowances  deducted  from  customers'
payments  exceeds our  estimates,  or the  financial  condition of the Company's
customers  were to  deteriorate,  resulting in an impairment of their ability to
make payments, additional allowances may be required.

     Income Taxes. Based on the Company's history of earnings and the limitation
on the use of its federal net operating loss carryforwards,  the Company records
a valuation  allowance to reduce its entire balance of net domestic deferred tax
assets (see Note 10 - Income  Taxes).  While the Company has  considered  future
taxable  income and ongoing  prudent and  feasible tax  planning  strategies  in
assessing the need for the valuation allowance, in the event the Company were to
determine  that it would be able to  realize  its  deferred  tax  assets  in the
future,  an adjustment to the deferred tax assets would  increase  income in the
period such determination was made.

     The above  listing is not  intended to be a  comprehensive  list of all our
accounting  policies.  In many cases,  the accounting  treatment of a particular
transaction  is   specifically   dictated  by  generally   accepted   accounting
principles,  with no need for management's judgment in their application.  There
are  also  areas in which  management's  judgment  in  selecting  any  available
alternative  would not produce a materially  different  result.  See the audited
consolidated  financial  statements  and notes thereto which contain  accounting
policies  and  other  disclosures  required  by  generally  accepted  accounting
principles.

Recent Events and Discontinued Operations

     On June 13, 2000, Phillips-Van Heusen Corporation, ("PVH"), and the Company
announced an agreement (the  "Agreement") for PVH to license the ARROW brand for
men's and boys' dress shirts, sports shirts (including knit, woven and all forms
of  fleece),  pants,  shorts and  sweaters  ("Licensed  Product")  in the United
States. In addition,  PVH and the Company agreed in principle for PVH to acquire
the stock of Cluett Designer Group, Inc. ("CDG"),  the licensee for Kenneth Cole
dress shirts. In conjunction with the Agreement,  the Company approved a plan to
discontinue the Company's shirt group segment's  manufacturing  and distribution
operations.

     On July 24, 2000, the transactions contemplated by the Agreement, including
the  Purchase and Sale  Agreement  among  Cluett,  Peabody & Co.,  Inc.  ("CP"),
Cluett,  Peabody Canada, Inc. ("CP Canada"),  Arrow Factory Stores Inc. ("AFS"),
CDG,  Consumer  Direct  Corporation  ("CDC"),   Cluett,  Peabody  Holding  Corp.
("Holding"), and PVH, (the "Purchase and Sale Agreement") and the Share Purchase
Agreement among CP, CDG, Bidermann Tailored Clothing Inc. ("BTC"),  and PVH (the
"Share Purchase Agreement") were closed. Each of the parties to the Purchase and
Sale Agreement and the Share Purchase  Agreement  other than PVH and CDG is, and
prior to the closing CDG was, a wholly owned subsidiary of the Company.


                                       13
<PAGE>



     Pursuant to the Purchase  and Sale  Agreement,  (i) all of the  outstanding
shares  of  capital  stock  of  C.A.T.  Industrial  S.A.  de C.V.,  ("C.A.T")  a
corporation  organized under the laws of Honduras,  were sold to PVH by CP, AFS,
CDG, CDC and Holding,(ii)  PVH purchased all of CP's and AFS's right,  title and
interest in and to certain of the other assets (principally inventory) of CP and
AFS used  primarily  by CP and AFS in their ARROW label and private  label men's
and boys'  dress and sport  shirt  businesses  and their  Arrow  factory  outlet
operations  in the United  States  and (iii) PVH  purchased  all of CP  Canada's
right,  title and interest in and to ARROW label dress and sport shirt inventory
used in CP Canada's  United States "Career  Apparel"  business.  Pursuant to the
Share Purchase Agreement,  all of the outstanding shares of capital stock of CDG
were sold by CP and BTC to PVH.

     The aggregate  purchase price paid by PVH pursuant to the Purchase and Sale
Agreement and the Share Purchase  Agreement for the stock and assets referred to
above  was  approximately  $51.2  million  in cash plus the  assumption  of $2.1
million of debt  related to C.A.T.,  calculated  as set forth in, and subject to
adjustment pursuant to, Article 3 of each of the Purchase and Sale Agreement and
the Share Purchase Agreement.

     Pursuant  to  the  Purchase  and  Sale  Agreement,  the  Trademark  License
Agreement  ("PVH  Trademark  License  Agreement"),  dated July 24, 2000,  by and
between Cluett Peabody Resources Corporation ("CPR"), a Delaware corporation and
a wholly-owned subsidiary of the Company, CP and PVH was executed and delivered.
Pursuant to the PVH Trademark License Agreement,  CP granted to PVH an exclusive
license to use  trademarks  related to CP's  ARROW  clothing  line in the United
States and its territories  and possessions in connection with its  manufacture,
advertising,  marketing, promotion,  distribution, offer to sell and the sale of
men's and  boys'  Licensed  Product  in  certain  specified  channels  of trade,
including the Internet.  CP also granted to PVH the right to operate most of the
websites that use URLs that incorporate the ARROW trademarks.  The PVH Trademark
License Agreement  provides for a $5.0 million minimum guaranteed annual royalty
fee to be paid to CP, subject to cost of living adjustments. The initial term of
the license expires on June 30, 2007;  however,  PVH has the option to renew the
PVH Trademark License Agreement for two additional five-year terms,  provided it
meets certain conditions.

     The Company used $39.3  million of the net  proceeds  from the Purchase and
Sale  Agreement,  the Share  Purchase  Agreement and the PVH  Trademark  License
Agreement  (collectively referred to as the "Transactions") to repay outstanding
borrowings under its Senior Credit Facility and CP Canada's Credit Facility.

     On January 29, 2001, and pursuant to an Asset Purchase Agreement, CP Canada
sold certain assets (principally inventory, personal property, and manufacturing
equipment)  used primarily by CP Canada's ARROW labeled apparel bearing the name
or logo of other Corporate  entities or other  organizations  ("Career Apparel")
businesses in Canada,  apparel sold in specialty  golf stores and golf pro shops
("Golf Apparel") and FRIDAY'S BY CLUETT businesses in Canada,  the United States
and Puerto Rico, to The John Forsyth Shirt Company, LTD. ("Forsyth").

     Pursuant to a  Trademark  License  Agreement  ("Forsyth  Trademark  License
Agreement"),  dated as of January 29, 2001, CP and CP Canada  granted to Forsyth
an exclusive  license to use trademarks  related to the ARROW business in Canada
and the  FRIDAY'S  BY CLUETT and golf  apparel  business  in Canada,  the United
States and Puerto Rico. The Forsyth Trademark  License Agreement  provides for a
1.0 million Canadian dollar minimum  guaranteed annual royalty fee to be paid to
CP,  subject to the Consumer  Price Index.  The license  expires on December 31,
2005;  however,  Forsyth  has the option to renew for two  additional  five-year
terms, provided it meets certain conditions.

      The  aggregate  purchase  price  paid by  Forsyth  pursuant  to the  Asset
Purchase  Agreement was  approximately  $8.0 million,  and subject to adjustment
pursuant to Section 4 of the Asset Purchase Agreement.

      The Company used $5.4 million of the net proceeds from the Asset  Purchase
Agreement to repay outstanding borrowings under CP Canada's loan facility.

      The Company has  completed  the majority of the  disposition  of the shirt
group segment's  manufacturing  and distribution  operations.  Accordingly,  the
Company's  consolidated  financial  statements  reflect  the shirt  segment as a
discontinued operation. Consequently, the Company's remaining businesses include
primarily the Sock and Licensing Groups.

      The Company has reflected the trade assets,  trade  liabilities and credit
facility paid off, and  operations of the shirt segment as  discontinued  in the
accompanying  consolidated  financial  statements.  The net  assets of the shirt
segment  are  classified  as  net  assets  of  discontinued  operations  in  the
accompanying  balance sheet. As of December 31, 2001, the Company's  disposition
of the shirt  segment  is  complete,  except for real  estate  held for sale and
sublease.  These  remaining net assets consist  primarily of  manufacturing  and
distribution  facilities located in Austell,  Georgia,  and Kitchener,  Ontario,
that are carried at fair value (less costs to sell).


    Losses  from  operations  of the  discontinued  segment  for  1999 and 2000
(through  the  commitment  date of June 13,  2000) were $24.9  million  and $9.9
million,  respectively.  The Company incurred a loss on the disposition of $26.7
million  ($11.2  million in 2000 and $15.5  million in 2001).  The $26.7 million
loss on the disposition of discontinued segment consists of a $12.1 million loss
on  disposition  and $14.6 million for operating  losses during the remainder of
the phase-out period.  Of the $15.5 million loss on the disposition  incurred in
2001,  approximately  $10.7 million was non-cash  charges  related to long-lived
assets  sold,  abandoned  and held for  sale,  and  foreign  translation  losses
recognized.


                                       14
<PAGE>



YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

         The following table sets forth, for the periods indicated, statement of
operations data in dollars and as a percentage of net sales.  This data has been
restated to reflect  the  Company's  continuing  operations  including  the Sock
Group,  the Licensing Group and all other (Latin  America,  Apparel On-Line LLC,
Cluett American Receivables LLC, U.S. Retail division and unallocated  corporate
overhead charges) and excludes the Company's discontinued Shirt Group operation.
<TABLE>
<CAPTION>

                                                                       2000                                 2001
                                                                       ----                                 ----
                                                                                     (DOLLARS IN
                                                                                      MILLIONS)

              <S>                                               <C>        <C>                       <C>         <C>
               Net sales                                         $178.8     100.0%                    $189.1      100.0%
               Cost of sales                                      113.4      63.4                      125.4       66.3
                                                                  -----      ----                      -----       ----
               Gross profit                                        65.4      36.6                       63.7       33.7
               Selling, general and administrative expense         35.9      20.1                       35.7       18.9
               Restructuring and impairment charges                 0.4       0.2                        5.8        3.1
                                                                    ---       ---                        ---        ---
               Operating income                                    29.1      16.3                       22.2       11.7
               Interest expense, net                               27.7      15.5                       23.2       12.3
               Other expense, net                                   0.1       0.1                         --         --
               Income taxes                                         1.1       0.6                        0.9        0.5
                                                                    ---       ---                        ---        ---
               Income(loss) from continuing operations            $ 0.2       0.1%                    $( 1.9)     (1.1)%
                                                                  =====       ===                     == ===      ====

</TABLE>


         Net Sales.  Net sales in 2001 increased $10.3 million to $189.1 million
compared to $178.8  million in 2000.  Growth of $4.7  million in the Sock Group,
$3.7 million in the Licensing Group and $1.9 million in the U.S. Retail division
drove the increase.

         Revenue in the Sock Group  increased  $4.7 million to $172.3 million in
2001 from $167.6 million in 2000. Sales increases were volume driven, related to
the Sock Group's new entry into the Sports  Specialty market partially offset by
declines in the department store channel of  distribution.  The decreases in the
department  store channel were due to the overall  slowdown in the U.S.  economy
and customer inventory reduction  strategies.  It is uncertain at this time when
the slowdown in the economy and the adverse affect on the Company's  orders will
end.  Overall  sales to the top 10  customers  for 2001  (all of which are major
retailers)  accounted  for 69.1% of net sales as  compared  with  79.0% in 2000.
Although the Company's  strategy is to diversify the net sales base, the Company
believes that its  dependence on sales to its largest  customers  will continue.
Recently,   several  major  retailers  have  experienced  significant  financial
difficulties and some, including Kmart, have filed for protection from creditors
under applicable bankruptcy laws. At December 31, 2001, the net exposure related
to  Kmart as well as other  customer  balances  for  which  management  believes
collection is doubtful was included in the calculation of allowance for doubtful
accounts.  The bankruptcy  filing of Kmart may also  negatively  impact sales in
2002. The Company's bad debt expense for 2001 was approximately $450,000.

         Licensing Group revenue increased $3.7 million to $13.6 million in 2001
from $9.9 million in 2000. The growth was due to an additional $2.6 million from
a full  year  of PVH  license  fees  and  the  new  Canadian  trademark  license
agreement. Overall license fees to the top five licensees for 2001 accounted for
approximately  59.0% of  revenues as  compared  with 56.0% in 2000.  The company
believes that its revenue  concentration to its largest licensees will continue,
however it is mitigated by fees being  generated by various  product  categories
from different geographic locations throughout the world.

         The U.S. Retail division revenue increased $1.9 million to $2.9 million
in 2001 from $1.0  million  in 2000 due  primarily  to the  opening  of four new
locations during 2001.

         Gross  Profit.  Gross  profit in 2001  decreased  $1.7 million to $63.7
million  compared to $65.4 million in 2000.  The  Company's  gross profit margin
decreased to 33.7% in 2001 compared to 36.6% in 2000. Increases in the Licensing
Group's  revenue of $3.7  million,  which no related cost of sales was incurred,
and an increase of $857,000 of gross  profit at the U.S.  Retail  Division  were
offset by the Sock Group's decline in gross profit.


                                       15
<PAGE>


         The Sock Group's gross profit decrease of $6.3 million to $48.6 million
in 2001  compared  to $54.9  million in 2000 was due to several  factors.  While
sales  declines in the higher  margin  department  store  channel were offset by
increases in sales from the Sock Group's entry into the Sport Specialty  market;
this introduced  lower margin private label white athletic  products to the mix.
The department  stores sales  shortfall  resulted in excess  inventories  and an
unusually high level of closeout goods that were liquidated in an over-saturated
off-price channel.  Additionally,  the recessionary  economic  conditions caused
continued  pricing  pressures from the retailers in terms of sales markdowns and
allowances.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative ("SG&A") expenses for 2001 decreased $200,000 to $35.7 million in
2001  compared  with  $35.9  million  in  2000.  Increases  in  the  Sock  Group
($900,000),  Licensing Group ($500,000) and U.S. Retail division ($850,000) were
offset  by $1.0  million  of  rental  income  and a $1.6  million  reduction  in
professional  fees.  The  increase  in the  Sock  Group  was  due to  additional
distribution  expenses of $500,000 related to volume and additional  general and
administrative bad debt expenses of $450,000 due to the financial  deterioration
of one of the  Sock  Group's  significant  customers  (see  Critical  Accounting
Policies - Allowance for Doubtful Accounts). The increase in the Licensing Group
is primarily related to legal fees incurred in the protection of the trademarks.
The rental income was received  from the lease of a warehouse  and  distribution
center  formerly  used in  discontinued  operations.  The rental income is being
classified in continuing  operations to offset interest expense,  which is being
incurred on associated debt expected to be repaid upon the sale of the assets.

         Restructuring  and  Impairment  charges.  Restructuring  and impairment
charges  increased  $5.4 million to $5.8 million in 2001 compared to $442,000 in
2000. In 2001, the Company's Sock Group approved a  restructuring  plan to cease
operations at an owned  facility  located in Bally,  Pennsylvania  (see Critical
Accounting  Policies  -  Restructuring  and  Impairment  Charges  and  Note  5 -
Restructuring  and  Impairment  Charges).  The Sock  Group  recorded  impairment
charges of $2.5 million for the  write-down  of property,  plant and  equipment,
$3.0 million in special  termination  benefits for 229 employees,  which will be
paid  directly  from the pension plan (see Note 11- Employee  Benefit  Plan) and
other costs of approximately $300,00 directly associated with the restructuring.
There were no cash expenditures  related to the Sock Group's  restructuring plan
in 2001, and the Company anticipates cash restructuring  expenses of $591,100 to
be paid in 2002. In 2000, the Company's Sock Group  completed the closing of the
Pottstown,  Pennsylvania  facility in which it paid additional  facility closing
costs of  $210,000;  and special  termination  costs of  approximately  $232,000
relating to 73 employees were paid from the pension plan (see Note 11 - Employee
Benefit Plan).

         Operating  Income.  Operating  income  decreased  $6.9 million to $22.2
million  in 2001  from  $29.1  million  in 2000  primarily  due to $5.4  million
non-cash increase in the restructuring and impairment charges,  and, the factors
discussed above.

         Interest Expense, net. Interest expense decreased $4.5 million to $23.2
million in 2001, as compared to $27.7 million in 2000,  due to lower debt levels
(see Note 3 - Discontinued  Operations) and prevailing interest rates during the
2001 period.

         Other Expense, net.  Other expense decreased $100,000 in 2001.

          Income Taxes. The provision for income taxes remained  relatively flat
for the  year-to-year  comparison.  Income taxes are recorded net of a valuation
allowance (see Critical  Accounting Policies - Income Taxes and Note 10 - Income
Taxes) to provide for operating  loss  carryforwards  based on estimated  future
earnings and for temporary  differences  based on expected  timing of reversals.
Consequently,  income tax expense  represents  primarily certain state and local
taxes and foreign taxes (including foreign withholding taxes).

         Income  (loss)  from  Continuing  Operations.  Income  from  continuing
operations  decreased $2.1 million to a loss of $1.9 million in 2001 compared to
income  from  continuing  operations  of  $200,000  in 2000.  The  decrease  was
primarily  due to the  $5.4  million  non-cash  increase  in  restructuring  and
impairment  charges  partially  offset by the $4.5 million  decrease in interest
expense, and, the factors discussed above.







                                       16
<PAGE>



YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

         The following table sets forth, for the periods indicated, statement of
operations data in dollars and as a percentage of net sales.  This data has been
restated to reflect  the  Company's  continuing  operations  including  the Sock
Group,  the Licensing Group and all other (Latin  America,  Apparel On-Line LLC,
Cluett American Receivables LLC, U.S. Retail division and unallocated  corporate
overhead charges) and excludes the Company's discontinued Shirt Group operation.

<TABLE>
<CAPTION>
                                                                      1999                                   2000
                                                                      ----                                   ----
                                                                                    (DOLLARS
                                                                                        IN
                                                                                     MILLIONS)

              <S>                                              <C>        <C>                       <C>           <C>
               Net sales                                       $173.2     100.0%                    $178.8        100.0%
               Cost of sales                                    107.5      62.1                      113.4         63.4
                                                                -----      ----                      -----         ----
               Gross profit                                      65.7      37.9                       65.4         36.6
               Selling, general and administrative expense       31.4      18.1                       35.9         20.1
               Restructuring and impairment charges               0.1       0.1                        0.4          0.2
                                                                  ---       ---                        ---          ---
               Operating income                                  34.2      19.7                       29.1         16.3
               Interest expense, net                             25.7      14.8                       27.7         15.5
               Other expense, net                                 0.2       0.1                        0.1          0.1
               Bankruptcy reorganization credits                 (0.6)     (0.3)                        --           --
               Income taxes                                       1.1       0.6                        1.1          0.6
                                                                  ---       ---                        ---          ---
               Income from continuing operations                $ 7.8       4.5%                     $ 0.2          0.1%
                                                                =====       ===                      =====          ===
</TABLE>



         Net Sales.  Net sales in 2000  increased $5.6 million to $178.8 million
compared to $173.2  million in 1999.  Revenue in the Licensing  Group  increased
$2.9 million to $9.9 million in 2000 from $7.0  million in 1999.  This  increase
resulted  primarily from the $2.5 million PVH license revenue increase.  Overall
license fees to the top five  licensees  for 2000  accounted  for  approximately
56.0% of revenues as compared with 47.0% in 1999. The company  believes that its
revenue  concentration  to its largest  licensees will  continue,  however it is
mitigated by fees being generated by various  product  categories from different
geographic locations throughout the world. Net sales in the Sock Group increased
$1.5  million  to $167.6  million  in 2000 from  $166.1  million  in 1999 due to
internal  growth of units sold.  Overall  sales to the top 10 customers for 2000
(all of which are major  retailers)  accounted  for  approximately  79.0% of net
sales as compared with 78.0% in 1999.  The company  believes that its dependence
on sales to its largest customers will continue.

         Gross Profit.  Gross profit in 2000 decreased $300,000 to $65.4 million
compared to $65.7 million in 1999. The Company's  gross profit margin  decreased
to 36.6% in 2000  compared  to 37.9% in  1999.  The  increase  in the  Licensing
Group's net revenue of $2.9 million, as a result of the PVH license for which no
related cost of sales was  incurred,  is offset by the Sock Group's gross profit
decrease of $3.8 million to $54.9  million in 2000  compared to $58.7 million in
1999.  In  2000,  the  Sock  Group  experienced  less  favorable   manufacturing
variances, specifically,  absorption related to plant capacity utilization ($2.2
million) and  unfavorable  prices,  compared to internal  production  costs,  on
finished product purchased from contract suppliers ($1.3 million).

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  ("SG&A")  expenses  for 2000  increased  $4.5  million  to $35.9
million in 2000  compared  with $31.4  million in 1999.  The Sock  Group's  SG&A
expenses  increased  $2.9 million to $30.7 million in 2000 from $27.8 million in
1999.  The  increase  is due to  selling  expenses  of $1.2  million  related to
additional  headcount  expenses  for expanded  product  lines and an increase in
promotion  and publicity  costs of $1.6  million.  The increase in promotion and
publicity  costs  was  primarily  attributable  to the new  Gold  Toe  packaging
initiative,  launched  in 2000.  The  Licensing  Group SG&A  expenses  increased
$700,000 due to selling expenses  ($400,000) and marketing  expenses  ($400,000)
offset by a decrease in general and  administrative  expenses of  $100,000.  The
Retail Stores increased $500,000.



                                       17
<PAGE>



         Restructuring  and  Impairment  charges.  Restructuring  and impairment
charges in 2000 increased  $300,000 to $400,000 compared to $100,000 in 1999. In
1999,  the  Company's  Sock  Group  approved  a  restructuring   plan  to  cease
distribution  operations at an owned  facility  located in Bally,  Pennsylvania,
which  was  completed  in  1999,  and to close a leased  dye-house  facility  in
Pottstown, Pennsylvania in 2000. In 2000, the Company's Sock Group completed the
closing of the  Pottstown,  Pennsylvania  facility  in which it paid  additional
facility  closing  costs  of  $210,000;   and  special   termination   costs  of
approximately  $232,000 relating to 73 employees were paid from the pension plan
(see Note 11 - Employee Benefit Plan). In 1999, the Company's Sock Group accrued
severance of $276,000 and $90,000 of facility closing costs, which was offset by
the reversal of $271,000 related to facility closing costs previously accrued.

     Operating Income.  Operating income decreased $5.1 million to $29.1 million
in 2000 from $34.2 million in 1999, due to the factors discussed above.

         Interest Expense, net. Interest expense increased $2.0 million to $27.7
million  in 2000,  as  compared  to $25.7  million  in 1999,  due  primarily  to
prevailing interest rates during the 2000 period.

         Other Expense, net.  Other expense decreased $100,000 in 2000.

     Bankruptcy   Reorganization   Credits.   The  Company  had  no   Bankruptcy
reorganization  costs  or  credits  during  the  fiscal  year  2000.  Bankruptcy
reorganization credits were $573,000 in 1999.

         Income  Taxes.  The  provision  for income taxes  remained flat for the
year-to-year  comparison  ($1.1  million).  Income  taxes are  recorded net of a
valuation  allowance  to  provide  for  operating  loss  carryforwards  based on
estimated future earnings and for temporary differences based on expected timing
of reversals.  Consequently,  income tax expense  represents  primarily  certain
state and local taxes and foreign taxes (including foreign withholding taxes).

         Income from Continuing  Operations.  Income from continuing  operations
decreased $7.6 million to approximately $200,000 in 2000 compared to income from
continuing  operations  of $7.8  million in 1999,  due to the factors  discussed
above.


Liquidity and Capital Resources

         The  Company  broadly  defines  liquidity  as its  ability to  generate
sufficient  cash flow from  operating  activities  to meet its  obligations  and
commitments.  In addition,  liquidity includes the ability to obtain appropriate
debt and equity  financing  and to convert  into cash those  assets  that are no
longer required to meet existing strategic and financial objectives.  Therefore,
liquidity cannot be considered separately from capital resources that consist of
current or potentially  available funds for use in achieving long range business
objectives and meeting debt service commitments.

Cash Flows

     Cash and cash  equivalents  remained flat in a year over year comparison of
$1.3 million in 2001 and $1.3 million in 2000.  For the year ended  December 31,
2001 the  Company  had EBITDA As Defined  from  continuing  operations  of $34.3
million,  of  which  $2.8  million  was  non-cash  pension  ($2.6  million)  and
miscellaneous  income;  $20.9 million was paid for cash interest expense (net of
interest income from overnight investments) and financing fees; $4.3 million was
invested in capital expenditures; $3.0 million was used to fund working capital,
including accounts receivable, prepaid expenses, inventory and accounts payable;
$2.1 million was used to pay discontinued operations expenditures;  $1.0 million
was paid for cash taxes and net debt repayment was $.2 million.

      EBITDA,  as defined  ("EBITDA As Defined") is defined as operating  income
before depreciation and amortization,  interest expense, taxes and restructuring
and impairment charges.  EBITDA As Defined should not be considered in isolation
or as a substitute for net income,  certain cash flows from operating activities
and  other  income or cash flow  statement  data  prepared  in  accordance  with
accounting principles generally accepted in the United States of America or as a
measure of  profitability  or  liquidity.  EBITDA As Defined is not  necessarily
comparable  to  other  similarly  titled  captions  of  other  companies  due to
differences in methods of calculation.


                                       18
<PAGE>


Liquidity and Capital Resources

     The Company's  liquidity  needs arise  primarily  from debt service and the
funding of working  capital and capital  expenditures.  As of December 31, 2001,
the Company had outstanding  $234.0 million of debt consisting of $125.0 million
in senior  subordinated  notes  (including  the Parity  Notes),  a Senior Credit
Facility consisting of a $21.5 million term A loan, a $43.3 million term B loan,
$17.5 million  Tranche C loan and $26.7 million in revolving  credit  facilities
borrowings.  During 2001,  the Company had net  borrowings  in revolving  credit
facilities  of $5.5 million and  principal  payments on  long-term  debt of $5.7
million.

     Net availability under the revolver at December 31, 2001, was $24.0 million
(including $1.8 million of availability under the Tranche C loan) in addition to
cash and cash equivalents of $1.3 million.

     As of  December  31,  2001,  the  Company  had  the  following  contractual
obligations and commercial commitments for continuing operations (in thousands):

<TABLE>
<CAPTION>

                                                       Less Than       1 to 3        4 to 5
Contractual Obligations                 Total          1 Year          Years         Years        Over 5 Years
-----------------------                 -----          ------          -----         -----        ------------


<S>                                   <C>              <C>            <C>            <C>             <C>
Long-Term Debt                        $234,030         $  8,036       $100,994       $125,000          --
Operating Leases                        10,762            1,664          4,686          3,066        1,346
Licensing Obligations                    3,708            1,521          2,187             --           --
                                         -----            -----          -----          -----        -----
Total Contractual
Cash Obligations                      $248,500          $11,221       $107,867       $128,066       $1,346
                                      ========          =======       ========       ========       ======


Commercial Commitments
----------------------
Standby Letters of Credit             $  1,054          $ 1,054       $     --        $    --       $  --

</TABLE>

Debt Service

     Principal  and  interest  payments  under  the  Company's  debt  agreements
represent  significant  liquidity   requirements  for  the  Company.   Aggregate
principal payments on the Company's indebtedness are $8.0 million, $9.6 million,
$70.3  million  and $21.1  million,  for each of the years  2002  through  2005,
respectively, with $125.0 million thereafter through 2008.

     The  Company's  senior  subordinated  notes  mature  in  2008  and  require
semi-annual  interest  payments at an annual  rate of 10 1/8%.  The term A and B
loans mature in 2004 and 2005,  respectively,  and require  quarterly  principal
payments  and  quarterly  interest  payments  at  floating  rates based upon the
interest rate option  elected by the Company.  The revolving  credit  facilities
expire at May 2004, and require  quarterly  interest  payments at floating rates
based upon the interest  rate option  elected by the Company.  Borrowings  under
Tranche C Loan mature on May 18, 2004, and are  guaranteed by Vestar.  Cash paid
for interest in 2001 was $20.9 million. Interest expense for 2002 is expected to
be $22.2 million,  including $1.9 million of non-cash  amortization  of deferred
debt issuance costs.

Covenant Restrictions

     The Senior Credit Facility contains a number of covenants that, among other
things,  restrict  the ability of the Company and its  subsidiaries,  other than
pursuant  to  specified  exceptions,  to  dispose of  assets,  incur  additional
indebtedness,   incur  guarantee  obligations,  repay  other  indebtedness,  pay
dividends, create liens on assets, enter into leases, make investments, loans or
advances, make acquisitions,  engage in mergers or consolidations,  make capital
expenditures,  enter into sale and leaseback transactions,  change the nature of
their  business  or  engage  in  certain   transactions  with  subsidiaries  and
affiliates and otherwise restrict corporate activities.  In addition,  under the
Senior  Credit  Facility  the  Company  is  required  to comply  with  specified
financial ratios and tests, including minimum fixed charge coverage and interest
coverage ratios and maximum leverage  ratios,  including a senior leverage ratio
and a total leverage ratio and a minimum EBITDA test, each of which is tested as
of the last day of each fiscal quarter of the Company and its subsidiaries.  The
amendments in May 1998,  December 1998, March 1999,  September 1999, March 2000,
June 2000, March 2001 revised the original covenants. On April 12, 2002,

                                       19
<PAGE>


the Company obtained waivers of certain  financial  covenants under the facility
as of  December  31,  2001,  and the  facility  was  amended  to adjust  certain
financial  ratios and  tests,  increase  the  applicable  interest  rates on the
facility,  reduce the  Tranche C loan  commitment  from  $19.2  million to $17.5
million and extend the Tranche C loan due date to May 18, 2004.

     The Senior Credit Facility  includes a cross-default  provision which makes
it a default  under  the  Senior  Credit  Facility  if,  with  respect  to other
indebtedness  in excess of $2.0  million of  Holdings  and the  Company  and its
subsidiaries,  any such  party  defaults  in any  payment  with  respect to such
indebtedness  or defaults  in a manner  that  permits  such  indebtedness  to be
accelerated or such indebtedness is in fact accelerated.

     The consequences of a default under the Senior Credit Facility are that the
lender may terminate the commitments, accelerate the Company's obligations under
the Senior Credit Facility,  declaring them immediately due and payable, require
the credit  parties to  establish  a cash  collateral  account as  security  for
outstanding letters of credit and enforce any and all other rights and interests
existing under the credit documents.


Capital Expenditures

     Capital expenditures during 2001 were $4.3 million and related primarily to
general improvements to the Company's  manufacturing  facilities.  Total capital
spending  for 2002 is  expected  to be in the $5.0  million  range  and  relates
primarily to general  improvements  to the Company's  distribution  facility and
investments in software.

Financing Sources and Cash Flows

     At December 31, 2001,  the Company had $1.3 million in cash and  additional
availability of $24.0 million  (including $1.8 million of availability under the
Tranche C loan) under the  revolving  credit  facilities  included in the Senior
Credit  facility,  after  consideration  of $1.1  million of standby  letters of
credit.

    The Company has a substantial amount of indebtedness.  The Company relies on
internally generated funds and, to the extent necessary, on borrowings under the
revolving credit  facilities to meet its liquidity needs. The Company's  ability
to incur  additional  indebtedness  is  limited  under  its  existing  borrowing
arrangements.

    The Company believes that cash on hand,  together with cash flow anticipated
to be generated from  operations,  short-term  borrowings  for seasonal  working
capital,  and permitted  borrowings  will be sufficient to enable the Company to
satisfy  anticipated cash  requirements  for operating,  investing and financing
activities, including debt service, for the next twelve months.

     On January 7, 2002, the Company entered into a joint venture agreement with
Administradora  Gaco, S.A. de C.V. and Inversiones Gaco, S.A. de C.V.  investing
$2.6 million for a 50% share of  outstanding  capital  stock.  The joint venture
operation  is a leading  manufacturer  and  distributor  of men's,  women's  and
children's  socks in Mexico with the largest  Mexican brand,  CANNON.  By moving
labor-intensive  finishing  operations to a lower cost  environment,  management
believes it will recognize significant annual cost savings.

Income Taxes

     See Note 10 -  Income  Taxes of the  Notes  to the  Consolidated  Financial
Statements  included on pages F-7  through  F-28 of the  Consolidated  Financial
Statements.

New Accounting Pronouncements

     See Note 2 - Significant Accounting Policies,  "Recently Adopted Accounting
Standards"  and "Recently  Issued  Accounting  Standards Not Yet Adopted" of the
Notes to the  Consolidated  Financial  Statements  included on pages F-7 through
F-28 of the Consolidated Financial Statements.


                                       20
<PAGE>


Inflation

     General CPI  increased  1.6% during  fiscal 2001 and apparel CPI,  which is
indicative  of our  inventory,  decreased  3.2%.  We  make  no  assurances  that
continued  inflation or deflation will not have a material adverse effect on our
sales and gross profit dollars.

Cautionary Statement Regarding Forward-Looking Statements

         This  Annual  Report  on Form 10-K  contains  certain  statements  that
describe the Company's  beliefs  concerning  future business  conditions and the
outlook for the Company based on currently available information.  The preceding
Management's  Discussion  and  Analysis  contains   forward-looking   statements
regarding the Company's  performance,  liquidity and the adequacy of its capital
resources.  These forward looking statements are subject to risks, uncertainties
and other factors which could cause the Company's actual results, performance or
achievement to differ  materially  from those  expressed in, or implied by these
statements.  These risks,  uncertainties  and other factors  include but are not
limited to, the following: (i) the financial strength of the retail industry and
the level of  consumer  spending  for  apparel,  (ii) the  Company's  ability to
develop,  market and sell its products,  (iii) increased  competition from other
manufacturers  of socks,  (iv)  general  economic  conditions,  (v)  hiring  and
retaining  effective team members,  and (vi) sourcing  merchandise from domestic
and international vendors.  Therefore, while management believes that there is a
reasonable basis for the forward-looking  statements,  undue reliance should not
be placed on those statements.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market Risk Factors

     The Company has market risk  exposure  from  changes in interest  rates and
foreign  currency  exchange  rates.  The Company  operates under a senior credit
facility at variable interest rates.  Interest expense is primarily  affected by
the  general  level of U.S.  interest  rates,  LIBOR and  European  base  rates.
Currently,  the Company does not engage in any  derivative  type  instruments in
order to hedge  against  interest  rates  and  foreign  currency  exchange  rate
fluctuations.  However,  the  Company  feels it is  limited in its  exposure  to
foreign  currency  exchange  rate changes as inventory  purchase  contracts  are
denominated in U.S. Dollars.

Floating Interest Rate Risk
     In order to  assess  the  impact of  changes  in  interest  rates on future
earnings  and  cash  flow,  the  Company  assumed  a  1.0%  (100  basis  points)
unfavorable  shift in the  underlying  interest  rate would result in additional
interest expense of $1.1 million.

Fixed Interest Rate Risk
     The fair value of long-term  fixed  interest  rate debt and fixed  interest
rate preferred stock is also subject to interest rate risk. Generally,  the fair
value of fixed interest rate debt and preferred  stock will increase as interest
rates fall and decrease as interest rates rise. A  hypothetical  100 basis point
increase in the prevailing  interest rates at December 31, 2001, would result in
a  decrease  in fair  value of total  long-term  debt and  preferred  stock,  by
approximately $1.3 million.



                                       21
<PAGE>






Item 8. Consolidated Financial Statements and Supplementary Data


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



PAGE
---------
Report of Independent Auditors                                              F-2

Consolidated Financial Statements:

    Consolidated Balance Sheets as of December 31, 2000 and 2001            F-3

    Consolidated Statements of Operations for the years ended
    December 31, 1999, 2000 and 2001                                        F-4

    Consolidated Statements of Stockholder's Deficit for the years
    ended December 31, 1999, 2000 and 2001                                  F-5

    Consolidated Statements of Cash Flows for the years ended
    December 31, 1999, 2000 and 2001                                        F-6

    Notes to Consolidated Financial Statements                              F-7

Financial Statement Schedule:

    Schedule II - Valuation and Qualifying Accounts for each of
    the three years in period ended December 31, 2001                        41



All other  schedules are omitted because they are not applicable or the required
information  is provided in the  Consolidated  Financial  Statements  or related
notes thereto.










                                       F-1

<PAGE>










                         REPORT OF INDEPENDENT AUDITORS'


Board of Directors
Cluett American Corp. and Subsidiaries
New York, New York

We have audited the accompanying  consolidated balance sheets of Cluett American
Corp. and  subsidiaries  (the  "Company"),  a wholly owned  subsidiary of Cluett
American  Investment  Corp.,  as of December 31,  2000and 2001,  and the related
consolidated statements of operations, stockholder's deficit, and cash flows for
each of the three years in the period ended  December 31, 2001.  Our audits also
included the  financial  statement  schedule  listed in the Index at Item 14(a).
These   financial   statements   and  financial   statement   schedule  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial  statements and financial statement schedule based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial  position  of  Cluett  American  Corp.  and
subsidiaries  as of  December  31,  2000  and  2001,  and the  results  of their
operations  and their cash flows for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States of America.  Also,
in our opinion,  such financial statement schedule,  when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.


/s/ Deloitte & Touche LLP
Raleigh, North Carolina
April 12, 2002











                                       F-2


<PAGE>







<TABLE>
<CAPTION>


                                               CLUETT AMERICAN CORP. AND SUBSIDIARIES
                                                     CONSOLIDATED BALANCE SHEETS

                                                                                                DECEMBER 31,
                                                                                           2000               2001

                                                                                           (DOLLARS IN  THOUSANDS)
<S>                                                                                  <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                           $    1,268          $  1,299
  Accounts receivable, net                                                                33,442            29,084
   Inventories, net                                                                       30,434            34,248
   Prepaid expenses and other current assets                                               1,176             1,723
   Net assets of discontinued operations                                                  19,693             7,556
                                                                                          ------             -----
Total current assets                                                                      86,013            73,910

Property, plant and equipment, net                                                        26,930            22,898
Deferred financing costs                                                                   9,966             8,307
Pension assets                                                                            27,545            27,203
Other noncurrent assets                                                                      946               944
                                                                                             ---               ---
Total assets                                                                           $ 151,400          $133,262
                                                                                       =========          ========


LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
  Accounts payable and accrued expenses                                               $   14,012         $  14,011
  Accrued interest payable                                                                 5,362             6,031
  Restructuring reserve and obligations related to discontinued operations                 5,912             3,914
  Short-term debt and current portion of long-term debt                                    6,258             8,036
  Income taxes payable                                                                     1,941             1,582
                                                                                           -----             -----
Total current liabilities                                                                 33,485            33,574

Long-term debt                                                                           227,931           225,994
Other noncurrent liabilities                                                                  59                59
Redeemable preferred stock dividends payable                                                 718               809

Commitments and Contingencies

Senior Exchangeable Preferred Stock Due 2010, cumulative, $.01 par value:
authorized 4,950,000 shares, issued and outstanding 676,379 shares in 2000 and
763,569shares in 2001 (liquidation preference of $67,638 in 2000 and $76,357
in 2001)                                                                                  66,214            75,096
Stockholder's deficit:
  Common stock, $1 par value: authorized, issued and outstanding 1,000 shares                  1                 1
  Additional paid-in capital                                                             127,135           118,162
  Accumulated deficit                                                                   (303,039)         (320,433)
  Accumulated other comprehensive loss                                                    (1,104)               --
                                                                                          ------            ------
Total stockholder's deficit                                                             (177,007)         (202,270)
                                                                                        --------          --------
Total liabilities and stockholder's deficit                                          $   151,400        $  133,262
                                                                                     ===========        ==========

</TABLE>

                             See accompanying notes.


                                       F-3

<PAGE>



<TABLE>
<CAPTION>

                                               CLUETT AMERICAN CORP. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                                                 YEAR ENDED DECEMBER 31,
                                                                                         1999              2000              2001

                                                                                                   (DOLLARS IN THOUSANDS)

<S>                                                                                   <C>                <C>               <C>
Net sales                                                                             $ 173,209          $ 178,771         $189,062
Cost of goods sold                                                                      107,445            113,375          125,349
                                                                                        -------            -------          -------
Gross profit                                                                             65,764             65,396           63,713

Selling, general and administrative expenses                                             31,489             35,855           35,715
Restructuring and impairment charges                                                         95                442            5,813
                                                                                             --                ---            -----
Operating income                                                                         34,180             29,099           22,185

Interest expense, net                                                                    25,700             27,721           23,202
Other expense, net                                                                          184                127               --
                                                                                            ---                ---              ---
Income (loss) from continuing operations before bankruptcy  reorganization
credits and income taxes                                                                  8,296              1,251           (1,017)

Bankruptcy reorganization credits                                                          (573)                --               --
                                                                                           ----               ----             ----
Income (loss) from continuing operations before income taxes                              8,869              1,251           (1,017)

Income taxes                                                                              1,051              1,094              882
                                                                                          -----              -----              ---
Income (loss) from continuing operations                                                  7,818                157           (1,899)

Discontinued operations:
      Loss from operations of discontinued segment                                      (24,931)            (9,937)              --
      Loss on disposition of business segment, including provision of $7.6
      million for phase-out period operating losses in 2001 and $7.0 in 2000.                --            (11,210)         (15,495)
                                                                                        -------            -------          -------
Net loss                                                                               $(17,113)          $(20,990)        $(17,394)
                                                                                       ========           ========         ========
</TABLE>


                            See accompanying notes.

                                       F-4

<PAGE>


<TABLE>
<CAPTION>

                                               CLUETT AMERICAN CORP. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
                                                       (DOLLARS IN THOUSANDS)



                                               COMMON STOCK            ADDITIONAL                           OTHER
                                                                        PAID-IN        ACCUMULATED       COMPREHENSIVE
                                                 SHARES      AMOUNT     CAPITAL          DEFICIT             LOSS           TOTAL

<S>                                               <C>         <C>      <C>             <C>                 <C>       <C>
Balance at January 1, 1999                         1,000        $1       $116,920        $(264,936)        $(1,033)    $(149,048)

Net loss                                                                                   (17,113)                      (17,113)

Foreign currency translation adjustment                                                        752                           752
                                                                                                                             ---
Comprehensive loss                                                                                                       (16,361)
                                                                                                                         -------
Capital contribution from Parent                                           25,255                                         25,255

Accretion of dividend on senior exchangeable
   preferred stock                                                         (6,920)                                        (6,920)

Accretion of fees on senior exchangeable
   preferred stock                                                           (154)                                          (154)
                                                                             ----                                           ----
Balance at December 31, 1999                       1,000         1        135,101         (282,049)           (281)     (147,228)

Net loss                                                                                   (20,990)                      (20,990)

Foreign currency translation adjustment                                                                       (823)         (823)
                                                                                                              ----          ----
Comprehensive loss                                                                                                       (21,813)
                                                                                                                         -------

Accretion of dividend on senior exchangeable
  preferred stock                                                          (7,812)                                        (7,812)

Accretion of fees on senior exchangeable
  preferred stock                                                            (154)                                          (154)
                                                                             ----                                           ----
Balance at December 31, 2000                       1,000         1        127,135         (303,039)          (1,104)    (177,007)

Net loss                                                                                   (17,394)                      (17,394)

Foreign currency translation adjustment                                                                         (228)       (228)

Reclassification for translation adjustment
recognized  related to loss on discontinued                                                                    1,332       1,332
operations

Comprehensive loss                                                                                                       (16,290)
                                                                                                                         -------

Accretion of dividend on senior exchangeable
  preferred stock                                                          (8,818)                                        (8,818)

Accretion of fees on senior exchangeable
preferred stock                                                              (155)                                          (155)
                                                                             ----                                           ----
Balance at December 31, 2001                        1,000       $1       $118,162        $(320,433)          $  --     $(202,270)
                                                    =====       ==       ========        =========           =====     =========
</TABLE>



                             See accompanying notes.


                                      F-5


<PAGE>

<TABLE>
<CAPTION>

                                               CLUETT AMERICAN CORP. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                                     YEAR ENDED DECEMBER 31,

                                                                                                  1999          2000           2001

                                                                                                        (DOLLARS IN THOUSANDS)

OPERATING ACTIVITIES

<S>                                                                                            <C>           <C>           <C>
Net loss .................................................................................     $(17,113)     $(20,990)     $(17,394)
Adjustments  to  reconcile  net loss to net cash  and cash  equivalents  used in
operating activities:
  Impairments of property, plant and equipment ...........................................          (18)           54         2,505
  Write-down of assets related to discontinued operations ................................         --           2,168         9,282
  Depreciation ...........................................................................        5,998         6,331         6,287
  Deferred finance amortization ..........................................................        1,592         1,742         1,795
  (Gain)loss on sale of property, plant and equipment ....................................         (201)           74             8

Changes in operating assets and liabilities, excluding the
  effect of acquisition:
  Accounts receivable ....................................................................       (4,124)       (4,072)        1,391
  Inventories ............................................................................        1,454        (5,514)       (3,814)
  Prepaid expenses and other current assets ..............................................         (239)          819          (547)
  Pension and other noncurrent assets ....................................................       (2,030)        4,697           343
  Accounts payable and accrued expenses ..................................................         (246)       (1,202)          669
  Restructuring reserve and obligations related to discontinued operations ...............         (482)        5,491        (1,998)
  Income taxes payable ...................................................................          495           (28)         (359)
  Other liabilities ......................................................................         (233)          114          --
  Effect of changes in foreign currency ..................................................          745          (823)         (228)
                                                                                                    ---          ----          ----
Net cash and cash equivalents used in operating
  activities of continuing operations ....................................................      (14,402)      (11,139)       (2,060)

INVESTING ACTIVITIES
Purchase of property, plant and equipment ................................................       (6,839)       (3,827)       (4,294)
Proceeds on disposal of property, plant and equipment ....................................        1,263            34            38
                                                                                                  -----            --            --
Net cash and cash equivalents used in investing activities of continuing operations ......       (5,576)       (3,793)       (4,256)

FINANCING ACTIVITIES
Net borrowings (repayments) under line-of-credit agreement ...............................       24,100          (204)        5,500
Proceeds from issuance of long term debt .................................................         --          28,200
Principal payments on long term debt .....................................................       (3,600)      (56,357)       (5,658)
Financing costs paid .....................................................................         --            (866)         (137)
                                                                                                   ----          ----          ----
Net cash and cash equivalents (used in) provided by financing
  activities of continuing operations ....................................................       20,500       (29,227)         (295)
                                                                                                 ------       -------          ----

Cash provided by discontinued operations .................................................        3,952        38,379         6,642
                                                                                                  -----        ------         -----
Net change in cash and cash equivalents ..................................................        4,474        (5,780)           31
Cash and cash equivalents at beginning of year ...........................................        2,574         7,048         1,268
                                                                                                  -----         -----         -----
Cash and cash equivalents at end of year .................................................     $  7,048      $  1,268      $  1,299
                                                                                               ========      ========      ========

SUPPLEMENTAL DISCLOSURES

Cash paid during the year:
  Interest ...............................................................................     $ 23,341      $ 24,924      $ 20,889
  Income taxes ...........................................................................     $    648      $  1,196      $  1,034

</TABLE>


                             See accompanying notes.

                                       F-6
<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Background

     Cluett  American Corp. and its  subsidiaries  (the  "Company") are a wholly
owned subsidiary of Cluett American  Investment Corp  ("Holdings").  The Company
was organized in 1982 and primarily  designs,  manufactures and markets socks in
the United  States,  as well as licenses its  proprietary  trademarks  and trade
names  domestically  and  internationally.   Formerly,   the  Company  designed,
manufactured  and marketed dress shirts and men's and women's  sportswear in the
United States and Canada (see Note 3 - Discontinued Operations).

     The Company filed  voluntary  petitions for relief under the  provisions of
Chapter 11 of the Federal  Bankruptcy Code on July 17, 1995. The Company emerged
from  bankruptcy on May 18, 1998. As part of the approved  reorganization  plan,
Vestar  Capital  Partners III, L.P.  ("Vestar")  and  co-investors  made a $61.3
million equity investment and Alvarez & Marsal, Inc. ("A&M") and certain members
of management made a $6.7 million equity investment in Holdings.

     The Company and Holdings used the equity  investments in  conjunction  with
borrowings under a new $160.0 million senior credit facility,  $112.0 million in
proceeds from the Company's  issuance of Senior  Subordinated Notes due 2008 and
$48.1 million in net proceeds from the issuance of Senior Exchangeable Preferred
Stock due 2010, to complete its recapitalization (the "Recapitalization")  under
which all of Holdings' and the Company's existing  pre-petition  obligations and
all borrowings under the Company's  debtor-in-possession  facility, were paid in
full. In addition, the Company issued $13.0 million in Senior Subordinated Notes
due 2008 (the "Parity Notes") to Holdings  shareholders  that were  shareholders
prior  to the  bankruptcy  as  part of the  Recapitalization.  These  notes  are
identical in, and rank in parity with, the $112.0  million  Senior  Subordinated
Notes due 2008.  As of December 31, 2001,  approximately  $2.0 million of Parity
Notes had been converted to Senior Subordinated Notes.

     During fiscal 2001, the Company substantially  completed the disposition of
the Shirt Group (see Note 3- Discontinued Operations).  The remaining net assets
of  discontinued  operations  consist  primarily of a  distribution  facility in
Austell,  Georgia  that is held for sale.  Fair  value  (less  costs to sell) is
approximately  $7.0  million.  The  proceeds  will be used to repay  outstanding
borrowings under the Company's Senior Credit Facility.

     On October 30, 2001, the Company announced restructuring plans for the Sock
Group to optimize plant capacity and maximize  supply chain  opportunities.  The
Company will  phase-out  production  from its Bally,  Pennsylvania  facility and
relocate  its  knitting  and  finishing  operations  to other  company-owned  or
contract facilities.  Effective December 31, 2001, Bally's finishing operations,
which represent  approximately 10 percent of total company volume, were absorbed
into available contract finishing  capacity in Mexico.  Effective  September 28,
2002, Bally's knitting production,  which represents approximately 20 percent of
total company volume, will be moved to the company's Burlington,  North Carolina
facility.  This plan will provide a reduced cost  structure  that is competitive
within the global market.  Management  believes that total sales volume will not
change as a result of these actions.  In conjunction with this restructuring the
Company recorded special termination benefits of $3.0 million for 229 employees,
which will be paid from the pension  plan,  impairment  of fixed  assets of $2.5
million and direct personnel costs of approximately $300,000 related to exit the
facility.

     In  connection  with this  restructuring  plan and on January 7, 2002,  the
Company entered into a joint venture agreement with Administradora Gaco, S.A. de
C.V. and Inversiones  Gaco, S.A. de C.V.  investing $2.6 million for a 50% share
of  outstanding  capital  stock.  The  joint  venture  operation  is  a  leading
manufacturer  and distributor of men's,  women's and children's  socks in Mexico
with the largest  Mexican brand,  CANNON.  By moving  labor-intensive  finishing
operations to a lower cost  environment,  management  believes it will recognize
significant annual cost savings.

                                       F-7

<PAGE>

2. Significant Accounting Policies

Principles of Consolidation

     The consolidated  financial  statements include all subsidiary companies of
the Company.  All significant  intercompany  balances and transactions have been
eliminated in consolidation.

Cash Equivalents

    The Company  considers all highly liquid  investments with maturity of three
months or less when purchased to be cash equivalents.

Accounts Receivable

    The Company's  principal  customers  are retail stores and chains  primarily
located in the United  States.  Royalty  and  licensing  income is earned from a
worldwide base of licensees  engaged in the sale and manufacture of textiles and
apparel.   The  Company  generally  does  not  require  collateral  on  accounts
receivable.

Inventory Valuation

    Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories  are  stated  net of an  allowance  for  obsolete  and  slow  moving
inventory.

Property, Plant and Equipment

    Property,  plant  and  equipment  are  stated  at cost  and are  depreciated
predominantly by the straight-line method over the estimated useful lives of the
assets as follows:


         Buildings........................... 32-39 years
         Site improvements................... 15-39 years
         Machinery, equipment and other......  3-10 years
         Leasehold improvements..............  The lesser of the lease term or
                                               estimated useful life

     Idle  property is recorded at the lower of cost or fair value less costs to
sell.

Impairment

     The  Company  reviews   long-lived  assets  and  certain   intangibles  for
impairment  when events or changes in  circumstances  indicate that the carrying
amount  of these  assets  may not be  recoverable.  Any  impairment  losses  are
reported in the period in which the recognition criteria are first applied based
on the fair value of the  assets.  Assets held for sale are carried at the lower
of carrying amount or fair value, less estimated costs to sell such assets.  The
Company discontinues depreciating or amortizing assets held for sale at the time
the decision to sell the assets is made.

Deferred Financing Costs

     Deferred  financing  costs  represent  expenses  related to issuance of the
Company's senior credit facilities and Senior  Subordinated  Notes.  These costs
are being amortized to interest expense using the effective interest method over
the lives of the related debt agreements.

                                       F-8
<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Significant Accounting Policies (Continued)

Income Taxes

    Deferred  income  taxes are  provided at the enacted  marginal  rates on the
differences  between the financial  statement and income tax basis of assets and
liabilities.  Valuation  allowances  are  established  when  necessary to reduce
deferred tax assets to the amounts expected to be realized.  The Company files a
consolidated federal income tax return with Holdings and separate,  consolidated
or unitary  state and local  income tax  returns in  accordance  with the filing
requirements  and options  applicable  in the  jurisdiction  in which income tax
returns are  required.  Income tax expense for the Company is  presented  in the
accompanying  consolidated  financial statements calculated on a separate return
basis.

Use of Estimates

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities,  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could be different from
those estimates.

Revenue Recognition

     The Company recognizes revenue when the apparel is shipped.  At this point,
persuasive  evidence of a sale arrangement  exists,  delivery has occurred,  the
Company's  price to the  buyer is fixed  and  collectibility  of the  associated
receivable is reasonably  assured.  Customer  returns and  allowances  have been
provided based on estimated  returns.  Fees from the licensing of trademarks and
processes  relating to the textile and apparel  industry are recognized  ratably
over the period of time for fixed license fees and based on estimated  sales for
variable  royalty fees. The Company  recognized  licensing fees of $7.0 million,
$9.9 million and $13.6 million in 1999, 2000 and 2001,  respectively,  which are
included in net sales in the accompanying consolidated statements of operations.

Interest Expense, net

     The Company  includes  interest  income from  overnight  investment  in net
interest expense. The Company recorded interest income of $244,000, $128,000 and
$151,000 in 1999, 2000 and 2001 respectively.

Recently Adopted Accounting Standards

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  No.  133,   "Accounting   For  Derivative   Instruments  and  Hedging
Activities"  ("SFAS No.  133").  This  statement,  as amended  and  interpreted,
establishes  accounting  and  reporting  standards  for  derivative  instruments
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either assets or liabilities  in the balance sheet  measured at fair value.  The
Company  adopted SFAS No. 133 on January 1, 2001. As the Company has not entered
into any derivative instruments or hedging activities,  the adoption of SFAS No.
133 did not have an impact on the  Company's  results of operations or financial
position.

     In June 2001, FASB issued SFAS No. 141, "Business  Combinations" ("SFAS No.
141"),  which  establishes  accounting and reporting  standards for all business
combinations  initiated after June 30, 2001, and establishes  specific  criteria
for the recognition of intangible assets separately from goodwill.  SFAS No. 141
eliminates  the  pooling-of-interest  method  of  accounting  and  requires  all
acquisitions  consummated subsequent to June 30, 2001, to be accounted for under
the purchase method. The adoption of SFAS No. 141 did not have a material impact
on the Company's results of operations and financial condition.
                                       F-9
<PAGE>

                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Significant Accounting Policies (Continued)

Recently Issued Accounting Standards Not Yet Adopted

     In June 2001, the FASB issued SFAS No. 142,  "Goodwill and Other Intangible
Assets" ("SFAS No. 142"), which addresses financial accounting and reporting for
acquired  goodwill  and  other  intangible  assets.   SFAS  No.  142  eliminates
amortization of goodwill and other intangible assets that are determined to have
an indefinite  useful life and instead requires an impairment only approach.  At
adoption,  any goodwill  impairment  loss will be recognized  as the  cumulative
effect of a change in accounting principal.  Subsequently, any impairment losses
will be  recognized  as a component of income from  operations.  SFAS No. 142 is
required to be adopted on January 1, 2002. The adoption of SFAS No. 142 will not
have a material  impact on the  Company's  results of  operations  and financial
condition.

     In  August  2001,  the FASB  issued  SFAS No.  143,  "Accounting  For Asset
Retirement Obligation" ("SFAS No. 143"), which requires recording the fair value
of a liability for an asset  retirement  obligation in the period in which it is
incurred,  and a  corresponding  increase in the  carrying  value of the related
long-lived asset. Over time, the liability is accreted to its present value each
period,  and the  capitalized  cost is  depreciated  over the useful life of the
related asset.  Upon  settlement of the liability,  it is either settled for its
recorded amount or a gain or loss upon  settlement is recorded.  SFAS No. 143 is
effective for the Company's  fiscal year ended December 31, 2003. The Company is
currently assessing,  but has not yet determined,  the impact of SFAS No. 143 on
its financial position and results of operations.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment for Disposal of Long-Lived  Assets" ("SFAS No. 144"), which addresses
financial  accounting and reporting for the impairment or disposal of long-lived
assets.  This Statement  supersedes FASB Statement No. 121,  "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of",
and the  accounting and reporting  provisions of APB Opinion No. 30,  "Reporting
the  Results of  Operations-Reporting  the Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions",  for the  disposal  of a segment  of a  business  (as  previously
defined in that Opinion).  The Company is currently  assessing,  but has not yet
determined,  the impact of SFAS No. 144 on its financial position and results of
operations.

3. Discontinued Operations

     On June 13, 2000, Phillips-Van Heusen Corporation, ("PVH"), and the Company
announced an agreement (the  "Agreement") for PVH to license the ARROW brand for
men's and boys' dress shirts, sports shirts (including knit, woven and all forms
of  fleece),  pants,  shorts and  sweaters  ("Licensed  Product")  in the United
States. In addition,  PVH and the Company agreed in principle for PVH to acquire
the stock of Cluett Designer Group, Inc. ("CDG"),  the licensee for Kenneth Cole
dress shirts. In conjunction with the Agreement,  the Company approved a plan to
discontinue the Company's shirt group segment's  manufacturing  and distribution
operations.

     On July 24, 2000, the transactions contemplated by the Agreement, including
the  Purchase and Sale  Agreement  among  Cluett,  Peabody & Co.,  Inc.  ("CP"),
Cluett,  Peabody Canada, Inc. ("CP Canada"),  Arrow Factory Stores Inc. ("AFS"),
CDG,  Consumer  Direct  Corporation  ("CDC"),   Cluett,  Peabody  Holding  Corp.
("Holding"), and PVH, (the "Purchase and Sale Agreement") and the Share Purchase
Agreement among CP, CDG, Bidermann Tailored Clothing Inc. ("BTC"),  and PVH (the
"Share Purchase Agreement") were closed. Each of the parties to the Purchase and
Sale Agreement and the Share Purchase  Agreement  other than PVH and CDG is, and
prior to the closing CDG was, a wholly owned subsidiary of the Company.


                                      F-10


<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Discontinued Operations (Continued)

     Pursuant to the Purchase  and Sale  Agreement,  (i) all of the  outstanding
shares  of  capital  stock  of  C.A.T.  Industrial  S.A.  de C.V.,  ("C.A.T")  a
corporation  organized under the laws of Honduras,  were sold to PVH by CP, AFS,
CDG, CDC and Holding,  (ii) PVH purchased all of CP's and AFS's right, title and
interest in and to certain of the other assets (principally inventory) of CP and
AFS used  primarily  by CP and AFS in their ARROW label and private  label men's
and boys'  dress and sport  shirt  businesses  and their  Arrow  factory  outlet
operations  in the United  States  and (iii) PVH  purchased  all of CP  Canada's
right,  title and interest in and to ARROW label dress and sport shirt inventory
used in CP Canada's  United States "Career  Apparel"  business.  Pursuant to the
Share Purchase Agreement,  all of the outstanding shares of capital stock of CDG
were sold by CP and BTC to PVH.

     The aggregate  purchase price paid by PVH pursuant to the Purchase and Sale
Agreement and the Share Purchase  Agreement for the stock and assets referred to
above  was  approximately  $51.2  million  in cash plus the  assumption  of $2.1
million of debt  related to C.A.T.,  calculated  as set forth in, and subject to
adjustment pursuant to, Article 3 of each of the Purchase and Sale Agreement and
the Share Purchase Agreement.

     Pursuant  to  the  Purchase  and  Sale  Agreement,  the  Trademark  License
Agreement  ("PVH  Trademark  License  Agreement"),  dated July 24, 2000,  by and
between Cluett Peabody Resources Corporation ("CPR"), a Delaware corporation and
a wholly-owned subsidiary of the Company, CP and PVH was executed and delivered.
Pursuant to the PVH Trademark License Agreement,  CP granted to PVH an exclusive
license to use  trademarks  related to CP's  ARROW  clothing  line in the United
States and its territories  and possessions in connection with its  manufacture,
advertising,  marketing, promotion,  distribution, offer to sell and the sale of
men's and  boys'  Licensed  Product  in  certain  specified  channels  of trade,
including the Internet.  CP also granted to PVH the right to operate most of the
websites that use URLs that incorporate the ARROW trademarks.  The PVH Trademark
License Agreement  provides for a $5.0 million minimum guaranteed annual royalty
fee to be paid to CP, subject to cost of living adjustments. The initial term of
the license expires on June 30, 2007;  however,  PVH has the option to renew the
PVH Trademark License Agreement for two additional five-year terms,  provided it
meets certain conditions.

     The Company used $39.3  million of the net  proceeds  from the Purchase and
Sale  Agreement,  the Share  Purchase  Agreement and the PVH  Trademark  License
Agreement  (collectively referred to as the "Transactions") to repay outstanding
borrowings under its Senior Credit Facility and CP Canada's Credit Facility.

     On January 29, 2001, and pursuant to an Asset Purchase Agreement, CP Canada
sold certain assets (principally inventory, personal property, and manufacturing
equipment)  used primarily by CP Canada's ARROW labeled apparel bearing the name
or logo of other Corporate  entities or other  organizations  ("Career Apparel")
businesses in Canada,  apparel sold in specialty  golf stores and golf pro shops
("Golf Apparel") and FRIDAY'S BY CLUETT businesses in Canada,  the United States
and Puerto Rico, to The John Forsyth Shirt Company, LTD. ("Forsyth").

     Pursuant to a  Trademark  License  Agreement  ("Forsyth  Trademark  License
Agreement"),  dated as of January 29, 2001, CP and CP Canada  granted to Forsyth
an exclusive  license to use trademarks  related to the ARROW business in Canada
and the  FRIDAY'S  BY CLUETT and golf  apparel  business  in Canada,  the United
States and Puerto Rico. The Forsyth Trademark  License Agreement  provides for a
1.0 million Canadian dollar minimum  guaranteed annual royalty fee to be paid to
CP,  subject to the Consumer  Price Index.  The license  expires on December 31,
2005;  however,  Forsyth  has the option to renew for two  additional  five-year
terms, provided it meets certain conditions.

     The aggregate purchase price paid by Forsyth pursuant to the Asset Purchase
Agreement was approximately $8.0 million,  and subject to adjustment pursuant to
Section 4 of the Asset Purchase Agreement.

                                 F-11
<PAGE>

                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Discontinued Operations (Continued)

     The Company used $5.4 million of the net proceeds  from the Asset  Purchase
Agreement to repay outstanding borrowings under CP Canada's loan facility.

     The Company has  completed  the  majority of the  disposition  of the shirt
group segment's  manufacturing  and distribution  operations.  Accordingly,  the
Company's  consolidated  financial  statements  reflect  the shirt  segment as a
discontinued operation. Consequently, the Company's remaining businesses include
primarily the Sock and Licensing Groups.

     The Company has reflected the trade assets,  trade  liabilities  and credit
facility paid off, and  operations of the shirt segment as  discontinued  in the
accompanying  consolidated  financial  statements.  The net  assets of the shirt
segment  are  classified  as  net  assets  of  discontinued  operations  in  the
accompanying balance sheets. As of December 31, 2001, the Company's  disposition
of the shirt  segment  is  complete,  except for real  estate  held for sale and
sublease.  These  remaining net assets consist  primarily of  manufacturing  and
distribution  facilities located in Austell,  Georgia,  and Kitchener,  Ontario,
that are carried at fair value (less costs to sell).

      Losses  from  operations  of the  discontinued  segment  for 1999 and 2000
(through  the  commitment  date of June 13,  2000) were $24.9  million  and $9.9
million,  respectively.  The Company incurred a loss on the disposition of $26.7
million  ($11.2  million in 2000 and $15.5  million in 2001).  The $26.7 million
loss on the disposition of discontinued segment consists of a $12.1 million loss
on  disposition  and $14.6 million for operating  losses during the remainder of
the phase-out period.  Of the $15.5 million loss on the disposition  incurred in
2001,  approximately  $10.7 million was non-cash  charges  related to long-lived
assets  sold,  abandoned  and held for  sale,  and  foreign  translation  losses
recognized.

      Net sales related to discontinued  operations for the years ended December
31, 1999,  2000 and 2001 were $176.9  million,  $117.2 million and $2.2 million,
respectively.

4. Redeemable Preferred Stock

     In connection with the Recapitalization,  the Company issued 500,000 shares
of 12 1/2% Senior Exchangeable  Preferred Stock ("Preferred Stock") due 2010 and
received net proceeds of $48.1 million.  Each preferred  share has a liquidation
preference  of $100.  The  holders of the  Preferred  Stock will be  entitled to
receive, as and if dividends are declared by the Board of Directors out of funds
the Company has legally available,  cumulative  preferential  dividends from the
date of issuance of the Preferred Stock accruing at the rate per share of 12 1/2
% per  annum.  Dividends  are  payable  semiannually  in  arrears  on May 15 and
November 15 of each year,  commencing  on November 15,  1998,  to the holders of
record as of the  preceding  May 1 and  November 1. On or prior to May 15, 2003,
the Company may, at its option,  pay dividends in cash or in additionally  fully
paid  and   non-assessable   shares  of  Preferred  Stock  having  an  aggregate
liquidation preference equal to the amount of such dividends. The carrying value
of Senior  Exchangeable  Preferred  Stock at December 31, 2000 and 2001 reflects
accretion of approximately $398,000 and $553,000,  respectively,  in transaction
fees.  Through  December 31, 2001, the Company declared and paid stock dividends
aggregating  263,569 shares on its Preferred Stock. As of December 31, 2001, the
Company had issued and outstanding 763,569 cumulative shares.



                                      F-12

<PAGE>






                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. Restructuring, Impairment Charges and Obilgations Related to Discontinued
   Operations

Continuing Operations
     In 1999, the Company's Sock Group  approved a  restructuring  plan to cease
distribution  operations at an owned  facility  located in Bally,  Pennsylvania,
which  was  completed  in  1999,  and to close a leased  dye-house  facility  in
Pottstown,  Pennsylvania  in 2000.  In 1999,  the  Company's  Sock Group accrued
severance  costs of $276,000 and $90,000 of facility  closing  costs,  which was
offset by a reversal of $271,000  related to facility  closing costs  previously
accrued.

      In 2000, the Company's Sock Group  completed the closing of the Pottstown,
Pennsylvania  facility in which it paid additional special termination  benefits
of  approximately  $232,000  relating to 73 employees  and  additional  facility
closing costs of $210,000.

     On October 30, 2001, the Company announced restructuring plans for the Sock
Group to optimize plant capacity and maximize  supply chain  opportunities.  The
Company will  phase-out  production  from its Bally,  Pennsylvania  facility and
relocate  its  knitting  and  finishing  operations  to other  company-owned  or
contract facilities.  Effective December 31, 2001, Bally's finishing operations,
which represent  approximately 10 percent of total company volume, were absorbed
into available contract finishing  capacity in Mexico.  Effective  September 28,
2002, Bally's knitting production,  which represents approximately 20 percent of
total company volume, will be moved to the company's Burlington,  North Carolina
facility.  This plan will provide a reduced cost  structure  that is competitive
within the global market. Total company sales volume will not change as a result
of these actions.  In conjunction with this  restructuring  the Company recorded
special  termination  benefits of $3.0 million for 229 employees,  which will be
paid from the pension plan (see Note 11 - Employee Benefit Plan),  impairment of
fixed  assets  of $2.5  million  and  direct  personnel  costs of  approximately
$300,000 related to exiting the facility.

<TABLE>
<CAPTION>

Restructuring and impairment charges are summarized as follows (in thousands):
                                                                              1999              2000              2001
                                                                              ----              ----              ----

<S>                                                                      <C>                    <C>             <C>
                   Severance and benefits                                $      276             $ 232           $ 3,316
                   Facility closure costs                                        90               210             2,497
                   Other, including reversal of amounts previously
                   accrued                                                     (271)               --                --
                                                                               ----              ----              ----
                   Restructuring and impairment charges from
                   continuing operations                                  $      95             $ 442            $5,813
                                                                          =========             =====            ======
</TABLE>


<TABLE>
<CAPTION>

The restructuring  reserveand obligations related to discontinued  operations at
December 31, 1999, 2000 and 2001, is summarized as follows (in thousands):

                                                     Severance and    Facility Closure        Other             Total
                                                        Benefits

<S>                                                    <C>              <C>              <C>               <C>
                   Balance, January 1, 2000            $      276       $     145        $       --        $       421
                       Additions                            7,106           1,836             7,810             16,752
                       Payments                            (4,423)         (1,138)           (5,700)           (11,261)
                                                           ------          ------            ------            -------
                   Balance, December 31, 2000               2,959             843             2,110              5,912
                       Additions                            1,242           2,550               596              4,388
                       Payments                            (3,211)         (1,230)           (1,945)            (6,386)
                                                           ------          ------            ------             ------
                   Balance, December 31, 2001          $      990         $ 2,163          $    761          $   3,914
                                                       ==========         =======          ========          =========
</TABLE>


                                      F-13

<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. Restructuring, Impairment Charges and Obilgations Related to Discontinued
   Operation(Continued)

     In 2001, the Company  recorded  severance and benefit cost of $1.2 million;
facility closure cost of $2.6 million,  related  primarily to losses on property
held for sublease;  and other cost of approximately $600,000 directly associated
with the restructuring.

Discontinued Operations

      During 1999, the Company approved a plan to close its owned  manufacturing
facility located in Enterprise,  Alabama and consolidate certain  administrative
functions within the Company's corporate group.  Special termination benefits of
$1.7 million  related to 280 employees of the Enterprise  facility were provided
through the company's  pension plan (see Note 11 - Employee  Benefit Plan).  All
terminations  were  completed by December 31, 1999. The Company also recorded an
impairment  charge of $383,000 to adjust the  carrying  value of the  Enterprise
facility to fair market value based upon the  consideration to be received.  The
Company  recorded   $737,000  of  other  costs  directly   associated  with  the
restructuring.  These  charges  are  included  as a  component  of the loss from
operations of discontinued segment in the consolidated statements of operations.

     As a  result  of  the  Transactions  described  in  Note  3 -  Discontinued
Operations,  the Company incurred charges  comprised of $13.1 million in special
termination  costs for  approximately  1,250  employees  ($6.2  million was paid
directly from the pension plan see Note 11 - Employee Benefit Plan) $1.5 million
in facility closing costs, $7.8 million in other costs directly  associated with
the disposition.

6. Accounts Receivable

    Allowances provided for accounts receivable are as follows:
                                                  December 31,
                                          2000                    2001
                                             (DOLLARS IN THOUSANDS)

Doubtful accounts                      $   909                   $1,134
Customer allowances                      4,037                    3,733
                                         -----                    -----
                                       $ 4,946                   $4,867
                                       =======                   ======

7. Inventories, Net

    Inventories consist of the following:
                                                  December 31,
                                         2000                       2001
                                             (DOLLARS IN THOUSANDS)

Finished goods                         $25,055                    $27,600
Work in process                          2,092                      2,939
Raw material and supplies                3,871                      5,313
                                         -----                      -----
                                        31,018                     35,852
Less: allowance for obsolete
      and slow moving inventory           (584)                    (1,604)
                                          ----                     ------
                                      $ 30,434                    $34,248
                                      ========                    =======


                                      F-14


<PAGE>

                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. Property, Plant and Equipment, Net

    Property, plant and equipment, net consist of the following:

                                                  December 31,
                                         2000                        2001
                                             (DOLLARS IN THOUSANDS)

Land                                  $    425                $       309
Buildings and site improvements         15,050                     11,005
Machinery, equipment and other          54,194                     53,348
Idle property                               --                        931
Construction in progress                    33                         32
                                            --                         --
                                        69,702                     65,625
Less accumulated depreciation          (42,772)                   (42,727)
                                       -------                    -------
                                      $ 26,930                  $  22,898
                                      ========                  =========



9. Long-Term Obligations and Financing Arrangements

     The  classification  of the Company's  long-term  obligations and financing
arrangements is as follows:

                                                December 31,
                                         2000                  2001

                                           (DOLLARS IN THOUSANDS)
Short-term debt and current portion
of long-term debt:
Senior Credit Facility:
     Swing Line                      $     600           $       100
     Term Loan A                         5,209                 7,487
     Term Loan B                           449                   449
                                           ---                   ---
 Total short-term                        6,258                 8,036

Long-term debt:
  Senior Credit Facility:
     Revolving Credit Facility          20,646                26,645
     Term Loan A                        21,486                13,999
     Term Loan B                        43,350                42,901
     Tranche Loan C                     17,449                17,449
Senior subordinated notes
   (includes the Parity Notes)         125,000               125,000
                                       -------               -------
Total long-term                        227,931               225,994
                                       -------               -------
Total debt                            $234,189              $234,030
                                      ========              ========




                                      F-15

<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Long-Term Obligations and Financing Arrangements (Continued)

Senior Credit Facility

    On May 18, 1998,  the Company  entered into a $160.0  million  Senior Credit
Facility (the "Senior Credit  Facility")  which is comprised of three  different
loans: a $50.0 million revolving credit facility (the "Revolver"),  a $50.0 term
loan ("Term A"), and a $60.0  million  term loan ("Term B").  The Senior  Credit
Facility  was  amended on May 27,  1998,  December  18,  1998,  March 19,  1999,
September 30, 1999,  March 29, 2000, June 30, 2000, March 23, 2001 and April 12,
2002. In 1999, the Company  obtained a revolving  credit  facility  ("Additional
Revolver")  that is guaranteed by Vestar.  On March 29, 2000,  the Senior Credit
Facility  and  the  Investment  and  Deposit  agreement  were  amended  and  the
Additional  Revolver  was  increased  and  incorporated  into the Senior  Credit
Facility as Tranche C loan.  On April 12, 2002 the Senior  Credit  Facility  was
amended,  reducing  the Tranche C loan  commitment  from $19.2  million to $17.5
million and  extending the Tranche C loan due date from December 31, 2002 to May
18, 2004.

    As of December 31, 2001,  $26.7 million was  outstanding on the Revolver and
the Company had no open trade letters of credit  outstanding for the purchase of
finished goods  inventory  from foreign  vendors.  In addition,  there were $1.1
million in standby letters of credit  outstanding.  Net  availability  under the
Revolver  was $24.0  million at December  31, 2001  (including  $1.8  million of
availablity  under the Tranche C loan), in addition to cash and cash equivalents
of $1.3 million.

     The Revolver and the Term A loan mature in 2004 and the Term B loan matures
in 2005.  Borrowings  under the Tranche C loan mature on May 18,  2004,  and are
guaranteed by Vestar.  As a result of the Purchases and Sale  Agreement,  during
the year ended  December 31, 2000,  the Company  permanently  reduced the Term A
loan,  the Term B loan and the Tranche C loan by $6.8 million,  $9.4 million and
$8.7 million, respectively. Term Loan A requires quarterly principal payments of
$1,627,760 through June 2002,  $2,116,088 through June 2003, and four additional
quarterly  payments of $2,441,640 through maturity in 2004. Term Loan B requires
quarterly  principal  payments of $112,306  through June 2004 and four quarterly
payments of  $10,556,722  beginning in September  30, 2004. No  prepayments  are
permitted on the Tranche C loan at any time unless the Revolving loans, the Term
A loan and the Term B loan have been paid in full, no letters of credit shall be
outstanding and the Revolving Commitments have expired or been terminated.

     Interest  for  borrowings  under the  Revolver  and Term A loan is based on
either, at the Company's option,  LIBOR plus 3.0% at December 31, 2000 and 2001,
or the  Alternative  Base Rate  plus 2.0% at  December  31,  2000 and 2001.  The
Alternative  Base Rate is the  greater of the Bank of America  prime rate or the
Fed Funds rate plus 0.5%.  Interest rates on the Revolver and Term Loan A ranged
between  9.2% to  11.5%,  and 4.6% to  11.5%  at  December  31,  2000 and  2001,
respectively.  Term Loan B interest  rate is based on either  LIBOR plus 3.5% at
December 31, 2000 and 2001 or, at the Company's  option,  the  Alternative  Base
Rate plus 2.5% at December 31, 2000 and 2001. Interest rates on Term Loan B were
10.2% and 5.2% at December 31, 2000 and 2001,  respectively.  The Tranche C loan
bears interest, at the Company's option, at either the Eurodollar rate plus 1.5%
or the Prime rate plus 0.5%.  Interest rates on the Tranche C borrowings  ranged
between 3.4% and 10.0% at December 31, 2001. At December 31, 2000 and 2001,  the
weighted  average  interest  rate on short-term  borrowings  was 10.1% and 5.5%,
respectively.






                                      F-16

<PAGE>




                                    CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Long-Term Obligations and Financing Arrangements (Continued)

     The Company's payment  obligations under the Senior Credit Facility and the
Senior Subordinated Notes (the "Notes") are fully and unconditionally guaranteed
on a joint and several basis by its current domestic subsidiaries,  principally:
Cluett Peabody & Co., Inc.,  Gold Toe Brands,  Inc.,  Apparel On-Line LLC, Great
American  Knitting  Mills,  Inc.,  Consumer  Direct  Corporation and U.S. Retail
division  (collectively  the  "Guarantor  Subsidiaries").  Each of the Guarantor
Subsidiaries is a direct or indirect wholly-owned subsidiary of the Company. The
Company's  payment  obligations  under  the  Notes  are  not  guaranteed  by the
remaining  subsidiaries:  Bidermann  Womenswear  Corp.  (formerly  Ralph  Lauren
Womenswear  Inc.),  Cluett Peabody Canada,  Inc.,  Arrow de Mexico S.A. de C.V.,
Arrow   Inter-America  &  Co.,  Ltd.  and  Cluett  American   Receivables,   LLC
(collectively  the  "Non-Guarantor  Subsidiaries").   The  obligations  of  each
Guarantor  Subsidiary  under its guarantee of the Notes are subordinated to such
subsidiary's obligations under its guarantee of the Senior Credit Facility.

     The Company has no  independent  assets or  operations,  the guarantees are
full and  unconditional  and  joint and  several,  and any  subsidiaries  of the
Company other than the subsidiary guarantors are minor.

     The Term A and  Term B loans  (and in the case of (i),  the  Revolver)  are
subject to mandatory  prepayment  (i) with the proceeds of certain  asset sales,
(ii) on an annual basis with 75.0% of the Company's excess cash flow (as defined
in the Senior  Credit  Facility),  (iii)  with the  proceeds  of certain  equity
offerings and (iv) with the proceeds from debt issuance.

     The Senior Credit Facility contains a number of covenants that, among other
things,  restrict  the ability of the Company and its  subsidiaries,  other than
pursuant  to  specified  exceptions,  to  dispose of  assets,  incur  additional
indebtedness,   incur  guarantee  obligations,  repay  other  indebtedness,  pay
dividends, create liens on assets, enter into leases, make investments, loans or
advances, make acquisitions,  engage in mergers or consolidations,  make capital
expenditures,  enter into sale and leaseback transactions,  change the nature of
their  business  or  engage  in  certain   transactions  with  subsidiaries  and
affiliates and otherwise restrict corporate activities.  In addition,  under the
Senior  Credit  Facility  the  Company  is  required  to comply  with  specified
financial ratios and tests, including minimum fixed charge coverage and interest
coverage ratios and maximum leverage  ratios,  including a senior leverage ratio
and a total leverage ratio and a minimum EBITDA test, each of which is tested as
of the last day of each fiscal quarter of the Company and its subsidiaries.  The
amendments in May 1998,  December 1998, March 1999,  September 1999, March 2000,
June 2000,  March 2001 revised the original  covenants.  On April 12, 2002,  the
Company obtained waivers of certain financial covenants under the facility as of
December 31, 2001,  and the  facility  was amended to adjust  certain  financial
ratios and tests, increase the applicable interest rates on the facility, reduce
the Tranche C loan commitment from $19.2 million to $17.5 million and extend the
Tranche C loan due date to May 18, 2004.

     The Senior Credit Facility  includes a cross-default  provision which makes
it a default  under  the  Senior  Credit  Facility  if,  with  respect  to other
indebtedness  in excess of $2.0  million of  Holdings  and the  Company  and its
subsidiaries,  any such  party  defaults  in any  payment  with  respect to such
indebtedness  or defaults  in a manner  that  permits  such  indebtedness  to be
accelerated or such indebtedness is in fact accelerated.

     The consequences of a default under the Senior Credit Facility are that the
lender may terminate the commitments, accelerate the Company's obligations under
the Senior Credit Facility,  declaring them immediately due and payable, require
the credit  parties to  establish  a cash  collateral  account as  security  for
outstanding letters of credit and enforce any and all other rights and interests
existing under the credit documents.



                                      F-17
<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Long-Term Obligations and Financing Arrangements (Continued)

Senior Subordinated Notes

    In connection with the  Recapitalization,  the Company issued $112.0 million
of 10 1/8% Senior  Subordinated Notes due 2008 and $13.0 million in Parity Notes
(collectively,  the "Notes").  The Parity Notes, which are convertible to senior
subordinated  notes, have the same terms as the Senior  Subordinated  Notes with
the exception that accumulated  interest is paid to each Parity Note holder upon
the  conversion  to Senior  Subordinated  Notes.  As of December 31, 2001,  $2.0
million of the initial $13.0 million  Parity Notes have been converted to Senior
Subordinated Notes. No mandatory  redeemable dates exist for the Parity Notes to
be  converted  to Senior  Subordination  Notes.  Commencing  November  15, 1998,
interest  is paid  semiannually  on May 15 and  November  15 of each  year.  The
Company is not required to make any mandatory redemption or sinking fund payment
with respect to the Notes prior to  maturity.  The Notes are  redeemable  at the
option  of the  Company,  in whole or in part,  at any time on or after  May 15,
2003,  at the  redemption  prices set forth in the  agreement  plus  accrued and
unpaid  interest.  The Notes are  subordinate  in priority to the Senior  Credit
Facility,  are  senior  in right  of  payment  to the  Preferred  Stock  and are
guaranteed by the Company's domestic subsidiaries.

The  aggregate  maturities  of  long-term  debt as of  December  31, 2001 are as
follows:

           2002                               $8,036
           2003                                9,564
           2004                               70,317
           2005                               21,113
           Thereafter                        125,000
                                             -------
                                            $234,030
                                            ========














                                      F-18



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. Income Taxes

The provision for income taxes is summarized as follows:


                                                        YEAR ENDED DECEMBER 31,
                                                        1999     2000      2001
                                                        (DOLLARS IN THOUSANDS)

Current:
   Continuing Operations:
   Federal .......................................    $ --      $ --      $ --
   State and local ...............................       600       600       351
   Foreign (1) ...................................       451       494       531
   Benefit of net operating loss carryforward
                                                      ------    ------    ------
                                                      ------    ------    ------
                                                       1,051     1,094       882

    Discontinued Operations-Foreign ..............        92        69      --
                                                      ------    ------    ------
                                                      $1,143    $1,163    $  882
                                                      ======    ======    ======


(1) Includes approximately $451,000,  $494,000, and $531,000 relating to foreign
withholding taxes for 1999, 2000 and 2001, respectively.

    A  reconciliation  of  the  statutory  federal  income  tax  benefit  to the
Company's provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                                                              YEAR ENDED DECEMBER 31,

                                                                                       1999               2000                2001
                                                                                              (DOLLARS IN THOUSANDS)

<S>                                                                                 <C>                 <C>                 <C>
Computed at statutory rate .............................................            $(5,430)            $(6,741)            $(5,914)
Foreign subsidiaries loss (income) .....................................              2,659               3,660               1,123
State and local income taxes, net of federal
income tax benefit .....................................................                396                 396                 232
Deductions relating to foreign taxes ...................................                361                 395                 531
Changes in valuation allowance for deferred tax
assets .................................................................              2,953               3,114               4,873
Other, net .............................................................                112                 270                  37
                                                                                    -------             -------             -------
                                                                                      1,051               1,094                 882

Discontinued operations-foreign subsidiaries ...........................                 92                  69                --
                                                                                    -------             -------             -------
                                                                                    $ 1,143             $ 1,163             $   882
                                                                                    =======             =======             =======
</TABLE>


     Deferred   income  taxes   represent  the  net  tax  effects  of  temporary
differences  between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.


                                      F-19

<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. Income Taxes (Continued)

    The significant components of the Company's domestic deferred tax assets and
liabilities are as follows:

                                                                DECEMBER 31,
                                                            2000          2001
                                                            ----          ----

                                                          (DOLLARS IN THOUSANDS)
Deferred tax liabilities:
    Workers compensation ...........................     $    833      $    918
    Depreciation ...................................        1,618          (141)
    Pension income .................................        3,468         3,746
    Other ..........................................          604           960
                                                         --------      --------
    Total deferred tax liabilities .................        6,523         5,483
Deferred tax assets:
    Net operating loss carryforwards ...............       81,834        83,191
    AMT credits ....................................          119           119
    Restructuring reserves .........................          875         1,281
    Bankruptcy reorganization ......................         --             313
    Interest to parent .............................          484           484
    Allowance for bad debts ........................          253           323
    Royalty income .................................         --             850
    Inventory overhead cost adjustment, net ........          463           494
    A/R reserves ...................................         --             986
    Trademark write-down ...........................         --             193
    Other ..........................................          980         1,044
                                                         --------      --------
Total deferred tax assets ..........................       85,008        89,278
Valuation allowance for deferred tax assets ........      (78,485)      (83,795)
                                                         --------      --------

Net deferred taxes .................................     $   --        $   --
                                                         ========      ========


    As of December 31, 2001,  the Company had federal net operating loss ("NOL")
carryforwards  of  approximately  $244.0 million.  These NOL  carryforwards  are
scheduled to expire from the year 2005 through 2021.  The Internal  Revenue Code
and Treasury Regulations  prescribe a limitation on the use of NOL carryforwards
following an ownership change. The Company  experienced such an ownership change
as a result of its Plan of  Reorganization  following  the  Company's  exit from
Chapter 11 of the United  States  Bankruptcy  Code on May 18,  1998.  Therefore,
approximately  $201.0 million of the Company's NOL  carryforwards are subject to
an annual usage  limitation of  approximately  $6.2 million plus any  additional
amounts related to any realized built in gains.  The amount of NOL  carryforward
that  remains  limited by the annual usage  limitation  is $176.0  million.  The
amount of NOL that is unlimited is $68.0 million.

     Based on the Company's history of earnings and the limitation on the use of
its NOL carryforwards, the Company's entire balance of net domestic deferred tax
assets have been  reduced by a valuation  allowance  of $78.5  million and $83.8
million at December 31, 2000 and 2001, respectively,  as it was not assured that
such assets would be realized in the future. The Company decreased its valuation
allowance by $4.8 million to $78.5  million in 2000 and  increased its valuation
allowance by $5.3 million to $83.8 million in 2001.


                                      F-20

<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


11. Employee Benefit Plan

    The  Company  has  a  qualified   defined   benefit  pension  plan  covering
essentially all employees of the Company in the United States.  The pension plan
employs a cash  balance form of benefit  that  provides  for  benefits  based on
salary,  age and  service.  The  Company's  practice is to fund amounts that are
required by statute and  applicable  regulations  and which are tax  deductible.
Assets of the plan are  investments in cash  equivalents,  publicly traded fixed
income and equity securities,  and real estate. Assets are valued using a method
which recognizes the difference between actual and expected market values over a
period of five years.

     At December 31, 2000 and 2001, the funded status of the Company's qualified
defined benefit pension plan was as follows:

<TABLE>
<CAPTION>
                                                                                                                 DECEMBER 31,
                                                                                                           2000              2001
                                                                                                          (DOLLARS IN THOUSANDS)
<S>                                                                                                    <C>                <C>
Benefit obligation at beginning of year ......................................................         $  67,270          $  63,886
Service cost .................................................................................             1,819              1,469
Interest cost ................................................................................             5,412              4,753
Actuarial loss ...............................................................................             4,314                507
Benefits paid ................................................................................           (14,855)            (8,198)
Amendments ...................................................................................             1,267               --
Curtailments .................................................................................                (1)              (285)
Settlements ..................................................................................            (8,730)            (3,161
Special termination benefits .................................................................             7,390              2,236
                                                                                                           -----              -----
Benefit obligation at end of year ............................................................         $  63,886          $  61,207
                                                                                                       =========          =========

Fair Value of Plan Assets
Fair value of plan assets at beginning of year ...............................................         $ 112,911          $  90,312
Actual return on plan assets .................................................................               986             (4,918)
Benefits paid ................................................................................           (14,855)            (8,198)
Settlements ..................................................................................            (8,730)            (3,161)
                                                                                                          ------             ------
Fair value of plan assets at end of year .....................................................         $  90,312          $  74,035
                                                                                                       =========          =========

Reconciliation of Funded Status, Amounts Not Recognized, and Amounts Recognized
Funded status ................................................................................         $  26,426          $  12,828
Unrecognized prior service cost ..............................................................             2,021              1,444
Unrecognized loss ............................................................................             3,348             15,895
Unrecognized reversion value discount ........................................................            (4,250)            (2,964)
                                                                                                          ------             ------
Prepaid benefit costs ........................................................................         $  27,545          $  27,203
                                                                                                       =========          =========

</TABLE>



                                                              F-21

<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. Employee Benefit Plan (Continued)

    Net pension benefit of the Company's  qualified defined benefit plan for the
years ended December 31, 1999, 2000 and 2001 include the following components:

<TABLE>
<CAPTION>


                                                            1999         2000        2001
                                                            ----         ----        ----

                                                                  (IN THOUSANDS)

<S>                                                      <C>         <C>         <C>
Service cost .........................................   $  2,086    $  1,819    $  1,469
Interest cost ........................................      5,034       5,412       4,753
Actual return on plan assets .........................    (11,370)       (986)      4,918
Amortization of unrecognized reversion value discount      (1,230)     (1,120)       (895)
Asset loss (gain) deferred for later recognition .....      1,496      (8,539)    (12,857)
                                                         --------    --------    --------
                                                           (3,984)     (3,414)     (2,612)
Other benefit charges:
Early retirement program / special retirement benefits      3,178       8,056       2,954
                                                         --------    --------    --------
Net pension expense (benefit) ........................   $ ( 806)    $  4,642    $    342
                                                         ========    ========    ========
</TABLE>

    The  assumptions  used in  determining  the funded  status of the  Company's
defined  benefit  pension plan for the years ended  December 31, 1999,  2000 and
2001 were discount rates of 8.25%, 7.75% and 7.25%, respectively, and an average
rate of increase in compensation  levels ranging from 3.25% to 13.25%  depending
on the  participant's  age at the  valuation  date.  In  addition,  the expected
long-term rate of return on plan assets was 9.5% for all periods.  The change in
assumptions  between  periods is reflected as an  actuarial  loss/(gain)  and is
reflected as a component of benefit obligation.

    During 1990, in connection with the acquisition of certain  businesses,  the
Company adjusted the actuarial  valuation of certain estimated pension assets to
reflect  their  net  realizable  value  based  upon a planned  reversion  to the
Company.  In August  1991,  the Company  decided not to revert the assets.  As a
result of this change,  the excess pension assets are being  recognized over the
Average  Future  Working  Lifetime of the plan  participants,  estimated to be a
period  of 14  years.  Amortization  of this  amount  was  $1,230,000  in  1999,
$1,120,000 in 2000 and $895,000 in 2001, and is included in pension  benefit for
each respective year. The Company  periodically  performs an actuarial valuation
of these  pension  assets and adjusts  the amount of the pension  assets and the
annual amortization based on the results of the valuation.

     During 1999, the Company's  qualified  defined  benefit plan was amended to
provide an Early  Retirement  Program.  The total  charge in 1999 related to the
program was  $1,443,000.  These  charges are included as a component of the loss
from  operations  of  discontinued  segment in the  consolidated  statements  of
operations.

     During 1999, the Company's  qualified  defined  benefit plan was amended to
provide special  termination  benefits to those employees severed as a result of
the  Enterprise  facility  closing.  The total  charge in 1999  related  to this
program  was  $1,735,000,  which is  included  as a  component  of the loss from
operations of discontinued segment in the consolidated  statements of operation.
In 2000,  the plan  provided  special  termination  benefits to those  employees
associated with the closing of the Pottstown facility in the Sock Group and with
the discontinued operations.  The total charge in 2000 related to these benefits
was $8,056,000,  of which $7,548,000 was related  termination  benefits directly
attributable  to  discontinued  operations.  In 2001, the plan provided  special
termination  benefits  to those  employees  associated  with the Bally  facility
closing. The total charge in 2001 related to this program was $2,954,000.


                                      F-22


<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. Commitments and Contingencies

     The Company  and certain of its  subsidiaries  are party to  litigation  in
connection  with the  normal  conduct  of their  businesses.  In the  opinion of
management, these matters are immaterial to the Company's financial position and
results of operations.

    The Company leases certain land, buildings and equipment under noncancelable
operating  leases  that expire in various  years  through  2010.  Certain of the
operating leases contain rent escalation  clauses and require the Company to pay
maintenance  costs,  property  taxes and  insurance  obligations  on the  leased
property.  Future minimum lease payments under noncancelable operating leases as
of December 31, 2001 are as follows:

                                   OPERATING
                                     LEASES
                                     ------

 Year payable:
   2002                             $ 1,664
   2003                               1,638
   2004                               1,571
   2005                               1,477
   2006                               1,245
   Thereafter                         3,167
                                      -----
Total minimum lease payments        $10,762
                                    =======



    Rent expense  totaled  approximately  $1.2 million in 1999,  $1.8 million in
2000, and $1.6 million in 2001.

    The Company has standby  letters of credit in the amount of $1.1  million as
of December 31, 2001.


13. Licensing Agreements

    Certain of the Company's  subsidiaries have licensing  agreements which give
them the  exclusive  rights to use certain  trademarks,  logos and related trade
names in connection  with the  manufacture and sale of certain men's and women's
apparel  and  socks  in  specified  territories.   License  fees  are  based  on
percentages  of net sales,  as defined,  for the various  products sold, but not
less than  specified  minimum  amounts.  The licensing  agreements  have various
renewal dates.  Certain of the license agreements contain automatic renewals and
are noncancelable.  The renewal terms range to three years and expire in various
years through 2004.

    Future  minimum  license  fees  payable in the  remaining  years  succeeding
December 31, 2001 are as follows (in thousands):

Year payable:

 2002                                $1,521
 2003                                 1,208
 2004                                   979




                                      F-23


<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. Related Party Transactions

    Subsequent to the emergence from  bankruptcy,  Holdings  allocated  interest
expense  of $24.3  million  related to  post-petition  interest  on  prepetition
obligations to the Company. This amount is included in bankruptcy reorganization
costs in 1998.  This amount was  contributed  by Holdings to the Company in 1999
and is reflected as a component of Stockholder's  Deficit.  In addition,  a $1.5
million and $2.1 million liability related to an employee stock plan was assumed
by the Company and the pension plan, respectively.  The liability assumed by the
pension plan is reflected as a component of the benefit  obligation (see Note 11
- Employee Benefit Plan).

    Pursuant to a management  advisory  agreement (the  "Management  Agreement")
entered  into in  connection  with the  reorganization  of the  Company in 1998,
Vestar Capital Partners ("Vestar  Capital") receives an annual advisory fee. The
Company  expensed  $500,000 in 1999,  $500,000  in 2000 and  $227,000 in 2001 in
consideration for certain advisory and consulting services (excluding investment
banking or other financial  advisory services and full- or part-time  employment
by  Holdings  or any of its  subsidiaries  of any  employee or partner of Vestar
Capital  and its  affiliates,  in each case for  which  Vestar  Capital  and its
affiliates shall be entitled to receive additional  compensation).  Holdings has
agreed to reimburse Vestar Capital for expenses incurred in connection with, and
to indemnify Vestar Capital and its affiliates for any liabilities arising from,
such advisory and consulting services.

    During 1995, Mr. Marsal  (founding  Managing  Director of A&M) was appointed
Chief Executive Officer of the Company. In connection with this appointment, the
Company paid A&M  $963,000,  $900,000 and  $332,500  for 1999,  2000,  and 2001,
respectively for compensations and other related expenses.

15. Risks, Uncertainties and Significant Concentrations

     The  Company  manufactures  and  sources a  portion  of its  products  from
domestic and foreign vendors.  The Company  attempts to limit the  concentration
with any one  manufacturer  or vendor.  The Company  believes it has alternative
manufacturing  and raw material sources available to meet its current and future
production  requirements  in the event  current  manufacturers  or  vendors  are
unavailable to fulfill the Company's needs.

     The Company's principal customer base, the retail industry, has experienced
significant  changes and  difficulties  over the past several  years,  including
consolidation  of ownership,  increased  centralization  of buying decisions and
restructurings.  The Company  cannot  predict  what  effect,  if any,  continued
changes within this industry would have on the Company's operations.

16. Fair Value of Financial Instruments

     The  carrying  amount of cash and cash  equivalents,  accounts  receivable,
short-term borrowings, accounts payable and accrued liabilities approximate fair
value  due to the  short  maturities  of these  instruments.  The fair  value of
long-term debt was approximately  $209.5 million at December 31, 2000 and $228.5
million  (book value of $226.0  million) at December  31, 2001 based on interest
rates that are  believed to be  available  to the Company for debt with  similar
provisions  provided for in the existing debt agreements.  The fair value of the
senior exchangeable  Preferred Stock was approximately $20.0 million at December
31, 2000 and $22.2  million  (book value of $75.1  million) at December 31, 2001
based on a market value analysis.



                                      F-24


<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. Segment Data

     The Company  identifies  its  reportable  segments  based on the  segments'
product  offerings.  As a result of the  Company's  June 13,  2000,  decision to
discontinue  the shirt group  operations  and license the ARROW  tradename,  the
composition of the Company's  reportable segments changed.  The licensing of the
ARROW brand by the two new Trademark  License  Agreements,  as described in Note
3-Discontinued  Operations,  will result in additional  minimum  annual  license
revenue of $5.6 million.  Subsequent to June 13, 2000, the Company conducted its
business through two principle segments: the Sock Group and the Licensing Group.
The financial  results  associated  with Latin America,  Apparel  On-Line,  LLC,
Cluett  American  Receivables,   LLC,  U.S.  Retail  division  are  referred  to
collectively as "All Other".  Segment data disclosures for the three years ended
December 31, 1999, December 31, 2000 and December 31, 2001 have been restated to
reflect the above noted change.
































                                      F-25


<PAGE>





                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. Segment Data (Continued)

                                               1999         2000         2001
                                                   (Dollars in Thousands)
Net Sales
         Sock ...........................   $ 168,366    $ 168,971    $ 174,119
         Licensing ......................       6,993        9,930       13,599
         All other ......................          51        1,212        3,185
         Intercompany ...................      (2,201)      (1,342)      (1,841)
                                            ---------    ---------    ---------
                                            $ 173,209    $ 178,771    $ 189,062
                                            =========    =========    =========

Gross Profit
         Sock ...........................   $  58,735    $  54,877    $  48,628
         Licensing ......................       6,993        9,930       13,599
         All other ......................          36          589        1,486
                                            ---------    ---------    ---------
                                            $  65,764    $  65,396    $  63,713
                                            =========    =========    =========

Selling, General and Administrative
         Sock ...........................   $  27,750    $  30,732    $  31,695
         Licensing ......................       2,309        2,959        3,463
         All other ......................         609        1,341        1,682
                                            ---------    ---------    ---------
                                            $  30,668    $  35,032    $  36,840
                                            =========    =========    =========

Operating Income (Loss)
  excluding restructuring and
  impairment and charges
         Sock ...........................   $  30,985    $  24,145    $  16,933
         Licensing ......................       4,684        6,971       10,136
         All other ......................        (573)        (752)        (196)
                                            ---------    ---------    ---------
                                            $  35,096    $  30,364    $  26,873
                                            =========    =========    =========

Identifiable Assets
         Sock ...........................   $  82,562    $  81,767    $  83,895
         Licensing ......................       1,984        3,107        2,799
         All other ......................       1,861        1,508        1,580
                                            ---------    ---------    ---------
                                            $  86,407    $  86,382    $  88,274
                                            =========    =========    =========

Depreciation
         Sock ...........................   $   5,815    $   5,969    $   5,779
         Licensing ......................          75           79           98
         All other ......................         108          283          396
                                            ---------    ---------    ---------
                                            $   5,998    $   6,331    $   6,273
                                            =========    =========    =========

Capital expenditures
         Sock ...........................   $   5,745    $   3,727    $   3,926
         Licensing ......................          23         --             21
         All other ......................       1,071          100          344
                                            ---------    ---------    ---------
                                            $   6,839    $   3,827    $   4,291
                                            =========    =========    =========
                                      F-26


<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. Segment Data (Continued)
     Interest  expense,  interest  income and  income  taxes are  excluded  from
reportable segment data as such amounts are not included in segment  information
reviewed by the chief operating decision maker.

Reconciliation of Reportable Segments Net sales, Operating Income (Loss)
and Identifiable Assets

<TABLE>
<CAPTION>
                                                                                     1999                2000                 2001
                                                                                                (Dollars in Thousands)
Net Sales
<S>                                                                               <C>                 <C>                 <C>
Total net sales for reportable segments ................................          $ 175,359           $ 178,901           $ 187,718
Other net sales ........................................................                 51               1,212               3,185
Eliminations of intersegment net sales .................................             (2,201)             (1,342)             (1,841)
                                                                                  ---------           ---------           ---------
Total consolidated net sales ...........................................          $ 173,209           $ 178,771           $ 189,062
                                                                                  =========           =========           =========

Operating Income (Loss)
Total operating income for reportable segments .........................          $  35,669           $  31,116           $  27,069
Other operating (loss) .................................................               (573)               (752)               (196)
Unallocated amounts:
     Other corporate (expense) .........................................               (821)               (823)              1,125
     Restructuring and impairment charges ..............................                (95)               (442)             (5,813)
                                                                                  ---------           ---------           ---------
Total operating income .................................................          $  34,180           $  29,099           $  22,185
                                                                                  =========           =========           =========

Assets
Total assets for reportable segments ...................................          $  84,546           $  84,874           $  86,694
Other assets ...........................................................              1,861               1,508               1,580
Net assets of discontinued operations ..................................             60,563              19,693               7,556
Unallocated amounts:
     Deferred finance costs ............................................             10,842               9,966               8,307
     Pension assets ....................................................             32,187              27,545              27,203
     Other unallocated amounts .........................................              7,200               7,814               1,922
                                                                                  ---------           ---------           ---------
Consolidated total .....................................................          $ 197,199           $ 151,400           $ 133,262
                                                                                  =========           =========           =========

Capital Expenditures
Total capital expenditures for reportable segments
                                                                                  $   5,768           $   3,727           $   3,947
Adjustments ............................................................              1,071                 100                 347
                                                                                  ---------           ---------           ---------
Consolidated total .....................................................          $   6,839           $   3,827           $   4,294
                                                                                  =========           =========           =========


Depreciation & Amortization
Total depreciation for reportable segments .............................          $   5,998           $   6,331           $   6,287
Amortization ...........................................................              1,592               1,742               1,795
                                                                                  ---------           ---------           ---------
Consolidated total .....................................................          $   7,590           $   8,073           $   8,082
                                                                                  =========           =========           =========
</TABLE>

     The Company  has two  customers,  which each  individually,  accounted  for
greater than 10% of the  Company's  net sales for fiscal years 1999,  2000,  and
2001(16.7%  and 14.2% in 1999;  15.3% and 14.1% in 2000;  and 17.9% and 11.2% in
2001).
                                      F-27

<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


18.Unaudited Quarterly Financial Information
(Dollars in thousands)

Quarterly financial information for 2000 and 2001 is summarized as follows:

Year Ended                                      Quarter
December 31,                   First        Second         Third         Fourth

2000 (1)
--------
Net Sales ..............     $ 40,421      $ 38,551      $ 47,572      $ 52,227
Gross Profit ...........       15,114        13,880        17,359        19,043
Net Loss ...............       (6,726)       (3,258)       (9,652)       (1,354)

2001 (1)
--------
Net Sales ..............     $ 44,098      $ 44,205      $ 46,857      $ 53,902
Gross Profit ...........       15,554        16,577        15,086        16,496
Net Income (Loss) ......         (212)       (6,805)          526       (10,903)


(1) Amounts for each quarter have been adjusted to reflect the reclassifications
of discontinued operations.


19.   Subsequent Events

     On January 7, 2002, the Company entered into a joint venture agreement with
Administradora  Gaco, S.A. de C.V. and Inversiones Gaco, S.A. de C.V.  investing
$2.6 million for a 50% share of  outstanding  capital stock. . The joint venture
operation  is a leading  manufacturer  and  distributor  of men's,  women's  and
children's  socks in Mexico with the largest  Mexican brand,  CANNON.  By moving
labor-intensive  finishing  operations to a lower cost  environment,  management
believes it will recognize significant annual cost savings.









                                      F-28

<PAGE>




Item 9.  Changes in and disagreements with Accountants on Accounting and
         Financial Disclosures

     None


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

    Set forth below are the names and  positions of the  directors and executive
officers of the Parent and the Company. All directors hold office until the next
annual meeting of  stockholders  of the Parent and the Company,  and until their
successors are duly elected and qualified. All officers serve at the pleasure of
the Board of Directors.


NAME                              AGE           POSITION(S)

Bryan P. Marsal                   51       Director and Chief Executive Officer
                                           of Holdings, CAG and the Company

James A. Williams                 59       Director of  Holdings, CAG and the
                                           Company; President and Chief
                                           Executive Officer of the Sock Group

Joseph A. Rosato                  43       Chief Executive Officer of the
                                           Licensing Group

William C. Sheely, III            43       Executive Vice President-Operations
                                           of the Sock Group

Kathy D. Wilson                   42       Vice President and Chief Financial
                                           and Accounting Officer of Holdings,
                                           CAG and the Company and Senior Vice
                                           President and Chief Financial Officer
                                           of the Sock Group

Dean G. Norman                    46       Executive Vice President-Sales of the
                                           Sock Group

Scott R. Coleman                  41       Vice President, General Counsel and
                                           Secretary of Holdings, CAG and the
                                           Company

Norman W. Alpert                  43       Director of Holdings, CAG and the
                                           Company

Neil P. DeFeo                     55       Director of Holdings, CAG and the
                                           Company

Sander M. Levy                    40       Director of Holdings, CAG and the
                                           Company

Michael A. McLain                 51       Director of Holdings, CAG and the
                                           Company

Daniel S. O'Connell               48       Director of Holdings, CAG and the
                                           Company

Steven M. Silver                  33       Director of Holdings, CAG and the
                                           Company




                                       22
<PAGE>






     BRYAN P.  MARSAL is a founding  Managing  Director  of A&M, a firm that was
formed in 1983. Mr. Marsal has been Chief Executive Officer of the Company since
1995. Mr. Marsal is a director of Timex Corporation and Aearo  Corporation.  Mr.
Marsal received both a B.B.A. and a M.B.A. from the University of Michigan.

     JAMES A.  WILLIAMS is  President  and Chief  Executive  Officer of the Sock
Group.  Mr.  Williams  joined  the  Sock  Group  in  July  1986 as  Senior  Vice
President-Sales  and  Marketing  and was  promoted  to his  current  position as
President in August 1991.  Mr.  Williams is a director of Esprit de Corp. and is
the Chairman and a director of Maidenform  Worldwide  Inc.  Prior to joining the
Company,  he worked for 15 years for  Adams-Millis  Corporation,  where his last
position was Senior Vice  President-Sales  and Marketing.  Mr. Williams earned a
B.S. in Chemistry from the University of Southern Mississippi.

     JOSEPH A. ROSATO is the Chief Executive Officer of the Licensing Group. Mr.
Rosato  joined  the  Company  in  September  1999.  Mr.  Rosato  has 16 years of
experience  in the  apparel  industry.  He has  worked for  Phillips-Van  Heusen
Corporation,  Tommy Hilfiger,  Inc., and most recently Warnaco Group,  Inc., and
has held various positions in sourcing and production  related areas. Mr. Rosato
earned a B.A. from New York University and a M.B.A. from Pace University.

     WILLIAM C. SHEELY,  III is the Executive Vice  President-Operations  of the
Sock  Group.  Mr.  Sheely  joined the Company as Vice  President  of Finance and
Controller  of the Sock Group in February  1993 and was  promoted to his current
position of  Executive  Vice  President-Operations  in April 1994.  Prior to his
tenure  with the  Company,  Mr.  Sheely was  controller  at  Kayser-Roth's  sock
division where he was employed for seven years, and with Springs  Industries for
five years in  various  financial  positions.  Mr.  Sheely is a graduate  of the
University of South Carolina where he received a B.S. in Business Administration
- Accounting and is also a C.P.A.

     KATHY D. WILSON joined the Company as Vice President of Finance of the Sock
Division  in 1994 and  became  Chief  Financial  Officer  of the  Parent and the
Company in December  2000.  Prior to joining the  Company,  Ms.  Wilson had five
years experience with international  accounting firms and also worked five years
in various  financial  positions in the hotel and leisure  industry.  Ms. Wilson
earned a B.S. in Business  Administration  - Accounting  from the  University of
North Carolina and is also a C.P.A.

     DEAN G. NORMAN joined the Sock  Division in May 1996.  Prior to joining the
Company, his 16 years in the hosiery industry included various senior management
positions in addition to owning his own sales and marketing company.  Mr. Norman
earned a B.S. degree from North Carolina State University and a M.B.A. from Wake
Forest University.

     SCOTT R. COLEMAN is Vice  President,  General  Counsel and Secretary of the
Parent and the Company effective  September 2000. Mr. Coleman joined the Company
in July 1998 as Assistant  General  Counsel and became Acting General Counsel in
August 1999. Prior to joining the Company,  Mr. Coleman worked for four years as
corporate associate at Paul, Weiss, Rifkind,  Wharton & Garrison, and five years
as an attorney for the City of New York. Mr. Coleman earned a J.D. from New York
University School of Law and a B.A. from Columbia College.

     NORMAN W. ALPERT is a Managing  Director of Vestar Capital Partners and was
a founding partner at its inception in 1988. Mr. Alpert is Chairman of the Board
of Directors of Aearo  Corporation and Advanced Organics  Holdings,  Inc., and a
director of Siegelgale Holdings,  Inc., Remington Products Company, LLC, and MCG
Capital Corp. all companies in which Vestar Capital  Partners or, its affiliates
have a significant  equity  interest.  Mr. Alpert  received an A.B.  degree from
Brown University.


                                       23
<PAGE>



     NEIL P. DEFEO was appointed Chairman of Remington Products Company,  LLC in
September 2001 and has been Chief Executive Officer, President and a Director of
Remington  Products Company,  LLC since January 1997. Mr. DeFeo is a director of
Driscoll Strawberry Association,  Inc. and Manhattan College. From 1993 to 1996,
Mr. DeFeo was Group Vice President,  U.S. Operations of The Clorox Company.  For
25 years  prior to 1993,  Mr.  DeFeo  worked  for  Procter & Gamble  in  various
executive positions,  including Vice President and Managing Director,  Worldwide
Strategic  Planning,  Laundry and Cleaning Products.  Mr. DeFeo holds a B.S.E.E.
from Manhattan College.

     SANDER M. LEVY is a Managing  Director of Vestar Capital Partners and was a
founding  partner at its  inception  in 1988.  Mr. Levy is a director of Gleason
Corporation and St. John Knits, Inc., companies in which Vestar Capital Partners
or its affiliates have a significant  equity interest.  Mr. Levy received a B.S.
degree from The Wharton  School of the University of  Pennsylvania  and a M.B.A.
degree from Columbia University.

     MICHAEL A.  MCLAIN  has been  Chief  Executive  Officer,  President,  and a
Director of the Aearo Company since February 1998. Prior to joining the Company,
he was  President  and Chief  Executive  Officer  of  DowBrands,  Inc.,  a large
manufacturer of household consumer products.  Mr. McLain is a Director of Little
Rapids  Corporation  and SYM Financial.  Mr. McLain  received a B.S. from Auburn
University and a M.B.A. from Furman University.

     DANIEL S.  O'CONNELL  is  founder  and Chief  Executive  Officer  of Vestar
Capital  Partners.  Mr.  O'Connell is a Director of Aearo  Corporation,  Insight
Communications  Company,  Inc.,  Remington  Products  Company,  LLC,  Siegelgale
Holdings,  Inc., St. John Knits, Inc., and Sunrise Medical,  Inc., all companies
in which Vestar  Capital  Partners or its affiliates  have a significant  equity
interest.  Mr.  O'Connell  received an A.B.  degree from Brown  University and a
M.P.P.M. degree from Yale University School of Management.

     STEVEN M. SILVER is a Managing  Director of Vestar  Capital  Partners.  Mr.
Silver joined Vestar Capital Partners in May of 1995. Between July 1990 and July
1993,  Mr.  Silver was an analyst in  Wasserstein  Perella & Co.'s  mergers  and
acquisitions  groups in New York and London. Mr. Silver is a director of Sunrise
Medical   Inc.,   Remington   Products   Company,   LLC.  and  McHugh   Software
International,  Inc.,  all  companies  in which Vestar  Capital  Partners or its
affiliates have a significant  equity  interest.  Mr. Silver holds a B.A. degree
from Yale College and a M.B.A. degree from Harvard University.






                                       24
<PAGE>



Compliance with Section 16(a) of the Exchange Act

     Each of the executive officers of the Company filed an Initial Statement of
Beneficial  Ownership of  Securities  on Form 3 to report his or her  beneficial
ownership  of  equity  securities  of the  Company.  None of such  directors  or
officers reported beneficial ownership of any equity securities of the Company.

Item 11. Executive Compensation

    The following table sets forth the cash and noncash  compensation  earned by
the Chief Executive Officer and the four other most highly compensated executive
officers of the Parent and the Company.

<TABLE>
<CAPTION>

                                                     SUMMARY COMPENSATION TABLE
                                                                                         LONG-TERM
                                                                                       COMPENSATION
                                                                                          AWARDS
                                                                                          ------

                                                    ANNUAL COMPENSATION                 SECURITIES
                                                    -------------------                 UNDERLYING           ALL OTHER
                                      YEAR       SALARY ($)        BONUS(4)             OPTIONS (#)        COMPENSATION
                                      ----       ----------        --------             -----------        ------------

<S>                                    <C>           <C>            <C>                  <C>              <C>
Bryan P. Marsal (1)                    2001          $332,500               0                   0                 0
 Chief Executive Officer of            2000           700,000               0                   0                 0
 Holdings and the Company              1999           700,000               0                   0                 0

James A.Williams                       2001           460,000               0                   0                 0
 President of the Sock Group           2000           460,000               0                   0                 0
                                       1999           442,600         343,029                   0           107,485(2)

Joseph A. Rosato                       2001           275,000          83,043                   0                 0
 President and Chief Operating         2000           275,000          39,557                   0                 0
 Officer of the Licensing Group        1999                 0               0                   0                 0

Kathy D. Wilson                        2001           235,000               0                   0                 0
  Vice President and CFO of            2000           197,692               0                   0                 0
  Holdings and the Company             1999           165,000         115,000                   0            59,400(2)
  Sr Vice President and CFO of
  the Sock Group

William C. Sheely                      2001           235,000               0                   0             6,000(3)
 Executive Vice President-             2000           200,000               0                   0             6,000(3)
 Operations of the Sock Group          1999           170,000         119,000                   0            67,200(2,3)

</TABLE>


(1)  A&M was paid  $200,000  and  $158,000  for  services of a  corporate  Chief
     Financial  Officer and  $112,000  and  $105,000  for  out-of-pocket  travel
     expenses during 2000 and 1999, respectively.
(2)  Contribution to Company's qualified defined benefit pension plan.
(3)  Car Allowance.
(4)  Bonuses are shown in the fiscal period in which they were earned.



                                       25
<PAGE>



Employment and Severance Agreements

    Mr.  Williams  entered  into an  employment  agreement  with the Sock  Group
effective  as of March 7, 1997,  pursuant  to which he serves as  President  and
Chief Executive  Officer of the Sock Group. Such employment  agreement  provides
for Mr.  Williams to receive an annual base salary of $400,000.  Mr. Williams is
also  entitled to annual  incentive  bonuses  under the Sock  Group's  executive
management  incentive  plan,  with  no  guaranteed  minimum  bonus  amount.  The
employment  agreement  continues until  terminated (a) by the Sock Group with or
without cause or (b) by Mr.  Williams with cause or upon 90 days notice.  In the
event that Mr.  Williams'  employment  is  terminated  without cause by the Sock
Group or with cause by Mr. Williams,  Mr. Williams will be entitled to severance
pay in an amount equal to two times the sum of $400,000 plus his average  annual
bonus calculated from prior years, up to a maximum severance of $1,200,000.

     Each of Mr.  Rosato,  Mr. Sheely,  Mr.  Norman,  Ms. Wilson and Mr. Coleman
(each an "Employee")  have entered into severance  agreements.  Each Employee is
entitled to  severance  pay equal to his or her current base salary for a period
of  one  year  (excluding  bonus   compensation)  upon  the  occurrence  of  the
termination of his or her employment  without cause.  These  severance  payments
cease upon the Employee  becoming a full-time  employee or full-time  consultant
(including self-employment) of another entity.

Bonus Plans

    Executive  officers along with certain other employees (the  "Participants")
of each of the  Licensing  Group and the Sock  Group  participate  in  incentive
compensation  plans pursuant to which the  Participants  are eligible to receive
bonus  compensation  based  upon  annual  minimum  EBITDA  targets  and upon the
weighing  of  certain  other  performance  criteria  by Bryan P.  Marsal and the
Compensation Committee of the Board of Directors.  Yearly bonus awards under the
incentive  plans are  limited  to 100% of the  respective  Participant's  annual
salary.

Management Equity Participation

    In  connection  with  the  Recapitalization,   Holdings  (i)  permitted  the
Management  Investors  to  subscribe  in the  aggregate  for up to  5.1%  of the
outstanding  Holdings  Common Stock (the  "Purchased  Stock") and (ii) adopted a
stock option plan (the "Option Plan")  providing for options to purchase  shares
of Holdings Common Stock  ("Options") to be granted to the Management  Investors
at the  consummation of the  Recapitalization  and to certain other employees of
Holdings  and its  subsidiaries  from time to time  thereafter,  in each case in
order to provide additional  compensation and financial incentives to Management
Investors and such other employees. The Option Plan may be amended, suspended or
terminated by the Holdings' Board of Directors at any time.

    Purchased Stock. On May 18, 1998 (the "the Recapitalization  closing date"),
the  Management  Investors  became  holders of an  aggregate  of $1.8 million of
Purchased Stock,  representing 5.1% of the outstanding  Holdings Common Stock on
the  Recapitalization  closing date.  All Purchased  Stock is subject to certain
forfeiture  provisions  referred to in the paragraph  entitled  "Puts and Calls"
below.

    Stock Options.  On the  Recapitalization  closing date,  Holdings  agreed to
grant  nonqualified  Options to purchase 5% of Holdings Common Stock (on a fully
diluted  basis).  Such  Options  will (i) vest and become  exercisable  in equal
installments in each of the five years following the grant date, (ii) expire ten
years from the grant date,  or earlier in certain  instances of  termination  of
employment and upon certain change of control events, and (iii) have an exercise
price  equal  to  $98.01  (the  per  share  price  at  which  Vestar,  A&M,  the
Co-Investors  and the Management  Investors  acquired  shares of Holdings Common
Stock   in  the   Recapitalization).   From   time   to   time   following   the
Recapitalization,  the  Board  of  Directors  of  Holdings,  or  a  compensation
committee  thereof,  may grant these or additional Options under the Option Plan
to various employees of Holdings,  the Company and their  subsidiaries on terms,
including vesting schedule,  term and exercise price, determined by the Board of
Directors or such committee in accordance  with the Option Plan. No options have
been granted under the Option Plan through December 31, 2001.


                                       26
<PAGE>

    Puts And Calls. Purchased Stock, Options and Holdings Common Stock purchased
upon the exercise of Options will be subject to certain put and call  provisions
relating to the death,  disability,  retirement and termination of employment of
the holder. Put and call prices will vary depending on the number of years since
grant or purchase,  the reason the put or call became exercisable,  and the fair
market value and initial  purchase price of Holdings Common Stock subject to the
put or call.  Under  certain  circumstances,  Holdings is permitted (i) to defer
exercise of the put or call to the extent prohibited by financing  agreements or
other  instruments,  and (ii) to pay the purchase price under the put or call in
prime-rate junior subordinated notes with maturities up to five years.

Compensation of Directors

     Directors  of the  Company  who are  neither  employees  of the Company nor
affiliated  with Vestar Capital  receive annual  compensation of $20,000 payable
quarterly  for  services in such  capacity.  Other  directors do not receive any
compensation for services in such capacity.

Compensation Committee Interlocks and Insider Participation

     Directors  Alpert and Levy, each of whom is affiliated with Vestar Capital,
are  the  members  of  the  Compensation  Committee  which  reviews  the  future
compensation and benefits of the Company's executive officers and key employees.

     Since the  Recapitalization,  each of these individuals has had an interest
in  transactions  or  business  relationships  involving  the  Company.  See the
information   contained  in  Item  13,   "Certain   Relationships   and  Related
Transactions", which is incorporated herein by reference.

Report on Executive Compensation

     This report sets forth the  compensation  policies that guide  decisions of
the  Compensation  committee with respect to the  compensation  of the Company's
executive  officers.  This report also reviews the  rationale  for pay decisions
that  affected  Mr.  Marsal  during the 2001 fiscal  year,  and, in that regard,
offers  additional  insight  into the figures  that  appear in the  compensation
tables  which are an  integral  part of the  overall  disclosures  of  executive
compensation. Any consideration to pay-related actions that may become effective
in future fiscal years are not reported in this statement.

     The central  responsibility  of the  Compensation  Committee  is to oversee
compensation  practices of the Company's executive offices. In this capacity, it
reviews  salaries,  benefits,  and  other  compensation  paid  to the  Company's
executive  officers and  recommends  actions to the full Board of Directors with
respect to those matters.

     The  Compensation  Committee is dedicated  to ensuring  that the  Company's
financial  resources  are used  effectively  to support the  achievement  of its
short-term and long-term business  objectives.  In general,  it is the policy of
the Company that executive  compensation  reflect  relevant market standards for
individuals  with  superior  capabilities  and be  driven  substantially  by the
Company's  performance as measured by the  achievement  of internally  generated
earnings targets.  The members of the Compensation  committee  believes that the
Company's  executive  compensation  program is well  structured  to achieve  its
objectives.

                                       27
<PAGE>



Item 12.  Security Ownership of Certain Beneficial Owners and Management

    All of the issued and outstanding  shares of common stock of the Company are
held by Cluett  American  Group ("CAG"),  which is a wholly owned  subsidiary of
Cluett American Investment Corp.  ("Holdings").  The following table sets forth,
as of March 1, 2002, certain information  regarding the beneficial  ownership of
the voting securities of Holdings by each person who beneficially owns more than
5% of any class of Holdings  voting  securities and by the directors and certain
executive officers of Holdings, individually, and by the directors and executive
officers of Holdings as a group. Except as indicated below, the address for each
of the persons listed below is c/o Cluett American Corp., 48 W 38th Street,  New
York, NY 10018.
                                           HOLDINGS COMMON STOCK
                                           SHARES BENEFICIALLY OWNED

                                           NUMBER OF             PERCENT OF
                                           SHARES                COMMON
5% STOCKHOLDERS:
  Vestar Capital Partners  III, L.P. ....   217,285               62.1%(1)
    245 Park Avenue, 41st Floor
    New York, New York 10167
  A&M....................................    49,995               14.3%(1)
    599 Lexington Avenue
    Suite 2700
    New York, New York 10022
  Societe Anonyme D'Etudes et de
  Participation Industrielles et
  Commerciales...........................    24,699                7.1%(1)
    114 rue de Turenne
    75003 Paris
  Cerberus Partners, L.P. ...............    20,622                5.9%(1)
    450 Park Avenue
    New York, New York 10022
OFFICERS AND DIRECTORS:
  Norman W. Alpert(3)....................   217,285                62.1%
  Sander M. Levy(3)......................   217,285                62.1%
  Daniel S. O'Connell(3).................   217,285                62.1%
  Steven M. Silver(3) ...................   217,285                62.1%
  Bryan P. Marsal(2).....................    49,995                14.3%
  James A. Williams......................     4,388                 1.3%
  Kathy D. Wilson........................     2,041                 (4)
  William C. Sheely .....................     1,633                 (4)
  Dean G. Norman.........................     1,123                 (4)
  Neil P. DeFeo .........................     1,020                 (4)
  Michael A. McLain .....................         0                 (4)
  All executive officers and directors as
  a group (11 persons)(2)(3) ............   277,485                79.3%

     (1)  For a discussion of certain  voting  arrangements  among these holders
          see Item 13.  "Certain  Relationship  and Related  Transactions--Stock
          Ownership and Stockholder's  Agreement".  Each of Vestar, A&M, Societe
          Anonyme  D'Etudes et de  Participation  Industrielles  et Commerciales
          ("SAEPIC") and Cerberus  Partners,  L.P.  disclaims the existence of a
          group and disclaims  beneficial ownership of Holdings Common Stock not
          owned of record by them.
     (2)  Includes shares owned by A&M. Mr. Marsal  disclaims the existence of a
          group and disclaims  beneficial ownership of the Holdings Common Stock
          not held by him.
     (3)  Includes shares owned by Vestar.  Each of Mr. Alpert,  Mr.  O'Connell,
          Mr.  Levy  and Mr.  Silver  disclaims  the  existence  of a group  and
          disclaims  beneficial  ownership of Holdings  Common Stock not held by
          him.
     (4)  Less than 1%.


                                       28
<PAGE>


Item 13.  Certain Relationships and Related Transactions

Issuance Of Shares Pursuant To Recapitalization

     In connection with the Plan and pursuant to the Subscription Agreement, the
Equity  Investors made the Equity  Investment in Holdings.  Approximately  $52.7
million of the Equity  Investment  was provided by Vestar in the form of a $21.3
million  common equity  investment in Holdings  Common Stock and a $31.4 million
investment  in  Holdings  Class C Junior  Preferred  Stock.  Approximately  $8.6
million of the Equity Investment was provided by the Co-Investors in the form of
a $3.5 million investment in Holdings Common Stock and a $5.1 million investment
in Holdings Class C Junior  Preferred  Stock.  A&M and the Management  Investors
provided the remaining Equity  Investment in the form of a $4.9 million and $1.8
million  investment  in  Holdings  Common  Stock,  respectively.  Each of  these
issuances of securities  were made in reliance on Section 4(2) of the Securities
Act of 1993,  as amended  (the  "Securities  Act").  The balance of the Holdings
Common Stock is held by former stockholders of Holdings.

Stock Ownership And Stockholders' Agreement

     In the  Recapitalization:  (i)  Vestar  acquired  60.8% of the  outstanding
Holdings  Common  Stock,  (ii) A&M acquired  14.0% of the  outstanding  Holdings
Common Stock,  (iii) the Management  Investors acquired in the aggregate 5.1% of
the outstanding Holdings Common Stock, and (iv) the Co-Investors  acquired 10.0%
of the outstanding Holdings Common Stock.  Following the  Recapitalization,  the
former  stockholders of Holdings (the "Original Equity Holders") retained in the
aggregate  10.1% of the  outstanding  Holdings  Common  Stock.  There  can be no
assurance  as to how long any of Vestar,  A&M,  the  Management  Investors,  the
Co-Investors  or the Original  Equity Holders will hold their shares of Holdings
Common Stock,  although certain transfers by them may be restricted as described
below.

     Vestar, A&M, the Co-Investors and the Management  Investors  (including any
employees of Holdings and its  subsidiaries  who purchase  Holdings Common Stock
from, or are granted options by, Holdings following the  Recapitalization)  (the
foregoing parties, collectively, the "Initial Investors") and SAEPIC and certain
other Original  Equity Holders  (SAEPIC and such other Original  Equity Holders,
the  "Participating   Original  Equity  Holders";   together  with  the  Initial
Investors, the "Participating Stockholders"),  have entered into a Stockholders'
Agreement  (the  "Stockholders'  Agreement")  which  provides  for,  among other
things, the matters described below.

     Transfers Of Holdings Common Stock And Holdings Preferred Stock. Subject to
certain  limitations,  transfers of Holdings  securities by A&M, the  Management
Investors,  the Co-Investors and the Participating  Original Equity Holders will
be restricted  unless the  transferee  agrees to become a party to, and be bound
by, the Stockholders'  Agreement.  In addition,  subject to certain limitations,
A&M, the Management Investors,  the Co-Investors and the Participating  Original
Equity Holders will agree that, unless a public offering of Holdings  securities
(a "Holdings Public Offering") has occurred, they will not transfer any Holdings
securities  for a period of five years  other  than as  described  below.  Under
certain  circumstances,  the transfer of Holdings  securities  by  Participating
Stockholders to their respective affiliates will be permitted.

     Election Of Directors. Subject to certain requirements and exceptions, each
Participating  Stockholder  will vote all of the Holdings  Common Stock owned or
held of record by such Participating  Stockholder so as to elect to the Board of
Directors of Holdings and each of its subsidiaries: (i) four designees of Vestar
Capital,  (ii)  three  additional  designees  of  Vestar  Capital  who  are  not
affiliates of any  Participating  Stockholder or employees of Holdings or any of
its  affiliates and (iii) three  designees of A&M and the Management  Investors.
The number of  designees,  to which  Vestar  Capital and A&M and the  Management
Investors are entitled,  decreases according to a formula based on the number of
shares  owned as compared to the number  acquired in the  Recapitalization.  Mr.
Marsal shall be Chairman of the Board of Directors and a designee of A&M and the
Management  Investors so long as he remains Chief Executive Officer of Holdings.
See  Item  10.  "Directors  and  Executive  Officers  of the  Registrant"  for a
discussion  of the present  officers and  directors  and their  relationship  to
Vestar Capital and A&M.

     Other Voting Matters.  So long as Vestar and its affiliates continue to own
at least one-half of the shares of Holdings Common Stock acquired by them in the
Recapitalization,  each Participating Stockholder (excluding the Original Equity
Holders)  will vote all of its  Holdings  Common  Stock in favor of adopting and
approving any action adopted and approved by the Holdings Board of Directors.

     Tag-Along  Rights.  So long  as no  Holdings  Public  Offering  shall  have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares  of  Holdings  Common  Stock  acquired  by them in the  Recapitalization,
subject to certain exceptions, with respect to any proposed transfer of Holdings
Common Stock or Holdings Class C Junior  Preferred  Stock by Vestar,  other than
transfers to  affiliates,  each other  Participating  Stockholder  will have the
right  to  require  that  the  proposed   transferee  purchase  a  corresponding
percentage  of any shares of Holdings  Common  Stock or Holdings  Class C Junior
Preferred Stock, as the case may be, owned by such Participating  Stockholder at
the same price and upon the same terms and conditions.

     Drag-Along  Rights.  So long as no  Holdings  Public  Offering  shall  have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares  of  Holdings  Common  Stock  acquired  by them in the  Recapitalization,
subject  to  certain  limitations,   each  Participating   Stockholder  will  be
obligated,  in  connection  with an offer by a third party to Vestar to purchase
(pursuant  to a sale of stock,  a merger or  otherwise)  all of the  outstanding
shares of Holdings Common Stock or Holdings Class C Junior  Preferred Stock held
by the Participating  Stockholders  (other than shares not purchased in order to
reserve availability of recapitalization  accounting treatment), to transfer all
of its shares of  Holdings  Common  Stock or Holdings  Class C Junior  Preferred
Stock to such third party on the terms of the offer accepted by Vestar.

     Participation  Rights.  So long as no Holdings  Public  Offering shall have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares of Holdings Common Stock acquired by them in the Recapitalization,  under
certain  circumstances,  if  Holdings or its  subsidiaries  propose to issue any
common stock to an Initial Investor or  Participating  Original Equity Holder or
to an affiliate thereof,  each other Initial Investor or Participating  Original
Equity Holder shall have the  opportunity to purchase such Holdings Common Stock
on a pro rata basis.

     Right Of First  Refusal.  After five  years and prior to a Holdings  Public
Offering,  if A&M, a Management  Investor,  the  Co-Investors or a Participating
Original Equity Holder or any of their transferees receives an offer to purchase
any  Holdings  securities  held by it, other than from its  affiliate,  and such
Participating  Stockholder or transferee  wishes to accept such offer, then such
Participating  Stockholder  or  transferee  shall  be  required  to  offer  such
securities  first to Holdings (or its designee) on the same terms and conditions
(provided  that Holdings may pay cash  consideration  equivalent to any non-cash
consideration offered) before accepting such third-party offer.

     Registration Rights. Subject to certain limitations, upon a written request
by Vestar, its affiliates or its transferees, Holdings will use its best efforts
to effect the  registration of all or part of the Holdings Common Stock owned by
Vestar or such affiliate or  transferee,  provided that (i) Holdings will not be
required to effect more than one registration within any 360-day period and (ii)
no more than six such  registrations  may be  requested,  unless the  requesting
party agrees to pay all costs and expenses thereof.

     Incidental Registration.  Under certain circumstances, if Holdings proposes
to register  shares of Holdings  Common Stock, it will, upon the written request
of any  Participating  Stockholder,  use all  reasonable  efforts  to effect the
registration of such Participating Stockholder's common stock.

     Termination.  The Stockholders' Agreement will terminate (i) in full on the
earliest of (A) the Initial Investors and their affiliates owning less than 5.0%
of the  outstanding  Holdings Common Stock (on a fully diluted basis) or (B) the
Participating Stockholders,  including their affiliates and transferees,  owning
less than 50.0% of the  outstanding  Holdings  Common Stock (on a fully  diluted
basis) and (C) ten years after the  Recapitalization and (ii) as to any Holdings
securities,  on the  date  such  securities  are sold in a  public  offering  or
pursuant to Rule 144.

Other Relationships

     Management  Advisory  Agreement.  For 2001 Holdings paid a $227,000  annual
management  fee to Vestar  Capital in  consideration  for certain  advisory  and
consulting  services provided by Vestar (excluding  investment  banking or other
financial advisory services and full- or part-time employment by Holdings or any
of its  subsidiaries  of any  employee  or  partner  of any of  Vestar  and  its
affiliates,  in each case for which Vestar and its affiliates  shall be entitled
to receive additional compensation). For 2002, the Vestar Capital management fee
is  $200,000.  Holdings  has agreed to  reimburse  Vestar  Capital for  expenses
incurred in connection  with, and to indemnify Vestar Capital and its affiliates
for any liabilities arising from, such advisory and consulting services.

     Management Loans. At the closing of the  Recapitalization,  Holdings loaned
$1.35  million to A&M, and  $900,000 to the  Management  Investors,  in order to
provide A&M and such Management  Investors with funds to be applied to a portion
of the purchase price of the Holdings  Common Stock to be issued to A&M and such
Management  Investors in  connection  with the  Recapitalization.  Such recourse
loans (i) are secured by pledges of the Holdings  common stock  purchased by the
respective borrowers, (ii) have a term of seven years, (iii) bear interest at an
annual rate of 5.69%, and (iv) are subject to mandatory  prepayment (a) with the
net  proceeds of any sales of Holdings  Common  Stock and (b) in full in certain
other  events  including,  in the  case  of  the  Management  Investors,  if the
employment  by  Holdings  and  its  subsidiaries  of  such  Management  Investor
terminates other than as a result of death, disability or retirement.  The terms
of  these  loans  may be more  favorable  to  Management  Investors  than  terms
obtainable from an unrelated third-party.




                                       29
<PAGE>






Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)          (1)      Financial Statements

                      Included in Part II, Item 8

                      Consolidated Balance Sheets as of December 31, 2000 and
                      December 31, 2001

                      Consolidated Statements of Operations for the years ended
                      December 31, 1999, December 31, 2000 and December 31, 2001

                      Consolidated  Statements of Stockholder's  Deficit for the
                      years  ended  December  31,  1999,  December  31, 2000 and
                      December 31, 2001

                      Consolidated  Statements  of Cash  Flows  for the  years
                      ended  December 31,  1999,  December 31, 2000 and December
                      31, 2001

                      Notes to Consolidated Financial Statements

             (2)      Financial Statement Schedule

                      Schedule II - Valuation and Qualifying Accounts

                      All  other  schedules  for which  provision  is made in
                      the applicable  accounting  regulation  of the  Securities
                      and Exchange  Commission  are not  required  under the
                      related instructions  or are  inapplicable  and therefore
                      have been omitted.

             (3)      List of Exhibits

 EXHIBIT
   NO.                        DESCRIPTION OF EXHIBIT
   ---                        ----------------------

     2.1  Third Amended plan of  Reorganization  of Cluett  American  Corp.  and
          Cluett American Investment Corp. (incorporated by reference to Exhibit
          2.1 to the  Company's  Registration  Statement  on Form S-4 (Reg.  No.
          333-58059) filed on June 30, 1998).

     2.2  Subscription  Agreement  dated as of March 30, 1998,  among  Bidermann
          Industries U.S.A., Inc., Vestar Capital Partners III, L.P. and Alvarez
          & Marsal,  Inc.  (incorporated  by  reference  to  Exhibit  2.2 to the
          Company's  Registration  Statement  on Form S-4 (Reg.  No.  333-58059)
          filed on June 30, 1998).

     2.3Stockholders'  Agreement dated as of May 18, 1998, among Cluett American
          Investment  Corp.,  Vestar Capital  Partners III, L.P., A&M Investment
          Associates  #7, LLC,  the  Co-Investors  named  therein,  the Original
          Equity  Holders  named  therein  and the  Management  Investors  named
          therein  (incorporated  by reference  to Exhibit 2.3 to the  Company's
          Registration  Statement on Form S-4 (Reg. No. 333-58059) filed on June
          30, 1998).

                                       30
<PAGE>

     2.4  Joinder  Agreement  dated as of June 30, 1998,  among Cluett  American
          Investment  Corp.,  Vestar  Capital  Partners III, L.P. and each other
          signatory  thereto  (an  "Additional  Stockholder")  (incorporated  by
          reference to Exhibit 2.4 to the  Company's  Registration  Statement on
          Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).

     3.1  Restated   Certificate  of  Incorporation  of  Cluett  American  Corp.
          (incorporated   by   reference   to  Exhibit  3.1  to  the   Company's
          Registration  Statement on Form S-4 (Reg. No. 333-58059) filed on June
          30, 1998).

     3.2  Bylaws of Cluett American Corp.  (incorporated by reference to Exhibit
          3.2 to the  Company's  Registration  Statement  on Form S-4 (Reg.  No.
          333-58059) filed on June 30, 1998).

     4.1  Indenture  between Cluett  American Corp. and The Bank of New York, as
          Trustee  (incorporated  by reference  to Exhibit 4.1 to the  Company's
          Registration  Statement on Form S-4 (Reg. No. 333-58059) filed on June
          30, 1998).

     4.2  Exchange  Debenture  Indenture  between Cluett  American Corp. and The
          Bank of New York, as Trustee (incorporated by reference to Exhibit 4.2
          to  the  Company's  Registration  Statement  on  Form  S-4  (Reg.  No.
          333-58059) filed on June 30, 1998).

     4.3  Certificate  of  Designations   of  the  121/2%  Senior   Exchangeable
          Preferred Stock Due 2010  (incorporated by reference to Exhibit 4.3 to
          the Company's  Registration Statement on Form S-4 (Reg. No. 333-58059)
          filed on June 30, 1998).

     4.4  Form of 10 1/8% Senior  Subordinated  Notes Due 2008  (incorporated by
          reference to Exhibit 4.4 to the  Company's  Registration  Statement on
          Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).

     4.5  Form  of  10  1/8%  Series  B  Senior   Subordinated  Notes  Due  2008
          (incorporated   by   reference   to  Exhibit  4.5  to  the   Company's
          Registration  Statement on Form S-4 (Reg. No. 333-58059) filed on June
          30, 1998).

     4.6  Form  of  12  1/2%  Senior  Exchangeable   Preferred  Stock  Due  2010
          (incorporated   by   reference   to  Exhibit  4.6  to  the   Company's
          Registration  Statement on Form S-4 (Reg. No. 333-58059) filed on June
          30, 1998).

     4.7  Form of 12 1/2% Series B Senior Exchangeable  Preferred Stock Due 2010
          (incorporated   by   reference   to  Exhibit  4.7  to  the   Company's
          Registration  Statement on Form S-4 (Reg. No. 333-58059) filed on June
          30, 1998).

     4.8  Note  Registration  Rights  Agreement dated May 18, 1998, among Cluett
          American  Corp.,  NationsBanc  Montgomery  Securities LLC, and NatWest
          Capital Markets Limited  (incorporated  by reference to Exhibit 4.8 to
          the Company's  Registration Statement on Form S-4 (Reg. No. 333-58059)
          filed on June 30, 1998).

     4.9  Preferred  Stock  Registration  Rights  Agreement  dated May 18, 1998,
          among Cluett American Corp.,  NationsBanc  Montgomery  Securities LLC,
          and NatWest  Capital  Markets  Limited  (incorporated  by reference to
          Exhibit 4.9 to the Company's  Registration Statement on Form S-4 (Reg.
          No. 333-58059) filed on June 30, 1998).

                                       31
<PAGE>

     10.1 $160,000,000  Credit  Agreement dated as of May 18, 1998, among Cluett
          American Corp., as the Borrower,  NationsBank, N.A., as Administrative
          Agent and Collateral Agent,  NationsBanc Montgomery Securities LLC, as
          Arranger and Syndication Agent, and lenders (incorporated by reference
          to Exhibit 10.1 to the  Company's  Registration  Statement on Form S-4
          (Reg. No. 333-58059) filed on June 30, 1998).

     10.2 First Amendment to the Credit  Agreement and Assignment  dated May 27,
          1998, by and among Cluett American Corp.,  Cluett American  Investment
          Corp.,  Cluett  American  Group,  Inc. and certain  subsidiaries,  the
          Existing Lenders,  New Lenders,  and agents (incorporated by reference
          to Exhibit 10.2 to the  Company's  Registration  Statement on Form S-4
          (Reg. No. 333-58059) filed on June 30, 1998).

     10.2.1 Second  Amendment to the Credit  Agreement and  Assignment  dated as
          December 18, 1998, by and among Cluett American Corp., Cluett American
          Investment   Corp.,   Cluett   American   Group,   Inc.   and  certain
          subsidiaries,   the  Existing   Lenders,   New  Lenders,   and  agents
          (incorporated  by reference to Exhibit 10.2.1 to the Company's  Annual
          Report on Form 10-K (Reg. No. 333-58059) filed on March 29, 1999).

     10.2.2 Third Amendment to the Credit  Agreement and Assignment  dated as of
          March 19, 1999, by and among Cluett  American  Corp.,  Cluett American
          Investment   Corp.,   Cluett   American   Group,   Inc.   and  certain
          subsidiaries,   the  Existing   Lenders,   New  Lenders,   and  agents
          (incorporated  by reference to Exhibit 10.2.2 to the Company's  Annual
          Report on Form 10-K (Reg. No. 333-58059) filed on March 29, 1999).

     10.2.3 Waiver to the Credit  Agreement and Assignment  dated July 28, 1999,
          by and among Cluett American Corp.,  Cluett American Investment Corp.,
          Cluett American  Group,  Inc. and certain  subsidiaries,  the Existing
          Lenders, New Lenders, and agents (incorporated by reference to Exhibit
          10.2.3 to the Company's Annual Report on Form 10-K (Reg No. 333-58059)
          filed on March 29, 1999).

     10.2.4 Fourth  Amendment  to the  Credit  Agreement  and  Assignment  dated
          September  30,  1999,  by and  among  Cluett  American  Corp.,  Cluett
          American  Investment  Corp.,  Cluett American Group,  Inc. and certain
          subsidiaries,   the   Existing   Lender,   New   Lender,   and  agents
          (incorporated   by  reference  to  Exhibit  10.2.4  to  the  Company's
          Quarterly  Report on Form 10-Q (Reg No.  333-58059)  filed on November
          16, 1999).

      10.2.5 Investment and Deposit  Agreement  between Vestar Capital  Partners
         and Bank of America dated September 30, 1999 (incorporated by reference
         to Exhibit 10.2.5 to the Company's  Quarterly  Report on Form 10-Q (Reg
         No. 333-58059) filed on November 16, 1999).

     10.2.6 $3.0 million Credit  Agreement  dated as of November 9, 1999,  among
          Cluett  American  Corp,  as the  borrower,  Bank of America,  N.A. and
          Vestar  Capital  Partners  III,  L.P., as guarantor  (incorporated  by
          reference to Exhibit 10.2.6 to the Company's  Quarterly Report on Form
          10-Q (Reg No. 333-58059) filed on November 16, 1999).

     10.2.7 $7.5  million  Amended and  Restated  Credit  Agreement  dated as of
          February 17, 2000,  among Cluett American Corp, as the borrower,  Bank
          of America,  N.A. and Vestar Capital  Partners III, L.P., as guarantor
          (incorporated  by reference to Exhibit 10.2.7 to the Company's  Annual
          Report on Form 10-K (Reg No. 333-58059) filed on March 30, 2000).

                                       32
<PAGE>

     10.2.8 Fifth Amendment to Credit Agreement and Waiver dated March 29, 2000,
          by and among Cluett American Corp.,  Cluett American Investment Corp.,
          Cluett American  Group,  Inc. and certain  subsidiaries,  the Existing
          Lender, New Lender,  and agents  (incorporated by reference to Exhibit
          10.2.8 to the Company's Annual Report on Form 10-K (Reg No. 333-58059)
          filed on March 30, 2000).

     10.2.9 Amended and Restated Investment and Deposit Agreement between Vestar
          Capital  Partners  III,  L.P. and Bank of America dated March 29, 2000
          (incorporated  by reference to Exhibit 10.2.9 to the Company's  Annual
          Report on Form 10-K (Reg No. 333-58059) filed on March 30, 2000).

     10.2.9.1 Six Amendment to Credit  Agreement and Waiver dated June 30, 2000,
          by and among Cluett American Corp.,  Cluett American Investment Corp.,
          Cluett American  Group,  Inc. and certain  subsidiaries,  the Existing
          Lender,  New Lender,  and agent  (incorporated by reference to Exhibit
          10.2.9.1  to the  Company's  Quarterly  Report  on Form  10-Q (Reg No.
          333-58059) filed on August 14, 2000).

     10.2.9.2 Seventh  Amendment to Credit  Agreement and Waiver dated March 22,
          2001 by and among Cluett  American Corp.,  Cluett American  Investment
          Corp.,  Cluett  American  Group,  Inc. and certain  subsidiaries,  the
          Existing  Lender,  Agents and  Documentation  Agents  (incorporated by
          reference to Exhibit  10.2.9.2 to the Company's  Annual Report on Form
          10-K (Reg No. 333-58059) filed on March 29, 2001).

     10.2.9.3 Eighth  Amendement to Credit  Agreement and Waiver dated April 12,
          2002 by and among Cluett  American Corp.,  Cluett American  Investment
          Corp.,  Cluett  American  Group,  Inc. and certain  subsidiaries,  the
          Existing Lenders,  Agents and Documentations  Agents  (incorporated by
          reference to Exhibit  10.2.9.3 to the Company's  Annual Report of Form
          10-K (Reg No. 333-58059) filed on April 16, 2002).

     10.3 Security  Agreement  dated as of May 18, 1998, made by Cluett American
          Corp.,  Cluett American  Investment Corp., Cluett American Group, Inc.
          and certain  Subsidiaries of Cluett American Investment Corp. in favor
          of NationsBank,  N.A. as agent  (incorporated  by reference to Exhibit
          10.3 to the  Company's  Registration  Statement on Form S-4 (Reg.  No.
          333-58059) filed on June 30, 1998).

     10.4 Pledge  Agreement  dated as of May 18, 1998,  made by Cluett  American
          Corp.,  Cluett American  Investment Corp., Cluett American Group, Inc.
          and certain  Subsidiaries of Cluett American Investment Corp. in favor
          of NationsBank,  N.A., as agent  (incorporated by reference to Exhibit
          10.4 to the  Company's  Registration  Statement on Form S-4 (Reg.  No.
          333-58059) filed on June 30, 1998).

     10.5 Joinder  Agreement dated as of May 18, 1998, by and between  Bidermann
          Tailored  Clothing,  Inc., and  NationsBank,  N.A., in its capacity as
          Agent under that  certain  Credit  Agreement  dated as of May 18, 1998
          (incorporated   by  reference   to  Exhibit  10.5  to  the   Company's
          Registration  Statement on Form S-4/A (Reg.  No.  333-58059)  filed on
          September 3, 1998).

     10.6 CDN  $15,000,000  Loan Agreement  dated as of August 8, 1997,  between
          Cluett,  Peabody Canada Inc., as the Borrower,  and Congress Financial
          Corporation  (Canada), as Lender (incorporated by reference to Exhibit
          10.6 to the  Company's  Registration  Statement on Form S-4 (Reg.  No.
          333-58059) filed on June 30, 1998).

                                       33
<PAGE>

     +10.7Employment  Agreement  dated  March  7,  1997,  by and  between  Great
          American Knitting Mills,  Inc. and James A. Williams  (incorporated by
          reference to Exhibit 10.7 to the Company's  Registration  Statement on
          Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).

     +10.8Severance  Agreement  dated  as of  August  8,  1997,  by and  between
          Cluett,  Peabody  & Co.,  Inc.  and  Phil  Molinari  (incorporated  by
          reference to Exhibit 10.8 to the Company's  Registration  Statement on
          Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).

     +10.9Severance  Agreement  dated as of May 5, 1997,  by and  between  Great
          American  Knitting  Mills,  Inc. and William Sheely  (incorporated  by
          reference to Exhibit 10.9 to the Company's  Registration  Statement on
          Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).

     +10.10 Severance  Agreement  dated as of May 5, 1997,  by and between Great
          American  Knitting  Mills,  Inc.  and Kathy  Wilson  (incorporated  by
          reference to Exhibit 10.10 to the Company's  Registration Statement on
          Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).

     +10.11  Advisory  Agreement  dated  May 18,  1998,  among  Cluett  American
          Investment  Corp.,  Cluett American Corp. and Vestar Capital  Partners
          (incorporated   by  reference  to  Exhibit   10.11  to  the  Company's
          Registration  Statement on Form S-4/A (Reg.  No.  333-58059)  filed on
          September 3, 1998).

     10.12Secured  Promissory  Note dated May 18, 1998,  made by A&M  Investment
          Associates  #7,  LLC in  favor of  Cluett  American  Investment  Corp.
          (incorporated   by  reference  to  Exhibit   10.12  to  the  Company's
          Registration  Statement on Form S-4/A (Reg.  No.  333-58059)  filed on
          September 3, 1998).

     10.13Form of Secured  Promissory  Note made by the Management  Investors in
          favor of Cluett American  Investment Corp.  (incorporated by reference
          to Exhibit 10.13 to the Company's Registration Statement on Form S-4/A
          (Reg. No. 333-58059) filed on September 3, 1998).

     +10.14  Severance  Agreement  dated as of August 8,  1997,  by and  between
          Cluett,  Peabody & Co.,  Inc.  and Robert  Riesbeck  (incorporated  by
          reference to Exhibit 10.14 to the Company's  Registration Statement on
          Form S-4/A (Reg. No. 333-58059) filed
         on October 15, 1998).

      10.16 Limited Liability Company Agreement of Cluett American  Receivables,
         LLC,  entered into by Great American  Knitting Mills,  Inc. as the sole
         equity member and Dwight Jenkins and Lori Rezza as the special  members
         (incorporate  by reference to Exhibit 10.16 to the Company's  Quarterly
         Report of Form 10-Q (Reg No. 333.58059) filed on May 16, 2000).

     10.16.1 Receivable  Transfer  Agreement  dated May 12, 2000,  between Great
          American  Knitting Mills,  Inc. and Cluett American  Receivables,  LLC
          (incorporate   by  reference  to  Exhibit  10.16.1  to  the  Company's
          Quarterly  Report on Form 10-Q  (Reg No.  333-58059)  filed on May 16,
          2000).

     10.16.2 Receivable  Purchase Agreement entered into between Cluett American
          Receivable,  LLC, and Banc of America  Commercial  Corp. dated May 12,
          2000  (incorporate  by reference to Exhibit  10.16.2 to the  Company's
          Quarterly  Report on Form 10-Q  (Reg No.  333-58059)  filed on May 16,
          2000).

     10.16.3 Partial Release  Agreement dated May 12, 2000, by and among Bank of
          America, N.A. f/k/a/ Nationsbank,  N.A. as agent for the Lenders under
          the Credit  Agreement,  Great American Knitting Mills, Inc. and Cluett
          American  Corp.  (incorporate  by reference to Exhibit  10.16.3 to the
          Company's  Quarterly Report on Form 10-Q (Reg No.  333-58059) filed on
          May 16, 2000).

                                       34
<PAGE>

     10.16.4 Guarantee  Agreement  dated May 12, 2000,  made by Cluett  American
          Corp.  (incorporate  by reference to Exhibit  10.16.4 to the Company's
          Quarterly  Report on Form 10-Q  (Reg No.  333-58059)  filed on May 16,
          2000).

      10.16.5  Repurchase  Agreement  dated May 12, 2000, made by Vestar Capital
         Partners III, L.P. in favor of Banc of America  Commercial  Corporation
         (incorporate by reference to Exhibit 10.16.5 to the Company's Quarterly
         Report on Form 10-Q (Reg No. 333-58059) filed on May 16, 2000).

     16.1 Letter  from  Ernst  &  Young  LLP,  former   Certifying   Accountants
          (incorporated  by reference to Exhibit 16.1 to the  Company's  Current
          Report  filed on Form 8-K (Reg.  No.  333-58059)  filed on January 10,
          2000).

     21   List of Subsidiaries (incorporated by reference to Exhibit 10.6 to the
          Company's  Registration  Statement  on Form S-4 (Reg.  No.  333-58059)
          filed on June 30, 1998).

     24   Powers of Attorney  (included on pages  II-5--II-11)  (incorporated by
          reference  to Exhibit 24 to the  Company's  Registration  Statement on
          Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).

     99.1 Form of Note  Letter of  Transmittal  (incorporated  by  reference  to
          Exhibit 99.1 to the Company's Registration Statement on Form S-4 (Reg.
          No. 333-58059) filed on June 30, 1998).

     99.2 Form  of  Preferred  Stock  Letter  of  Transmittal  (incorporated  by
          reference to Exhibit 99.2 to the Company's  Registration  Statement on
          Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).

     99.3 Form of Note Notice of Guaranteed Delivery  (incorporated by reference
          to Exhibit 99.3 to the  Company's  Registration  Statement on Form S-4
          (Reg. No. 333-58059) filed on June 30, 1998).

     99.4 Form of Preferred Stock Notice of Guaranteed Delivery (incorporated by
          reference to Exhibit 99.4 to the Company's  Registration  Statement on
          Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).

      +  This is a management contract or compensatory plan or arrangement


(b) No report was filed on Form 8-K during the three months  ended  December 31,
    2001.

(c) Exhibits: See (a)(3) above for a listing of the exhibits included as part of
    this report.
(d) Financial Statement Schedules:  See (a)(1) and (a)(2) above for a listing of
    the financial statements and schedules submitted as part of this report.



                                       35
<PAGE>



                                   Signatures

    Pursuant  to the  requirements  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                        CLUETT AMERICAN CORP.
                               (Registrant)

                  By:        /s/   Bryan P. Marsal


                  ------------------------------------------------------------
                           Name: Bryan P. Marsal
                  Title:   DIRECTOR AND CHIEF EXECUTIVE OFFICER

                  Date:   April 16, 2002
                  ------------------------------------------------------------

    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


                  /s/   Bryan P. Marsal
                  ------------------------------------------------------------
                  Name:    Bryan P. Marsal
                  Title:   Director and Chief Executive Officer

                  Date:    April 16, 2002
                  ------------------------------------------------------------


                  /s/   Kathy D. Wilson
                  ------------------------------------------------------------
                  Name:    Kathy D. Wilson
                  Title:   Vice President and Chief Financial and Accounting
                           Officer

                  Date:    April 16, 2002
                  ------------------------------------------------------------


                  /s/     James A. Williams
                  ------------------------------------------------------------
                  Name:    James A. Williams
                  Title:   Director

                  Date:    April 16, 2002
                  ------------------------------------------------------------


                                       36
<PAGE>



                  /s/   Norman W. Alpert
                  ------------------------------------------------------------
                  Name:    Norman W. Alpert
                  Title:   Director

                  Date:    April 16, 2002
                  ------------------------------------------------------------


                  /s/   Steven M. Silver
                  ------------------------------------------------------------
                  Name:    Steven  M. Silver
                  Title:   Director

                  Date:    April 16, 2002
                  ------------------------------------------------------------


                  /s/   Sander M. Levy
                  ------------------------------------------------------------
                  Name:    Sander M. Levy
                  Title:   Director

                  Date:    April 16, 2002
                  ------------------------------------------------------------


                  /s/   Daniel S. O' Connell
                  ------------------------------------------------------------
                  Name:    Daniel S. O'Connell
                  Title:   Director

                  Date:    April 16, 2002
                  ------------------------------------------------------------





                                  EXHIBIT INDEX

10.2.9.3 Eighth Amendment to Credit Agreement and Waiver dated April 12, 2002




                                       37
<PAGE>



 Item 14 (d).  Financial Statement Schedules


<TABLE>
<CAPTION>

                                   SCHEDULE II

                              CLUETT AMERICAN CORP.

                        VALUATION AND QUALIFYING ACCOUNTS

                                 (IN THOUSANDS)


COLUMN A                                       COLUMN B               COLUMN C          COLUMN D        COLUMN E
--------                                       --------               --------          --------        --------
                                                                      ADDITIONS
                                                                      ---------

                                               BALANCE AT     CHARGED TO   CHARGED                      BALANCE
                                               BEGINNING      COSTS AND    TO OTHER                     AT END
DESCRIPTION                                    OF YEAR        EXPENSES     ACCOUNTS     DEDUCTIONS      OF YEAR
-----------                                    -------        --------     --------     ----------      -------
<S>                                            <C>             <C>                     <C>             <C>
PERIOD ENDED DECEMBER 31, 1999:
    Deduction from asset account:
      Allowance for doubtful accounts          $  1,172        $    87        --       $    425 (1)    $     834
      Customer allowances                         3,405            680        --            671 (1)        3,414
      Inventory reserves                          2,157             --        --          1,147 (1)        1,010
                                                  -----          -----        --          -----            -----
        Total                                  $  6,734        $   767        --       $  2,243 (1)    $   5,258
                                               ========        =======        ==       ========        =========


PERIOD ENDED DECEMBER 31, 2000:
    Deduction from asset account:
      Allowance for doubtful accounts          $    834        $   246         --      $    171(1)     $     909
      Customer allowances                         3,414          1,205         --           582(1)         4,037
      Inventory reserves                          1,010             24         --           450(1)           584
                                                  -----             --         --         -----              ---
        Total                                  $  5,258        $ 1,475         --      $  1,203(1)     $   5,530
                                               ========        =======         ==         =====            =====

PERIOD ENDED DECEMBER 31, 2001:
    Deduction from asset account:
      Allowance for doubtful accounts          $    909        $   411         --      $    186(1)     $   1,134
      Customer allowances                         4,037           (156)        --           148(1)         3,733
      Inventory reserves                            584          1,031         --             11(1)        1,604
                                                    ---          -----         --           ----           -----

        Total                                  $  5,530        $ 1,286         --      $     345(1)    $   6,471
                                               ========        =======         ==      =========       =========
</TABLE>





(1)      Write offs, net of recoveries






                                       38
<PAGE>






                                                              Exhibit 10.2.9.3

                  EIGHTH AMENDMENT TO CREDIT AGREEMENT & WAIVER

     THIS EIGHTH  AMENDMENT  TO CREDIT  AGREEMENT & WAIVER  (this  "Amendment"),
dated  as of  April  12,  2002,  is by and  among  Cluett  American  Corp.  (the
"Borrower"),  Cluett American  Investment Corp. (the "Parent"),  Cluett American
Group, Inc. ("Interco") and the certain subsidiaries of the Parent identified on
the  signature  pages  hereto  (together  with  the  Parent  and  Interco,   the
"Guarantors"),  the  lenders  identified  on the  signature  pages  hereto  (the
"Lenders"),  Bank of America,  N.A.  (formerly known as  NationsBank,  N.A.), as
agent for the Lenders (in such  capacity,  the  "Agent"),  and Gleacher  NatWest
Inc., as documentation agent (the "Documentation Agent").


                               W I T N E S S E T H

     WHEREAS,  the  Borrower,  the  Guarantors,  the Lenders,  the Agent and the
Documentation  Agent have entered into that certain Credit Agreement dated as of
May 18, 1998, as amended as of May 27, 1998,  December 18, 1998, March 19, 1999,
September  30, 1999,  March 29, 2000,  May 2, 2000,  June 30, 2000 and March 23,
2001 (as so previously amended the "Existing Credit Agreement"); and

     WHEREAS,  the parties to the Existing Credit Agreement have agreed to amend
the Existing Credit Agreement and waive certain  provisions  thereof as provided
herein.

     NOW, THEREFORE,  in consideration of the agreements  hereinafter set forth,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:


                                     PART 1
                                   DEFINITIONS

     SUBPART 1.1 Certain  Definitions.  Unless  otherwise  defined herein or the
context  otherwise  requires,  the  following  terms  used  in  this  Amendment,
including its preamble and recitals, have the following meanings:

     "Amended Credit  Agreement"  means the Existing Credit Agreement as amended
hereby.

     "Amendment No. 8 Effective Date" is defined in Subpart 3.1.


     SUBPART  1.2 Other  Definitions.  Unless  otherwise  defined  herein or the
context otherwise requires, terms used in this Amendment, including its preamble
and recitals, have the meanings provided in the Amended Credit Agreement.



<PAGE>






                                     PART 2
                AMENDMENTS TO EXISTING CREDIT AGREEMENT & WAIVER

         Effective on (and subject to the  occurrence  of) the  Amendment  No. 8
Effective  Date, the Existing  Credit  Agreement is hereby amended in accordance
with this Part 2. Except as so amended,  the Existing  Credit  Agreement and all
other Credit Documents shall continue in full force and effect.


         SUBPART 2.1 Amendments to Section 1.1.

     (a)  The  pricing  grid  in  the  definition  of  "Applicable   Percentage"
          appearing in Section 1.1 of the Existing  Credit  Agreement is amended
          and restated in its entirety to read as follows:
<TABLE>
<CAPTION>

                                        Applicable Percentage For
                                        Revolving Loans and Tranche    Applicable Percentage For
                                             A Term Loan                 Tranche B Term Loan

                            Applicable                                                             Applicable          Applicable
                Senior      Percentage                                                          Percentage For      Percentage for
  Pricing      Leverage     For Unused  Eurodollar  Base Rate          Eurodollar  Base Rate  Standby Letter of    Trade Letter of
   Level         Ratio          Fee        Loans      Loans               Loans       Loans       Credit Fee          Credit Fee
   -----         -----          ---        -----      -----               -----       -----       ----------          ----------
<S>            <C>            <C>         <C>        <C>                <C>         <C>            <C>                <C>
     I         > 2.00 to
                 1.00          0.50%       3.25%      2.25%               3.75%       2.75%          3.25%              1.625%

    II         < 2.00 to
               -
                 1.00          0.50%       3.00%      2.00%               3.50%       2.50%          3.00%               1.50%

</TABLE>

     (b) The  following  definitions  appearing  in Section 1.1 of the  Existing
Credit  Agreement  are  amended  and  restated  in their  entireties  to read as
follows:

     "Consolidated EBITDA Adjustment" means (i) for any fiscal quarter ending on
or after September 30, 1999 and not later than December 31, 2000, the sum of (A)
the amount of charges taken during such quarter in respect of reorganization and
restructuring   charges  (including,   without  limitation,   facility  closing,
severance, pension expense and re-engineering costs) incurred by the Borrower or
any of its  Subsidiaries  during the period from and including  June 30, 1999 to
and including December 31, 2000,  provided that the aggregate amount of all such
charges for all such periods shall not exceed  $6,000,000  and (B) the amount of
charges taken during such fiscal quarter in respect of the  establishment  on or
prior  to  June  30,  2000  of a  litigation  reserve  of  up to  $725,000  (ii)
restructuring charges not to exceed $11,000,000 in the aggregate pursuant to the
Gold Toe brands  restructuring  plan for  fiscal  years 2001  through  2003,  as
presented  to the Lenders by the  Borrower on March 6, 2002,  and (iii)  accrued
annual  management  fees of the Sponsor or its  Affiliate  designee  and accrued
compensation  of Bryan P. Marsal  (whether paid  directly or indirectly  through
Alvarez and Marsal,  Inc.) in an aggregate annual amount not to exceed $500,000,
in each case calculated in accordance with GAAP.

     "Eurodollar  Rate" means,  for any Eurodollar  Loan for any Interest Period
therefor,  the rate per annum  (rounded  upwards,  if necessary,  to the nearest
1/100 of 1%)  determined  by the Agent to be equal to the  quotient  obtained by
dividing  (a) the  Interbank  Offered  Rate  for such  Eurodollar  Loan for such
Interest  Period  by (b) 1 minus the  Eurodollar  Reserve  Requirement  for such
Eurodollar Loan for such Interest  Period;  provided,  however,  for purposes of
this  Credit  Agreement,  the  Eurodollar  Rate shall not be less than 2.75% per
annum at any time after the earlier to occur of (i)  September  30, 2002 or (ii)
the first date  occurring  after the  Amendment  No. 8  Effective  Date that the
Eurodollar Rate (as determined above) equals or exceeds 2.75% per annum.
<PAGE>

     "Excluded  Asset  Disposition"  means  (i)  any  Asset  Disposition  to any
Consolidated  Party if (a) the Credit  Parties  shall cause to be  executed  and
delivered such documents,  instruments and certificates as the Agent may request
so as to cause the Credit Parties to be in compliance  with the terms of Section
7.13 after giving effect to such Asset  Disposition  and (b) after giving effect
to such Asset  Disposition,  no Default  or Event of  Default  exists,  (ii) any
casualty or condemnation event (other than in respect of any Property comprising
the Shirt Group) with  respect to which the net proceeds  received by the Parent
or the Consolidated  Parties are less than  $1,000,000,  (iii) the sale or other
disposition  of any Property  (other than inventory and other than in respect of
any Equity  Interests  or Property  comprising  the Shirt Group) in the ordinary
course of business,  provided that the  aggregate  book value of all Property so
sold or disposed of in any twelve consecutive months shall not exceed $1,000,000
and (iv) the sale or discount  without  recourse of (a) accounts  receivable for
which K-Mart Corp. is the account debtor and (b) other accounts  receivable only
in connection with the compromise thereof or the assignment of past-due accounts
for collection.

     "Interest  Period" means, (i) as to Eurodollar Loans, a period of one, two,
three or six months' duration,  as the Borrower may elect,  commencing,  in each
case,  on the date of the borrowing  (including  continuations  and  conversions
thereof) and (ii) as to any Swingline Loan, a period  commencing in each case on
the date of the  borrowing  and ending on the date agreed to by the Borrower and
the Swingline  Lender in  accordance  with the  provisions of Section  2.3(b)(i)
(such  ending date in any event to be not more than thirty  (30)  Business  Days
from the date of borrowing); provided, however, (a) if any Interest Period would
end on a day which is not a Business Day, such Interest Period shall be extended
to the next  succeeding  Business  Day  (except  that where the next  succeeding
Business  Day  falls in the next  succeeding  calendar  month,  then on the next
preceding Business Day), (b) no Interest Period shall extend beyond the Maturity
Date,  (c) with  regard to the Tranche A Term Loans,  no Interest  Period  shall
extend  beyond any  Principal  Amortization  Payment  Date unless the portion of
Tranche A Term Loans  comprised of Base Rate Loans  together with the portion of
Tranche A Term  Loans  comprised  of  Eurodollar  Loans  with  Interest  Periods
expiring  prior to the date such  Principal  Amortization  Payment is due, is at
least  equal to the amount of such  Principal  Amortization  Payment due on such
date,  (d) with  regard to the Tranche B Term Loans,  no Interest  Period  shall
extend  beyond any  Principal  Amortization  Payment  Date unless the portion of
Tranche B Term Loans  comprised of Base Rate Loans  together with the portion of
Tranche B Term  Loans  comprised  of  Eurodollar  Loans  with  Interest  Periods
expiring  prior to the date such  Principal  Amortization  Payment is due, is at
least  equal to the amount of such  Principal  Amortization  Payment due on such
date and (e) where an  Interest  Period  begins  on a day for which  there is no
numerically corresponding day in the calendar month in which the Interest Period
is to end,  such  Interest  Period  shall end on the last  Business  Day of such
calendar month.

     "Maturity Date" means (i) as to the Revolving Loans, Letters of Credit (and
the related LOC  Obligations),  Swingline Loans and Tranche A Term Loan, May 18,
2004,  (ii) as to the  Tranche  B Term  Loan,  May 18,  2005 and (iii) as to the
Tranche C Loans and the Tranche C Letters of Credit  (and the related  Tranche C
LOC Obligations), May 18, 2004.

     "Permitted   Acquisition"  means  an  Acquisition  by  the  Parent  or  any
Consolidated  Party  that has  been  consented  to in  writing  by the  Required
Lenders.

     "Permitted  Austell  Property  Sale"  means  (i) the  sale  of the  Austell
Property  contemplated by clause (ii) of the definition of "Austell Transaction"
set forth in this Section 1.1 and (ii) a sale of the Austell Property  otherwise
in compliance with the terms of Section 8.5.
<PAGE>

     "Permitted  Investments"  means  Investments  which are either (i) cash and
Cash  Equivalents;  (ii) accounts  receivable  created,  acquired or made by the
Parent or any Consolidated  Party in the ordinary course of business and payable
or  dischargeable  in accordance with customary trade terms;  (iii)  Investments
consisting  of  Equity  Interests,  obligations,  securities  or other  property
received  by the Parent or any  Consolidated  Party in  settlement  of  accounts
receivable  (created  in the  ordinary  course of  business)  from  bankrupt  or
insolvent  obligors;   (iv)  existing  Investments  in  Subsidiaries  and  other
Investments  existing as of the Closing Date and set forth in Schedule 1.1B; (v)
additional  Investments  in any Credit  Party  other than the Parent or Interco;
(vi) additional  Investments in Foreign Subsidiaries not exceeding $5,000,000 in
the  aggregate;  (vii)  Guaranty  Obligations  permitted by Section 8.1;  (viii)
transactions  permitted by Section  8.9;  (ix)  advances or loans to  directors,
officers,  employees, agents, customers or suppliers that do not exceed $100,000
in the aggregate at any time outstanding; (x) advances or loans by the Parent to
management  of the  Parent and to Alvarez  and  Marsal in  conjunction  with the
Recapitalization  in  an  aggregate  principal  of  up  to  $2.5  million;  (xi)
Investments which constitute  capital  expenditures (as determined in accordance
with GAAP) otherwise permitted under this Credit Agreement; (xii) Investments in
Joint Ventures not to exceed $5,000,000;  (xiii) Permitted  Acquisitions;  (xiv)
the  purchase by the  Borrower of the Austell  Property  pursuant to the Austell
Transaction;  (xv) an Investment in the Receivables  Financing  Subsidiary in an
aggregate  amount not to exceed  $1,000,000;  and (xvi) an  Investment  of up to
$250,000 in a Person  organized  under the laws of, or doing business  primarily
in, the Peoples Republic of China.

     "Senior  Leverage Ratio" means, as of the last day of any fiscal quarter of
the  Consolidated  Parties for the twelve month period ending on such date,  the
ratio of (a) Senior  Funded  Indebtedness  to (b)  Consolidated  EBITDA for such
period.

     "Total  Leverage  Ratio" means, as of the last day of any fiscal quarter of
the  Consolidated  Parties for the twelve month period ending on such date,  the
ratio of (a) all Funded  Indebtedness  (net of cash and Cash Equivalents) of the
Consolidated  Parties on a  consolidated  basis on the last day of such  period,
including  Subordinated   Indebtedness,   but  excluding  the  Tranche  C  Loans
Obligations to (b) Consolidated EBITDA for such period.

     (c) Clauses (xv) and (xvi) in the definition of "Permitted Liens" appearing
in Section 1.1 of the  Existing  Credit  Agreement  are amended and  restated in
their entireties to read as follows:

     (xv) Liens on Property of the Borrower or any other Domestic Subsidiary not
otherwise  permitted  hereunder  securing  Indebtedness of such Person permitted
under Section 8.1 not exceeding $3,000,000 in aggregate at any time outstanding;

     (xvi) Liens on cash and Cash Equivalents deposited by the Borrower with the
Tranche C Lender  pursuant to and in accordance with the terms of Section 2.6(i)
or Section 3.15(b) to secure Tranche C LOC Obligations; and

     (d) The following new definition of "Senior Funded  Indebtedness" is hereby
added  to  Section  1.1 of the  Existing  Credit  Agreement  in the  appropriate
alphabetical  order:  "Senior Funded  Indebtedness"  means,  as of any date, all
Funded  Indebtedness  (net of cash and  Cash  Equivalents)  of the  Consolidated
Parties  on a  consolidated  basis  on such  date,  excluding  (i)  Subordinated
Indebtedness and (ii) the Tranche C Obligations.

     (e) The  following  definitions  appearing  in Section 1.1 of the  Existing
Credit  Agreement  are  hereby  deleted:  "Cash  Collateral  Account",  "General
Partner",  "Investment  Commitment",   "Leverage  Reduction  Period",  "Leverage
Reduction Requirements",  "Limited Partners",  "Mandatory Investment", "Pro Rata
Share",  "Sponsor  Equity  Issuance  Prepayment  Event" and  "Sponsor  Letter of
Credit".

<PAGE>

     (f) A new definition of "Amendment No. 8 Effective Date" is hereby added to
Section 1.1 of the Existing  Credit  Agreement in the  appropriate  alphabetical
order to read as follows:

                  "Amendment No. 8 Effective Date" means April 12, 2002.

     SUBPART 2.2 Amendments to Section 2.6. The first sentence of Section 2.6(a)
of the Existing Credit  Agreement and the last sentence of Section 2.6(e) of the
Existing Credit  Agreement are amended and restated in their  entireties to read
as follows:

     (a)  Tranche C  Commitment.  Subject  to the terms and  conditions  of this
Credit Agreement,  the Tranche C Lender agrees to make available to the Borrower
revolving credit loans requested by the Borrower in Dollars  ("Tranche C Loans")
from time to time from the  Amendment  No. 5 Effective  Date until the  Maturity
Date,  or  such  earlier  date as the  Tranche  C  Commitment  shall  have  been
terminated as provided herein; provided,  however, that the sum of the aggregate
principal  amount of  outstanding  Tranche C Loans  shall not  exceed  SEVENTEEN
MILLION FOUR HUNDRED FORTY-EIGHT  THOUSAND SIX HUNDRED THIRTY AND 30/100 DOLLARS
($17,448,630.30)  (as such aggregate  maximum amount may be reduced from time to
time as provided in Section 2.6(d), the "Tranche C Committed Amount").
                                     *******

     (e)  Interest.  The Tranche C Loans shall bear interest at a per annum rate
equal to:

                                     *******

     The Borrower  hereby promises to pay in arrears to the order of the Tranche
C  Lender,  on each  Interest  Payment  Date (or at such  other  times as may be
specified herein),  accrued interest on the Tranche C Loans; provided,  however,
all unpaid  interest on the Tranche C Loans that accrued  prior to the Amendment
No. 8  Effective  Date  and all  interest  accruing  from  the  Amendment  No. 8
Effective Date through and including  September 30, 2002 shall, in each case, be
paid in full on September 30, 2002.

     SUBPART 2.3  Amendments to Section  3.3(a).  Section 3.3(a) of the Existing
Credit Agreement is amended and restated in its entirety to read as follows:

     (a)  Voluntary  Prepayments.  The  Borrower  shall have the right to prepay
Loans in whole  or in part  from  time to time;  provided,  however,  that  each
partial  prepayment of Loans shall be (i) in the case of Revolving  Loans,  in a
minimum  principal  amount of $2,000,000  and integral  multiples of $100,000 in
excess thereof and (ii) in the case of Swingline  Loans, in a minimum  principal
amount of $100,000.  Subject to the foregoing terms,  amounts prepaid under this
Section  3.3(a) shall be applied as the Borrower may elect;  provided,  however,
that the  Tranche  C Loans  and  Tranche C LOC  Obligations  may not be  prepaid
pursuant to this Section 3.3(a) at any time unless the Revolving  Loans, the LOC
Obligations, the Tranche A Term Loan and the Tranche B Term Loan shall have been
paid in full,  no  Letters  of Credit  shall be  outstanding  and the  Revolving
Commitments  shall have expired or been terminated.  All prepayments  under this
Section 3.3(a) shall be subject to Section 3.12, but otherwise  without  premium
or penalty,  and be  accompanied  by interest on the  principal  amount  prepaid
through the date of prepayment.


<PAGE>

     SUBPART 2.4 Amendments to Section 3.3(b).

     (a)  Sections  3.3(b)(vi)(D),  3.3(b)(vi)(E)  and  3.3(b)(vii)  are  hereby
deleted,  and Sections 3.3(b)(ii),  3.3(b)(iii),  3.3(b)(v) and 3.3(b)(vi)(C) of
the Existing  Credit  Agreement are amended and restated in their  entireties to
read as follows:

     (ii)  Excess  Cash Flow.  Within 90 days after the end of each  fiscal year
(commencing  with the fiscal year ending December 31, 1998), the Borrower hereby
promises  to prepay the Loans in an amount  equal to (x) 75% of the Excess  Cash
Flow earned  during such prior fiscal year less (y) the amount of any  voluntary
prepayments  of the  Tranche  A Term  Loan,  the  Tranche B Term Loan or (to the
extent  accompanied  by a  reduction  in the  Revolving  Committed  Amount)  the
Revolving Loans during such prior fiscal year (such  prepayment to be applied as
set forth in clause (vi)(C) below).

                                     *******

     (iii) Asset Dispositions.

     (A) [Reserved].

     (B)  Other  Asset  Sales.  Immediately  upon the  occurrence  of any  Asset
Disposition  Prepayment  Event, the Borrower hereby promises to prepay the Loans
in an  aggregate  amount  equal to 100% of the Net Cash  Proceeds of the related
Asset  Disposition (such prepayment to be applied as set forth in clause (vi)(C)
below).

                                     *******

     (v)  Non-Sponsor  Equity  Issuance.  Immediately  upon the  occurrence of a
Non-Sponsor  Equity Issuance  Prepayment  Event, the Borrower hereby promises to
prepay the Loans in an aggregate  amount equal to 100% of the Net Cash  Proceeds
of such Equity  Issuance  (such  prepayment to be applied as set forth in clause
(vi)(C) below).

     (vi) Application of Mandatory Prepayments.  All amounts required to be paid
pursuant to Section 3.3(b) and Section 3.3(c) shall be applied as follows:

                                     *******

     (C) Excess Cash Flow, Sales of Assets,  Debt Issuances,  Non-Sponsor Equity
Issuances and Section 3.3(c)  Prepayments.  With respect to all amounts  prepaid
pursuant to Section 3.3(b)(ii),  Section  3.3(b)(iii)(B),  Section 3.3(b)(iv) or
Section  3.3(b)(v),  pro rata to the  Tranche A Term Loan and the Tranche B Term
Loan (in each case  ratably to the  remaining  Principal  Amortization  Payments
thereof);  provided,  however,  that notwithstanding the foregoing terms of this
clause  (C),  (1) 25% of the Net Cash  Proceeds  from  the  sale of the  Austell
Property  may,  at the option of the  Borrower,  be applied  pro rata to (x) the
Swingline  Loans (without any reduction in the Revolving  Committed  Amount) and
(y) the Revolving  Loans and, after all Revolving  Loans have been repaid,  to a
cash collateral account in respect of LOC Obligations  (without any reduction in
the Revolving  Committed Amount),  and (2) with respect to any Asset Disposition
of any portion of the Sock Group  occurring  prior to December  31, 2003 that is
permitted by Section 8.5,  upon  written  notice to the Agent,  the Borrower may
postpone the  mandatory  prepayment  of up to 75% of the Net Cash  Proceeds from
such Asset  Disposition  until the earlier of (x) 365 days following the date of
such Asset  Disposition and (ii) December 31, 2003,  provided that the aggregate
amount of Net Cash  Proceeds  subject  to such  postponement  shall  not  exceed
$3,000,000;

<PAGE>


     (b) The first sentence of the last  paragraph of Section  3.3(b)(vi) of the
Existing Credit Agreement is hereby amended and restated in its entirety to read
as follows:

     Solely for purposes of determining the pro rata share of any Tranche A Term
Lender in connection  with any prepayment  referred to in clause (C) above,  the
outstanding principal amount of all Revolving Loans and LOC Obligations, and the
outstanding  Participation  Interests in Swingline Loans, of such Tranche A Term
Lender (in its capacity as a Revolving  Lender) shall be deemed to be additional
Tranche  A  Term  Loan  principal   owing  to  such  Lender;   for  purposes  of
clarification,  to the extent the Tranche A Term Loan has been paid in full, the
pro rata share of the Tranche A Term  Lenders  attributable  to the  outstanding
Revolving  Loans and LOC  Obligations  of such  Lenders  (as  calculated  in the
preceding  sentence)  will be  applied  to (1) the  Swingline  Loans and (2) the
Revolving  Loans and,  after all  Revolving  Loans have been  repaid,  to a cash
collateral  account  in  respect  of  LOC  Obligations  (in  each  case  with  a
corresponding permanent reduction in the Revolving Committed Amount).

     SUBPART 2.5  Amendments to Section  3.3(c).  Section 3.3(c) of the Existing
Credit Agreement is amended and restated in its entirety to read as follows:

     (c) [Reserved.]

     SUBPART 2.6 Amendments to Section 7.1.  Section  7.1(b)(ii) of the Existing
Credit  Agreement  is amended  and  restated in its  entirety  and a new Section
7.1(m) is hereby added to the Existing Credit Agreement to read as follows:

     (b) Interim Financial Statements.
                                     *******

     (ii) Monthly Financial Statements.  As soon as available,  and in any event
within 45 days after the close of each fiscal month of the Consolidated  Parties
a consolidated  balance sheet and income statement of the Consolidated  Parties,
as of  the  end  of  such  fiscal  month,  together  with  related  consolidated
statements  of cash flows for such fiscal  month,  in each case setting forth in
comparative form consolidated  figures for both the corresponding  period of the
preceding  fiscal  year and the  corresponding  period of the  budget  delivered
pursuant to Section 7.1(d) of the current  fiscal year,  all in reasonable  form
and  detail  and  reasonably  acceptable  to the  Agent,  and  accompanied  by a
certificate  of the chief  financial  officer of the Borrower to the effect that
such monthly  financial  statements  fairly present in all material respects the
financial  position  of the  Consolidated  Parties  and have  been  prepared  in
accordance  with  GAAP,  subject  to  changes  resulting  from  audit and normal
year-end adjustments.

                                     *******

     (m) Cash Flow Forecast.  (i) Commencing on April 30, 2002 and on the second
Business Day of every other week  thereafter,  a 13 week  forecast of cash flows
(the "Cash Flow Forecast"),  including all cash receipts and disbursements,  for
the  Consolidated  Parties  on a  consolidated  basis  and in a form  reasonably
acceptable  to the Agent and (ii)  commencing  on May 15, 2002 and on the second
Business Day of every other week thereafter,  a reconciliation  (current through
the  last  Business  Day  of  the  prior  week)  of  actual  cash  receipts  and
disbursements against the projected cash receipts and disbursements contained in
the Cash Flow Forecast  furnished to the Lenders two weeks earlier and in a form
reasonably acceptable to the Agent.


<PAGE>

     SUBPART 2.7 Amendments to Section 7.11. Section 7.11 of the Existing Credit
Agreement is amended and restated in its entirety to read as follows:

     7.11 Financial Covenants.

     The Credit Parties shall cause:

     (a) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as of the
last day of each fiscal quarter of the Consolidated  Parties, to be greater than
or equal to:



                  March 31          June 30        September 30     December 31

        2001          --               --               --         1.00 to 1.00

        2002     0.80 to 1.00     0.80 to 1.00     1.00 to 1.00    1.00 to 1.00

  thereafter     1.00 to 1.00     1.00 to 1.00     1.00 to 1.00    1.00 to 1.00


     (b) Interest  Coverage Ratio.  The Interest  Coverage Ratio, as of the last
day of each fiscal quarter of the  Consolidated  Parties,  to be greater than or
equal to:


                   March 31          June 30       September 30     December 31

        2001          --               --               --         1.50 to 1.00

        2002     1.60 to 1.00     1.40 to 1.00     1.60 to 1.00    1.60 to 1.00

        2003     1.75 to 1.00     1.75 to 1.00     2.00 to 1.00    2.00 to 1.00

        2004     2.25 to 1.00     2.25 to 1.00     2.25 to 1.00    2.25 to 1.00

  thereafter     2.50 to 1.00     2.50 to 1.00     2.50 to 1.00    2.50 to 1.00


     (c) Senior Leverage Ratio. The Senior Leverage Ratio, as of the last day of
each fiscal quarter of the Consolidated Parties, to be less than or equal to:

                  March 31          June 30       September 30     December 31

        2002    3.00 to 1.00     3.50 to 1.00     3.25 to 1.00    3.00 to 1.00

        2003    3.00 to 1.00     1.30 to 1.00*    1.30 to 1.00*   1.30 to 1.00*

  thereafter    1.30 to 1.00*    1.30 to 1.00*    1.30 to 1.00*   1.30 to 1.00*

     *To the extent that (i) Senior Funded Indebtedness  outstanding on April 1,
2003 does not exceed  $48,000,000  and (ii) the sum of the  Revolving  Committed
Amount plus the  outstanding  principal  amount of the Tranche A Term Loans plus
the  outstanding  principal  amount of the Tranche B Term Loans, in each case on
April 1, 2003,  does not exceed  $58,700,000,  the maximum Senior Leverage Ratio
shall  be 2.00  to  1.00  as of the  last  day of  each  fiscal  quarter  of the
Consolidated Parties ended on or after June 30, 2003.

     (d) Total Leverage  Ratio.  The Total Leverage Ratio, as of the last day of
each fiscal quarter of the Consolidated Parties, to be less than or equal to:


                  March 31          June 30       September 30     December 31

        2002    7.50 to 1.00     8.00 to 1.00     7.75 to 1.00    6.75 to 1.00

        2003    6.00 to 1.00     5.00 to 1.00*    5.00 to 1.00*   5.00 to 1.00*

  thereafter    5.00 to 1.00*    5.00 to 1.00*    5.00 to 1.00*   5.00 to 1.00*

<PAGE>

     * To the extent that (i) Senior Funded Indebtedness outstanding on April 1,
2003 does not exceed  $48,000,000  and (ii) the sum of the  Revolving  Committed
Amount plus the  outstanding  principal  amount of the Tranche A Term Loans plus
the  outstanding  principal  amount of the Tranche B Term Loans, in each case on
April 1, 2003,  does not exceed  $58,700,000,  the maximum Total  Leverage Ratio
shall  be (x)  6.00 to 1.00 as of the last  day of the  fiscal  quarters  of the
Consolidated  Parties ended on June 30, 2003 and September 30, 2003 and (y) 5.50
to 1.00 as of the last day of each fiscal  quarter of the  Consolidated  Parties
ended on or after December 31, 2003.

     (e)  Minimum  Sock  Group  EBITDA.  The  portion  of  Consolidated   EBITDA
attributable  to the Sock Group as of the last day of each fiscal quarter of the
Consolidated  Parties for the twelve  month  period  ending on such date,  to be
greater than or equal to:


                   March 31         June 30       September 30      December 31

        2002     $19,000,000      $18,000,000      $20,000,000      $25,000,000
        2003     $28,000,000      $28,800,000      $31,000,000      $33,000,000
        2004     $34,000,000      $35,000,000      $35,000,000      $35,000,000
  thereafter     $35,000,000      $35,000,000      $35,000,000      $35,000,000

     (f) Fiscal Quarter  Computations.  For purposes of this Section 7.11,  each
reference to March 31, June 30,  September 30 and December 31 shall refer to the
fiscal quarter of the Consolidated Parties ending on or about such dates.

     SUBPART 2.8  Amendments to Section 8.1.  Sections  8.1(g) and 8.1(l) of the
Existing Credit  Agreement are amended and restated in their  entireties to read
as follows:

     (g)  Indebtedness  of Foreign  Subsidiaries  not  exceeding  $3,000,000  in
aggregate  principal  amount at any one time  outstanding  for all such  Persons
taken together;
                                     *******

     (l) in addition to the  Indebtedness  otherwise  permitted  by this Section
8.1,  other  unsecured  Indebtedness  hereafter  incurred  by the  Borrower  not
exceeding $10,000,000 in aggregate principal amount at any one time outstanding.

     SUBPART 2.9  Amendments to Section 8.5. The first  paragraph of Section 8.5
of the Existing Credit Agreement is amended and restated in its entirety to read
as follows:

     8.5 Asset  Dispositions.  The Credit  Parties will not permit the Parent or
any  Consolidated  Party  to make  any  Asset  Disposition  (including,  without
limitation,  any Sale and  Leaseback  Transaction)  other  than  Excluded  Asset
Dispositions  and a  Permitted  Austell  Property  Sale,  unless  (a)  except in
connection with the licensing of any of the  intellectual  property of the Shirt
Group  on terms  providing  for the  reversion  to the  applicable  Consolidated
Parties of all rights to such  intellectual  property  at the end of the license
term and  upon  default  in the  payment  of  licensing  fees by the  applicable
licensee thereof, the consideration paid in connection therewith is at least 75%
cash or  Cash  Equivalents,  (b) if such  transaction  is a Sale  and  Leaseback
Transaction,  such transaction is permitted by the terms of Section 8.13 and (c)
the Credit Parties shall,  immediately  following the consummation of such Asset
Disposition  apply (or  cause to be  applied)  an  amount  equal to the Net Cash
Proceeds of such Asset  Disposition  to prepay the Credit Party  Obligations  in
accordance with the terms of Section 3.3(b)(iii).  Notwithstanding any provision
of this Credit Agreement to the contrary, (i) no Asset Disposition involving any
portion of the Sock Group (other than an Asset Disposition of Property no longer
used or useful in the  conduct of such  Person's  business)  shall be  permitted
unless  simultaneously  all of the Credit Party  Obligations are repaid and this
Credit  Agreement is terminated in accordance with the terms of Section 11.13(b)
except pursuant to a transaction  permitted under the following clause (ii), and
(ii) none of the  Consolidated  Parties may sell,  lease,  transfer or otherwise
dispose of accounts receivable except pursuant to a transaction  constituting an
Excluded Asset Disposition.

<PAGE>

    SUBPART 2.10 Amendments to Section 8.9.  Clauses (d) and (f) of Section 8.9
of the Existing Credit Agreement are amended and restated in their entireties to
read as follows:

     (d)  normal  compensation  and  reimbursement  of  expenses  of  employees,
officers and directors,  provided,  however, that during such time as payment of
the annual management fee of the Sponsor or its Affiliate  designee permitted by
clause (f) below is accrued and not payable in cash, the  compensation  of Bryan
P. Marsal (whether paid directly or indirectly through Alvarez and Marsal, Inc.)
shall also accrue and not be payable in cash,

                                     *******

     (f) reimbursement of out-of-pocket expenses of the Sponsor or its Affiliate
designee of in connection  with the management of the  Consolidated  Parties for
the applicable  year and the accrual of an annual  management fee of the Sponsor
or its Affiliate  designee,  not to exceed in the aggregate  $600,000 during any
year,

     SUBPART 2.11  Amendments to Section 9.1.  Sections 9.1(m) and 9.1(n) of the
Existing Credit  Agreement are hereby deleted,  the "; or" at the end of Section
9.1(l) is amended and replaced with a "." and Sections  9.1(h) and 9.1(i) of the
Existing Credit  Agreement are amended and restated in their  entireties to read
as follows:

     (h)  Defaults  under Other  Agreements.  With  respect to any  Indebtedness
(including  the  Tranche C Loans,  but  excluding  any other  than  Indebtedness
outstanding  under  this  Credit  Agreement)  in  excess  of  $2,000,000  in the
aggregate for the Parent and the Consolidated  Parties taken as a whole, (i) the
Parent or any  Consolidated  Party shall (A) default in any payment  (beyond the
applicable grace period with respect  thereto,  if any) with respect to any such
Indebtedness,  or  (B)  the  occurrence  and  continuance  of a  default  in the
observance  or  performance  relating to such  Indebtedness  or contained in any
instrument or agreement  evidencing,  securing or relating thereto, or any other
event or condition shall occur or condition  exist,  the effect of which default
or other event or  condition  is to cause,  or permit,  the holder or holders of
such  Indebtedness  (or  trustee  or agent on behalf of such  holders)  to cause
(determined  without regard to whether any notice or lapse of time is required),
any such  Indebtedness to become due prior to its stated  maturity;  or (ii) any
such Indebtedness  shall be declared due and payable,  or required to be prepaid
other than by a regularly  scheduled  required  prepayment,  prior to the stated
maturity thereof; or

     (i) Judgments.  One or more  judgments or decrees shall be entered  against
one or more of the Parent and the Consolidated  Parties involving a liability of
$2,000,000  or more in the aggregate (to the extent not paid or fully covered by
insurance  provided  by a  carrier  who has  acknowledged  coverage  and has the
ability  to  perform)  and any such  judgments  or  decrees  shall not have been
vacated,  discharged or stayed or bonded  pending appeal within 30 days from the
entry thereof; or

<PAGE>

     SUBPART 2.12 Amendments to Section 11.6.  Section 11.6(vii) of the Existing
Credit Agreement is amended and restated in its entirety to read as follows:

     (vii) without the consent of the Tranche C Lender,  no  amendment,  change,
waiver,  discharge or  termination  of any of the following  which would have an
adverse  effect  on  the  Tranche  C  Lender  shall  be  effective:  any  of the
definitions of  "Commitment",  "Lender",  "Loan",  "LOC Documents" and "Maturity
Date" (clause (iii) thereof only) set forth in Section 1.1.

     SUBPART 2.13  Waiver.  Subject to the  occurrence  of the  Amendment  No. 8
Effective  Date,  the Required  Lenders hereby waive the  requirements  that the
Credit Parties comply with Sections 7.11(c), 7.11(d) and 7.11(e) of the Existing
Credit  Agreement  for the fiscal  quarter  ended  December 31, 2001.  This is a
one-time  waiver and is granted  only for the limited  purposes set forth herein
and shall be effective only in the specific circumstances provided for above and
only for the purpose for which given.  The waiver  pursuant to this Subpart 2.13
shall be deemed to be effective as of December 31, 2001.


                                     PART 3
                                  EFFECTIVENESS

     SUBPART 3.1 Amendment No. 8 Effective  Date.  This  Amendment  shall be and
become  effective as of the date hereof (the  "Amendment No. 8 Effective  Date")
when all of the conditions  set forth in this Part 3 shall have been  satisfied,
and  thereafter  this  Amendment  shall be  known,  and may be  referred  to, as
"Amendment No. 8."


     SUBPART 3.1.1 Execution of Counterparts of Amendment.  The Agent shall have
received  counterparts of this Amendment which collectively shall have been duly
executed on behalf of each of the  Borrower,  the  Guarantors  and the requisite
Lenders in accordance with Section 11.6 of the Existing Credit Agreement.

     SUBPART 3.1.2 Amendment Fee. The Agent shall have received, for the account
of each Lender that has delivered an executed  counterpart  of this Amendment to
the Agent on or before April 12, 2002,  an amendment  fee equal to 0.375% of the
Commitment of each such Lender under the Existing Credit Agreement.


                                     PART 4
                                  MISCELLANEOUS

     SUBPART 4.1. Cross-References.  References in this Amendment to any Part or
Subpart  are,  unless  otherwise  specified,  to such  Part or  Subpart  of this
Amendment.

     SUBPART  4.2  Instrument  Pursuant  to  Existing  Credit  Agreement.   This
Amendment  is a  Credit  Document  executed  pursuant  to  the  Existing  Credit
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered  and applied in  accordance  with the terms and  provisions  of the
Existing Credit Agreement.

     SUBPART 4.3  References  in Other  Credit  Documents.  At such time as this
Amendment No. 8 shall become effective pursuant to the terms of Subpart 3.1, all
references in the Credit Documents to the "Credit  Agreement" shall be deemed to
refer to the Amended Credit Agreement.

     SUBPART 4.4  Counterparts/Telecopy.  This  Amendment may be executed by the
parties hereto in several  counterparts,  each of which shall be deemed to be an
original  and all of  which  shall  constitute  together  but  one and the  same
agreement. Delivery of executed counterparts of this Amendment by telecopy shall
be  effective  as an original  and shall  constitute  a  representation  that an
original shall be delivered.

     SUBPART 4.5 Governing Law. THIS AMENDMENT  SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

     SUBPART 4.6  Attorney's  Fees. The Credit Parties hereby promise to pay all
costs and expenses of the Agent in connection  with this  Amendment,  including,
without limitation, the reasonable fees and expenses of Moore & Van Allen PLLC.

     SUBPART 4.7  Successors and Assigns.  This Amendment  shall be binding upon
and inure to the benefit of the parties hereto and their  respective  successors
and assigns.


<PAGE>



     IN WITNESS  WHEREOF the Borrower,  the Guarantors and the Required  Lenders
have caused this Amendment to be duly executed on the date first above written.

CREDIT PARTIES:              CLUETT AMERICAN Corp.
---------------              Cluett American Investment Corp.
                             Cluett American Group, Inc.
                             CONSUMER DIRECT CORPORATION
                             ARROW FACTORY STORES, INC.
                             GAKM RESOURCES CORPORATION
                             CLUETT PEABODY RESOURCES CORPORATION
                             CLUETT PEABODY HOLDING CORP.
                             CLUETT, PEABODY & CO., INC.
                             BIDERTEX SERVICES INC.
                             GREAT AMERICAN KNITTING MILLS, INC.
                             BIDERMANN TAILORED CLOTHING, INC.
                             GOLD TOE BRANDS, INC.

                             By:
                                ---------------------------------------
                             Name:
                                ---------------------------------------
                             Title:
                                ---------------------------------------


<PAGE>


                             [Signatures Continued]

AGENT:                       BANK OF AMERICA, N.A.
------                       (formerly known as NationsBank, N. A.), as Agent

                             By:
                                -----------------------------------------
                             Name:
                                -----------------------------------------
                             Title:
                                -----------------------------------------

LENDERS:                     BANK OF AMERICA, N.A.
--------                    (formerly known as NationsBank, N. A.)

                             By:
                               ------------------------------------------
                             Name:
                               ------------------------------------------
                             Title:
                               ------------------------------------------

                             BANK OF AMERICA, N.A.
                             (formerly known as NationsBank, N. A.), solely in
                              its capacity as the Tranche C Lender

                             By:
                                -----------------------------------------
                             Name:
                                -----------------------------------------
                             Title:
                                -----------------------------------------

                            NATIONAL WESTMINSTER BANK PLC

                            By:
                               -----------------------------------------
                            Name:
                                 ---------------------------------------
                            Title:
                                  --------------------------------------

                            FLEET BANK, N.A.

                            By:
                               -----------------------------------------
                            Name:
                                 ---------------------------------------
                            Title:
                                  --------------------------------------

                            BANKBOSTON, N.A.

                            By:
                               -----------------------------------------
                            Name:
                                 ---------------------------------------
                            Title:
                                  --------------------------------------

                            FLEET BUSINESS CREDIT CORPORATION
                            (successor in interest to Sanwa Business Credit
                             Corporation)

                             By:
                                -----------------------------------------
                             Name:
                                  ---------------------------------------
                             Title:
                                   --------------------------------------

                             BANK AUSTRIA CREDITANSTALT
                             CORPORATE FINANCE, INC.

                             By:
                                -----------------------------------------
                             Name:
                                  ---------------------------------------
                             Title:
                                   --------------------------------------

                             By:
                                -----------------------------------------
                             Name:
                                  ---------------------------------------
                             Title:
                                   --------------------------------------

                            FIRST SOURCE FINANCIAL LLP,
                            By: First Source Financial Inc., its manager

                            By:
                               -----------------------------------------
                            Name:
                                 ---------------------------------------
                            Title:
                                  --------------------------------------

                             GENERAL ELECTRIC CAPITAL
                             CORPORATION

                             By:
                                -----------------------------------------
                             Name:
                                  ---------------------------------------
                             Title:
                                   --------------------------------------

                             FLEET NATIONAL BANK

                             By:
                                -----------------------------------------
                             Name:
                                  ---------------------------------------
                             Title:
                                   --------------------------------------

                             HSBC BANK USA

                             By:
                                -----------------------------------------
                             Name:
                                  ---------------------------------------
                             Title:
                                   --------------------------------------

                            AG CAPITAL FUNDING PARTNERS, L.P.
                            By: Angelo Gordon & Co., L.P. as Investment Advisor

                            By:
                               -----------------------------------------
                            Name:
                                 ---------------------------------------
                            Title:
                                  --------------------------------------

<PAGE>


                            NORTHWOODS CAPITAL LIMITED
                            By: Angelo Gordon & Co., L.P. as Collateral Manager

                            By:
                                 -----------------------------------------
                            Name:
                                 -----------------------------------------
                            Title:
                                 -----------------------------------------

                            NEW YORK LIFE INSURANCE COMPANY

                            By:
                               -----------------------------------------
                            Name:
                               -----------------------------------------
                            Title:
                               -----------------------------------------

                            SENIOR DEBT PORTFOLIO
                            By:  Boston Management and Research,
                                 as Investment Advisor

                            By:
                               -----------------------------------------
                            Name:
                               -----------------------------------------
                            Title:
                                ----------------------------------------

                            ML CLO XX PILGRIM AMERICA (CAYMAN) LTD.

                            By:
                               -----------------------------------------
                            Name:
                               -----------------------------------------
                            Title:
                               -----------------------------------------

                            TORONTO DOMINION (TEXAS), INC.

                            By:
                               -----------------------------------------
                            Name:
                               -----------------------------------------
                            Title:
                               -----------------------------------------

                            GREAT POINT CLO 1999-1 LTD.
                            By: Sankaty Advisors, Inc., as Collateral Managers

                            By:
                               -----------------------------------------
                            Name:
                               -----------------------------------------
                            Title:
                               -----------------------------------------

                            EATON VANCE SENIOR INCOME TRUST

                            By:
                               -----------------------------------------
                            Name:
                               -----------------------------------------
                            Title:
                               -----------------------------------------


<PAGE>


ACKNOWLEDGED
AND AGREED:                  Vestar Capital Partners III, L.P.,
-----------                  a Delaware limited partnership, solely in its
                             capacity as "Sponsor" under the Tranche C Guaranty

                             By:      Vestar Associates III, L.P.,
                                      its General Partner

                             By:      Vestar Associates corporation III,
                                      its General Partner


                             By:
                                ------------------------------------------
                             Name:
                             Title:


                             BRYAN P. MARSAL, an individual (solely for purposes
                             of consenting to the amendment to clause (d) of
                             Section 8.9 of the Existing Credit Agreement)