GUARANTEE

                  GUARANTEE, dated as of May 12, 2000 (as amended,  supplemented
or  otherwise  modified  from  time to time,  the  "Guarantee"),  made by CLUETT
AMERICAN  CORP.  (together with its  successors  and assigns  permitted  herein,
"Cluett  American"),   in  favor  of  CLUETT  AMERICAN  RECEIVABLES,   LLC  (the
"Purchaser").

                              W I T N E S S E T H :

                  WHEREAS, pursuant to the Receivables Transfer Agreement, dated
as of May 12, 2000 (as amended,  supplemented or otherwise modified from time to
time, the "Transfer  Agreement"),  between Great American  Knitting Mills,  Inc.
("Great  American"),  as  seller  and  servicer  ("Great  American"),   and  the
Purchaser,  the Purchaser has agreed to purchase certain Receivables (as defined
therein) on the Purchase Dates referred to therein;

                  WHEREAS,  pursuant to Sections 2.6, 2.7 and  6.2(a)(vi) of the
Transfer  Agreement,  Great  American shall have,  under certain  circumstances,
certain repurchase and indemnification obligations with respect to the Purchased
Receivables (as defined therein); and

                  WHEREAS, Great American is a wholly-owned subsidiary of Cluett
American  and it is to the  advantage  of  Cluett  American  that the  Purchaser
purchase certain Receivables from Great American;

                  NOW THEREFORE,  in consideration of the premises and to induce
the  Purchaser to enter into the Transfer  Agreement and to induce the Purchaser
to make the purchases from Great American under the Transfer  Agreement,  Cluett
American hereby agrees with the Purchaser as follows:

                  1. Defined  Terms.  Terms  defined in the preamble  hereof and
the recitals  hereto and terms defined in the Transfer Agreement and used herein
without definition shall have their defined meanings when used herein.

                  2. Cluett American Indemnification Obligation. Cluett American
hereby  unconditionally  guarantees to the Purchaser  the  performance  by Great
American when due of its  obligations  under  Sections  2.6, 2.7 and  6.2(a)(vi)
of the Transfer
Agreement.

                  3. No Subrogation,  Contribution,  Reimbursement or Indemnity.
Notwithstanding  anything to the  contrary in this  Guarantee,  Cluett  American
hereby  irrevocably  waives all rights which may have arisen in connection  with
this Guarantee to be subrogated to any of the rights (whether contractual, under
Title 11 of the United States Code, including Section 509 thereof,  under common
law or otherwise) of the Purchaser  against Great  American or against any right
of offset of the Purchaser with respect to Great  American's  obligations  under
Section  6.2(a)(vi)  the Transfer  Agreement.  Cluett  American  hereby  further
irrevocably  waives all  contractual,  common law,  statutory or other rights of
reimbursement,  contribution,  exoneration  or indemnity (or any similar  right)
from or against  Great  American  or any other  Person  which may have arisen in
connection with this  Guarantee.  The provisions of this paragraph shall survive
the termination of the Transfer  Agreement and the Guarantee;  provided that the
foregoing  waiver  shall be of no  force  and  effect  370  days  following  the
termination of the Transfer  Agreement and the Guarantee but only if during such
370-day period Great American shall not have commenced or have commenced against
it a bankruptcy proceeding under Title 11 of the United States Code.

                  4. Amendments, etc. with respect to the Purchased Receivables.
Cluett American shall remain obligated hereunder  notwithstanding  that, without
any  reservation  of rights against  Cluett  American,  and without notice to or
further  assent  by  Cluett  American,  any  demand  for  payment  of any of the
Purchased  Receivables made by the Purchaser may be rescinded by such Purchaser,
and  the  liability  of any  Obligor  upon  or for  any  part  of the  Purchased
Receivables, or any collateral security or guarantee therefor or right of offset
with respect  thereto,  may, from time to time, in whole or in part, be renewed,
extended, amended, modified,  accelerated,  compromised,  waived, surrendered or
released by the  Purchaser,  and the Transfer  Agreement or any other  documents
executed  and  delivered  in  connection  therewith  may be  amended,  modified,
supplemented  or  terminated,  in whole or in part,  as the  Purchaser  may deem
advisable from time to time, and any collateral security,  guarantee or right of
offset  at any time  held by the  Purchaser  for the  payment  of the  Purchased
Receivables  may be  sold,  exchanged,  waived,  surrendered  or  released.  The
Purchaser  shall not have any obligation to protect,  secure,  perfect or insure
any Lien at any time held by it as security for the Purchased Receivables or for
this Guarantee or any property subject thereto.

                  5.  Guarantee  Absolute  and  Unconditional.  Cluett  American
waives any and all notice of the creation,  renewal, extension or accrual of any
of the Purchased Receivables and notice of or proof of reliance by the Purchaser
upon this  Guarantee or acceptance  of this  Guarantee;  the Transfer  Agreement
shall  conclusively  be deemed to have been  created,  contracted or incurred in
reliance upon this Guarantee;  and all dealings between Great American or Cluett
American,  on the one hand, and the Purchaser,  on the other,  shall likewise be
conclusively  presumed to have been had or  consummated  in  reliance  upon this
Guarantee.  Cluett American waives diligence,  presentment,  protest, demand for
payment and notice of default or nonpayment to or upon Great  American or Cluett
American  with respect to the Purchased  Receivables.  This  Guarantee  shall be
construed as a continuing,  absolute and unconditional  Guarantee without regard
to (a) the validity or enforceability of the Transfer Agreement,  the Guarantee,
the Assignments or any other document or instrument  executed in connection with
any  of  the  foregoing  documents,  any of  the  Purchased  Receivables  or any
collateral  security  therefor  or  guarantee  or right of offset  with  respect
thereto at any time or from time to time held by the Purchaser,  (b) any defense
which  relates,   directly  or  indirectly,   to  the  matters  covered  by  the
representations  and warranties  set forth in the Transfer  Agreement or set-off
which in either  case may at any time be  available  to or be  asserted by Great
American against the Purchaser,  or (c) any other circumstance  whatsoever (with
or without  notice to or knowledge of Great American or Cluett  American)  which
constitutes,  or  might  be  construed  to  constitute,  an  equitable  or legal
discharge of Great American,  any Obligor for the Purchased  Receivables,  or of
Cluett  American under this  Guarantee,  in bankruptcy or in any other instance;
provided  that this  clause (c) shall not  prevent  Cluett  American  from being
discharged from its obligations under this Guarantee pursuant to confirmation of
a plan of reorganization under Chapter 11 of the United States Code in a case in
which Cluett  American is the debtor.  When the Purchaser is pursuing its rights
and remedies hereunder against Cluett American,  the Purchaser may, but shall be
under no  obligation  to, pursue such rights and remedies as it may have against
Great American,  the Obligor on any Purchased  Receivable or any other Person or
against any  collateral  security or guarantee for the Purchased  Receivables or
any right of offset with respect  thereto,  and any failure by the  Purchaser to
pursue  such other  rights or remedies  or to collect  any  payments  from Great
American,  any such Obligor or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of Great  American,  any such Obligor or any such other Person or of any
such collateral security, guarantee or right of offset, shall not relieve Cluett
American of any liability  hereunder,  and shall not impair or affect the rights
and remedies,  whether express,  implied or available as a matter of law, of the
Purchaser against Cluett American.

                  6.   Reinstatement.   This  Guarantee  shall  continue  to  be
effective, or be reinstated,  as the case may be, if at any time payment, or any
part thereof, of any of the Purchased Receivables is rescinded or must otherwise
be  restored  or  returned by the  Purchaser  upon the  insolvency,  bankruptcy,
dissolution,  liquidation or  reorganization of Great American or any Obligor or
upon or as a result of the appointment of a receiver,  intervenor or conservator
of, or trustee or similar  officer  for,  Great  American  or any Obligor or any
substantial part of its property, or otherwise,  all as though such payments had
not been made.

                  7.   Payments.  Cluett American  hereby agrees that payments
required to be made by it hereunder will be paid to the Purchaser in immediately
available funds without set-off in U.S.  Dollars at the office of the Purchaser
at the address  specified in subsection 6.8 of the Transfer Agreement.

                  8.  Severability.  Any  provision of this  Guarantee  which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

                  9.  Section  Headings.  The section  headings used in this
Guarantee are for  convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.

                  10. No Waiver; Cumulative Remedies. The Purchaser shall not by
any act (except by a written instrument  pursuant to Section 11 hereof),  delay,
indulgence,  omission or  otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default or breach of any of the terms and
conditions hereof. No failure to exercise,  nor any delay in exercising,  on the
part of the Purchaser,  any right, power or privilege hereunder shall operate as
a waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further  exercise  thereof or the exercise
of any other right,  power or privilege.  A waiver by the Purchaser of any right
or remedy  hereunder on any one occasion  shall not be construed as a bar to any
right or remedy which the Purchaser would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative,  may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by law.

                  11. Waivers and  Amendments;  Successors and Assigns.  None of
the terms or provisions of this Guarantee may be waived,  amended,  supplemented
or otherwise modified except by a written instrument executed by Cluett American
and the  Purchaser.  This  Guarantee  shall be binding upon the  successors  and
permitted  assigns  of Cluett  American  and shall  inure to the  benefit of the
Purchaser and its successors and assigns; provided,  however, that the Purchaser
shall not assign this  Guarantee  to any Person  except in  accordance  with the
Transfer Agreement;  and provided further,  that the Company agrees that it will
not assign or transfer  all or any portion of its rights or delegate  any of its
obligations hereunder without the prior written consent of the Purchaser.

         Cluett  American  acknowledges  that the Purchaser  will,  concurrently
herewith,  assign to the  Unaffiliated  Purchaser all of the Purchaser's  right,
title and  interest  in, to and under (but none of the  Purchaser's  obligations
under),  whether now or hereafter  owned,  existing or arising,  this Guarantee.
Cluett  American  consents to such  assignment and agrees that the  Unaffiliated
Purchaser,  to the extent provided in the Receivables Purchase Agreement,  shall
be entitled to enforce the terms of this  Guarantee  and the rights  (including,
without limitation, the right to grant or withhold any consent or waiver) of the
Purchaser  directly against Cluett American.  Cluett American hereby consents to
all of the terms of the Receivables Purchase Agreement.

                  12.      GOVERNING LAW. THIS GUARANTEE AND THE  OBLIGATIONS OF
CLUETT  AMERICAN  HEREUNDER  SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                  13.  Notices.  All notices by the Purchaser to Cluett American
hereunder to be effective shall be in writing  (including by telecopy or telex),
and shall be deemed to have been duly given or made (d) when  delivered by hand,
(e) in the case of mail, three Business Days after deposit in the mail,  postage
prepaid,  (f) in the case of telecopy notice, when received,  or (g) in the case
of telex notice,  when sent, answer back received,  addressed to Cluett American
at its  address or  transmission  number set forth  under its  signature  below.
Cluett  American  may change its  address  and  transmission  numbers by written
notice to the Purchaser.

                  14.   Waiver.    The   Purchaser   hereby    irrevocably   and
unconditionally  waives,  to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal  action or  proceeding  relating to
this  Guarantee  any  special,  exemplary,  punitive or  consequential  damages;
provided  that the waiver  contained  in this Section 14 shall not extend to any
right to claim or recover from Cluett American any special, exemplary,  punitive
or consequential  damages for which the Purchaser is liable to any Person (other
than an affiliate of such Purchaser).

                  15.   Acknowledgments.  Cluett American  hereby  acknowledges
with respect to the transactions  contemplated by the Transfer Agreement that:

                  (h)  it has been advised by counsel in the negotiation,
execution and delivery of this Guarantee;

                  (i) the  Purchaser  has no  fiduciary  relationship  to Cluett
         American or Great American and the relationship  between the Purchaser,
         on the one hand, and Cluett  American or Great  American,  on the other
         hand, is solely that of debtor and creditor; and

                  (j) no joint venture  exists  between  Great  American and the
Purchaser or between Cluett American and the Purchaser.

                  16.  WAIVERS OF JURY TRIAL.  EACH OF CLUETT AMERICAN AND THE
PURCHASER  HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM
THEREIN.


<PAGE>


         IN WITNESS  WHEREOF,  Cluett  American has caused this  Guarantee to be
duly  executed  and  delivered  in New  York,  New York by its  proper  and duly
authorized officer as of the day and year first above written.

                                               CLUETT AMERICAN CORP.


                                               By:
                                               Name:
                                               Title:

                                               Address for Notices:

                                               Cluett American Corp.
                                               48 West 38th Street, 8th Floor
                                               New York, New York 10018-6211
                                               Attention: General Counsel


                                               Acknowledged By:

                                               CLUETT AMERICAN RECEIVABLES, LLC


                                               By:
                                               Name:
                                               Title:



<PAGE>