Limited Liability Company Agreement

LIMITED LIABILITY COMPANY AGREEMENT


OF


CLUETT AMERICAN RECEIVABLES, LLC


This Limited Liability Company Agreement (together with the schedules attached hereto, and as amended, restated or supplemented or otherwise modified from time to time, this "Agreement") of Cluett American Receivables, LLC (the "Company"), is entered into by Great American Knitting Mills, Inc. (a wholly-owned subsidiary of Cluett American Corp. (the "Parent")), as the sole equity member (the "Member"), and Dwight Jenkins and Lori Rezza as the Special Members (as defined on Schedule A hereto).


The Member, by execution of this Agreement, hereby forms the Company as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del. C. ' 18-101 et seq.), as amended from time to time (the "Act"), and this Agreement, and the Member, Dwight Jenkins and Lori Rezza hereby agree as follows:


Section 1. Name.


The name of the limited liability company formed hereby is Cluett American Receivables, LLC.


Section 2. Principal Business Office.


The principal business office of the Company shall be located at 661 Plaid Street, Burlington, NC 27215 or such other location as may hereafter be determined by the Member.


Section 3. Registered Office.


The address of the registered office of the Company in the State of Delaware is c/o The Corporation Trust Company, Corporate Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.


Section 4. Registered Agent.


The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, Corporate Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.


Section 5. Members.


(a) The mailing address of the Member is set forth on Schedule B attached hereto. The Member was admitted to the Company as a member of the Company upon its execution of a counterpart signature page to this Agreement.


(b) Subject to Section 9(j), the Member may act by written consent.


(c) Upon the occurrence of any event that causes the Member to cease to be a member of the Company (other than (i) upon an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Sections 21 and 23, or (ii) the resignation of the Member and the admission of an additional member of the Company pursuant to Sections 22 and 23), each person acting as an Independent Manager pursuant to Section 10 shall, without any action of any Person and simultaneously with the Member ceasing to be a member of the Company, automatically be admitted to the Company as a Special Member and shall continue the Company without dissolution. No Special Member may resign from the Company or transfer its rights as Special Member unless (i) a successor Special Member has been admitted to the Company as Special Member by executing a counterpart to this Agreement, and (ii) such successor has also accepted its appointment as an Independent Manager pursuant to Section 10; provided, however, the Special Members shall automatically cease to be members (but not Independent Managers) of the Company upon the admission to the Company of a substitute Member. Each Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets. Pursuant to Section 18-301 of the Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company. A Special Member, in its capacity as Special Member, may not bind the Company. Except as required by any mandatory provision of the Act, each Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including, without limitation, the merger, consolidation or conversion of the Company. In order to implement the admission to the Company of each Special Member, each person acting as an Independent Manager pursuant to Section 10 shall execute a counterpart to this Agreement. Prior to its admission to the Company as Special Member, each person acting as an Independent Manager pursuant to Section 10 shall not be a member of the Company.


Section 6. Certificates.


James G. Leyden, Jr. is hereby designated as an "authorized person" within the meaning of the Act, and has executed, delivered and filed the Certificate of Formation of the Company with the Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware, his powers as an "authorized person" ceased, and the Member thereupon became the designated "authorized person" and shall continue as the designated "authorized person" within the meaning of the Act. The Member shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in North Carolina and in any other jurisdiction in which the Company may wish to conduct business.


The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.


Section 7. Purposes.


The purpose to be conducted or promoted by the Company is to engage in the following activities:


(a)


(i) to purchase from time to time, pursuant to a receivables transfer agreement between the Company and the Member, current and future receivables (the "Receivables") and other rights, assets and property of the Member and to transfer or sell the Receivables and such other rights, assets and property to commercial banks, financial institutions other purchasers pursuant to an agreement therewith;


(ii) to acquire, own, hold, sell, transfer, service, convey, safekeep, dispose of, pledge, assign, borrow money against, finance, refinance or otherwise deal with, publicly or privately and whether with unrelated third parties or with affiliated entities, the Receivables and other rights, assets and property;


(iii) to engage in any lawful act or activity and to exercise any powers permitted to limited liability companies organized under the laws of the State of Delaware that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above-mentioned purposes (including the entering into of interest rate or basis swap, cap, floor or collar agreements, currency exchange agreements or similar hedging transactions and referral, management, servicing and administration agreements).


(b) The Company may enter into and perform any documents, agreements, certificates or financing statements relating to the transactions set forth in paragraph (a) above, all without any further act, vote or approval of any other Person notwithstanding any other provision of this Agreement, the Act or applicable law, rule or regulation. The foregoing authorization shall not be deemed a restriction on the powers of the Member to enter into other agreements on behalf of the Company.


Section 8. Powers.


Subject to Section 9(j), the Company (i) shall have and exercise all powers necessary, convenient or incidental to accomplish its purposes as set forth in Section 7 and (ii) shall have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act.


Section 9. Management.


(a) Board of Directors. Subject to Section 9(j), the business and affairs of the Company shall be managed by or under the direction of a Board of one or more Directors designated by the Member. Subject to Section 10, the Member may determine at any time in its sole and absolute discretion the number of Directors to constitute the Board. The authorized number of Directors may be increased or decreased by the Member at any time in its sole and absolute discretion, upon notice to all Directors, and subject in all cases to Section 10. The initial number of Directors shall be one. Each Director elected, designated or appointed by the Member shall hold office until a successor is elected and qualified or until such Director's earlier death, resignation, expulsion or removal. Each Director shall execute and deliver the Management Agreement. Directors need not be a Member. The initial Directors designated by the Member are listed on Schedule D hereto.


(b) Powers. Subject to Section 9(j), the Board of Directors shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise. Subject to Section 7, the Board of Directors has the authority to bind the Company. A Director is hereby designated as a "manager" of the Company within the meaning of Section 18-101(10) of the Act.


(c) Meeting of the Board of Directors. The Board of Directors of the Company may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board may be called by the President on not less than one day's notice to each Director by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President or Secretary in like manner and with like notice upon the written request of any one or more of the Directors. The Board of Directors may act by written consent.


(d) Quorum: Acts of the Board. At all meetings of the Board, a majority of the Directors shall constitute a quorum for the transaction of business and, except as otherwise provided in any other provision of this Agreement, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board. If a quorum shall not be present at any meeting of the Board, the Directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee, as the case may be.


(e) Electronic Communications. Members of the Board, or any committee designated by the Board, may participate in meetings of the Board, or any committee, by means of telephone conference or similar communications equipment that allows all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting. If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.


(f) Committees of Directors.


(i) The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the Directors of the Company. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.


(ii) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.


(iii) Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.


(g) Compensation of Directors; Expenses. The Board shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at meetings of the Board, which may be a fixed sum for attendance at each meeting of the Board or a stated salary as Director. No such payment shall preclude any Director from serving the Company in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.


(h) Removal of Directors. Unless otherwise restricted by law, any Director or the entire Board of Directors may be removed or expelled, with or without cause, at any time by the Member, and any vacancy caused by any such removal or expulsion may be filled by action of the Member.


(i) Directors as Agents. To the extent of their powers set forth in this Agreement and subject to Section 9(j), the Directors are agents of the Company for the purpose of the Company's business, and the actions of the Directors taken in accordance with such powers set forth in this Agreement shall bind the Company. Notwithstanding the last sentence of Section 18-402 of the Act, except as provided in this Agreement or in a resolution of the Directors, a Director may not bind the Company.


(j) Limitations on the Company's Activities.


(i) This Section 9(j) is being adopted in order to comply with certain provisions required in order to qualify the Company as a "special purpose" entity.


(ii) The Member shall not, prior to the date which is one year and one date after the date on which all obligations of the Company under the documents referred to in Section 7(a)(i) have been paid in full, amend, alter, change or repeal the definition of "Independent" or Sections 5(c), 7, 8, 10, 20, or 31 (or Schedule A of this Agreement to the extent such modification would affect the foregoing provisions) without the prior written consent of the Independent Managers. Subject to this Section 9(j), the Member reserves the right to amend, alter, change or repeal any provisions contained in this Agreement in accordance with Section 31.


(iii) Notwithstanding any other provision of this Agreement and any provision of law that otherwise so empowers the Company, the Member, the Board, any Officer or any other Person, none of the Company, the Member or the Board or any Officer or any other Person shall be authorized or empowered, nor shall they permit the Company, to take any of the following actions without the prior written consent of the Independent Managers:


1. File or consent to the filing of any bankruptcy, insolvency or reorganization petition naming the Company as debtor or otherwise institute bankruptcy or insolvency proceedings by or against the Company or otherwise seek with respect to the Company relief under any laws relating to the relief from debts or the protection of debtors generally;


2. Seek or consent to the appointment of a receiver, liquidator, conservator, assignee, trustee, sequestrator, custodian or any similar official for the Company or all or any portion of any of its properties;


3. Make or consent to any assignment for the benefit of the Company's creditors;


4. Take any action that might reasonably be expected to cause the Company to become insolvent;


5. Admit in writing the inability of the Company to pay its debts generally as they become due;


Except as contemplated by the documents referred to in Section 7(a)(i), engage in any transactions with an Affiliate of the Company;


Consent to substantive consolidation with the Member or the Parent;


Declare or permit any distribution to the Member other than out of legally available funds or otherwise in accordance with the documents referred to in Section 7(a)(i); or


Take any action in furtherance of any of the preceding actions.


(iv) The Board and the Member shall cause the Company to do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise following the date which is one year and one date after the date on which all obligations of the Company under the documents referred to in Section 7(a)(i) have been paid in full if the Board shall determine that the preservation thereof is no longer desirable for the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Company. The Company shall, and the Board shall cause the Company to:


1. At all times have at least two Independent Managers.


2. At all times have sufficient personnel to run its business and operations. Compensate its employees (if any) from its own available funds for services provided to it. In the event employees of the Company participate in pension, insurance and other benefit plans of the Member or the Parent or any Affiliates of the Member or the Parent, the Company will on a current basis reimburse the Member, the Parent or the relevant Affiliate, as the case may be, for its pro rata share of the costs thereof.


3. Pay its own liabilities out of its own funds and assets.


4. Maintain a separate office (a) which if leased from the Member or the Parent will be on terms no more or less favorable to the Company than could be obtained in a comparable arm's-length transaction with an unaffiliated Person and (b) which will be conspicuously identified as the Company's office so it can be easily located by outsiders. The Company will use its own stationery, invoices, checks and telephone and facsimile numbers.


5. The Company will hold itself out and identify itself as a separate and distinct entity under its own name and not as a division or part of any other Person.


6. The Company will promptly correct any misunderstanding regarding its separate existence and identity.


7. The Company will prepare and maintain its own full and complete books, records and financial statements separate from any other Person. The Company's financial statements will comply with generally accepted accounting principles.


8. The Company will maintain a bank account in its name.


9. Except for the servicing of the Receivables pursuant to the documents referred to in Section 7(a)(i), all business transactions entered into by the Company with any of its Affiliates will be on terms that are intrinsically fair and not more or less favorable to the Company, as the case may be, than terms and conditions available at the time to the Company for comparable arm's-length transactions with unaffiliated Persons.


10. The Company will not assume or guarantee or become obligated for debts of the Member or the Parent and neither the Member nor the Parent will assume or guarantee or become obligated for the debts of the Company, other than as provided in the documents referred to in Section 7(a)(i). The Company will not hold its credit out as being available to satisfy the obligations of any other Persons.


11. The Company will not acquire obligations or securities of the Member, the Parent or any of their respective Affiliates. The Company will not make loans to the Member or the Parent.


12. Except to the limited extent provided in the documents referred to in Section 7(a)(i), the Company will not commingle any of its money or other assets with the money or assets of the Member or the Parent. The Company will ensure that its funds will be clearly traceable at each step in any financial transaction.


13. The Company will engage in transactions and conduct all other business activities solely in its own name and through its own authorized officers and agents and will present itself to the public as a separate company. Except to the limited extent provided in the documents referred to in Section 7(a)(i), neither the Member nor the Parent will be appointed agent of the Company.


14. The Company will not engage in any transaction with any of its Affiliates involving any intent to hinder, delay or defraud any Person.


Failure of the Company or the Member or the Board on behalf of the Company to comply with any of ...