CONTINUITY OF INTEREST AGREEMENT
New Rio, L.L.C. ("New Rio"), and each of the
undersigned members of New Rio (the "Members" and, including New
Rio, the "Shareholders"), hereby enter into this Agreement as of
September 25, 1997.
WHEREAS, the Shareholders and The Warnaco Group, Inc.
("Warnaco") have entered into a Stock Exchange Agreement, dated
as of September 25, 1997 (the "Exchange Agreement"), pursuant to
which New Rio will transfer all of its shares of common stock of
Designer Holdings Ltd. ("DSH Common Stock") to Warnaco in
exchange for certain shares of Warnaco Class A Common Stock (the
"Exchange");
WHEREAS, Warnaco, Warnaco Acquisition Corporation
("WAC"), and Designer Holdings Ltd. ("DSH") have entered into an
Agreement and Plan of Merger, dated as of September 25, 1997 (the
"Merger Agreement"), pursuant to which WAC will merge with and
into DSH (the "Merger");
WHEREAS, as an inducement to Warnaco, WAC and DSH to
effect the Exchange and consummate the Merger, the Shareholders
are executing this Agreement in connection with qualifying the
Exchange and the Merger together as a tax-free reorganization
under the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
Now, therefore, the parties hereto, intending legally
to be bound, hereby agree as follows:
1. Each Shareholder represents that such Shareholder
has not purchased, sold, exchanged, distributed, transferred by
gift or otherwise disposed of (including through transactions
which had the economic effect of a disposition such as through
the use of puts and calls, short sales, equity swaps or any
similar type of arrangement) (collectively, "dispose" or
"disposition") shares of DSH Common Stock or Warnaco Class A
Common Stock prior to the date hereof either in contemplation of
or as part of the Exchange or the Merger.
2. New Rio represents that it does not have any plan
or intention to sell, exchange, distribute, transfer by gift, or
otherwise dispose of any interest in a number of shares (as
adjusted for stock splits or other similar transactions) of
Warnaco Class A Common Stock exceeding 80% of the number of
shares (as adjusted for stock splits or other similar
transactions) of Warnaco Class A Common Stock to be received in
the Exchange, other than a transfer of such shares pursuant to a
plan of complete liquidation of New Rio.
3. Each Member represents that it does not have any
plan or intention to sell, exchange, transfer by gift, or
otherwise dispose of (i) a number of shares of Warnaco Class A
Common Stock that would reduce such Member's ownership of Warnaco
Class A Common Stock (including any beneficial ownership
attributable to such Member's interest in New Rio) to a number of
shares (as adjusted for stock splits or other similar
transactions) that is less than 20% of the number of shares (as
adjusted for stock splits or other similar transactions) of the
Warnaco Class A Common Stock to be received by New Rio in the
Exchange which are beneficially attributable to such Member, or
(ii) more than 80% of such Member's Percentage Interest (as
defined in the Third Amended and Restated Limited Liability
Company Agreement of New Rio, dated as of May 9, 1996) in New Rio
as of the date hereof.
4. Each Shareholder will immediately notify Xxxxxxx
Xxxxxxx & Xxxxxxxx ("Xxxxxxx") and Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP ("Skadden") if such Shareholder has obtained knowledge
or information which indicates that any of the foregoing
representations by such Shareholder may cease to be true or
accurate.
5. Subject to the provisions of Section 7, except
pursuant to a plan of complete liquidation, New Rio, for a period
of one year after the Merger, will not sell, exchange, transfer
by gift or otherwise dispose of a number of shares (as adjusted
for stock splits or other similar transactions) of Warnaco Class
A Common Stock exceeding 80% of the number of shares (as adjusted
for stock splits or other similar transactions) of Warnaco Class
A Common Stock received in the Exchange.
6. Each Member, for a period of one year after the
Merger, will not (and, to the extent otherwise permitted, will
not direct New Rio to) sell, exchange, distribute, transfer by
gift or otherwise dispose of (i) a number of shares of Warnaco
Class A Common Stock that would reduce such Member's ownership of
Warnaco Class A Common Stock (including any beneficial ownership
attributable to such Member's interest in New Rio) to a number of
shares (as adjusted for stock splits or other similar
transactions) that is less than 20% of the number of shares (as
adjusted for stock splits or other similar transactions) of the
Warnaco Class A Common Stock to be received by New Rio in the
Exchange which are beneficially attributable to such Member, or
(ii) more than 80% of such Member's Percentage Interest in New
Rio as of the date hereof.
7. A disposition shall not be in contravention of
paragraphs 5 and 6 of this Agreement if (i) there has been an
unforseen change in circumstances and such Shareholder has
obtained the written opinion of Skadden (which opinion will have
been delivered to, and found reasonably satisfactory by, Xxxxxxx)
that such transaction will not prevent the Exchange and the
Merger from together qualifying as a tax-free reorganization
under the provisions of Section 368 of the Code, or (ii) with
respect only to transactions described in paragraph 6, such
Shareholder has died or, in the case of a Member classified as a
partnership for federal income tax purposes (the distributees of
which have agreed in writing, in a form reasonably satisfactory
to Skadden and Xxxxxxx, to be legally bound by this Agreement),
has distributed all of its assets pursuant to a plan of complete
liquidation.
8. The Shareholders will, for a period of one year
after the Merger, notify Skadden no later than 10 business days
after any sale, exchange, transfer by gift or other disposition
of any New Rio membership interest or Warnaco Class A Common
Stock received pursuant to the Exchange, which notice will
describe (i) the number of Warnaco Class A Common Shares disposed
of, and (ii) the exact manner of such disposition.
9. Each Shareholder understands that the provisions
of this Agreement (i) have been expressly relied upon by Warnaco,
WAC and DSH in connection with entering into the Exchange
Agreement and the Merger Agreement, and (ii) will be relied upon
by Skadden and Xxxxxxx in connection with the rendering of their
respective opinions concerning certain federal income tax
consequences of the Merger, the rendering and delivery of which
are conditions precedent to the consummation of the Merger.
10. If the Merger Agreement is terminated at any time
or the Merger has not been consummated by September 30, 1998,
this Agreement shall automatically terminate and be of no force
and effect, and the parties hereto shall not be bound by any of
the provisions hereof.
11. This Agreement shall be binding upon and
enforceable against the successors and assigns of the parties
hereto.
12. This Agreement may not be modified, amended,
altered or supplemented except by a written agreement executed by
all of the parties hereto and approved in writing by Skadden and
Xxxxxxx.
13. All notices to Skadden should be sent to:
Xxxxxxxxx X. Xxxxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
14. All notices to Xxxxxxx should be sent to:
Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
15. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
16. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter
hereof.
In witness whereof, the parties hereto have caused this
Agreement to be duly executed on the date first set forth above.
NEW RIO, L.L.C.
By: A.S. Enterprises, L.L.C.
Member Manager
By: Apparel Ventures, Inc.
By: ______________________________
Name:
Title:
By: CHARTERHOUSE EQUITY PARTNERS II, L.P.
Member Manager
By: CHUSA EQUITY INVESTORS II, L.P.
General Partner
By: CHARTERHOUSE EQUITY II, INC.
General Partner
By: ______________________________
Name:
Title:
______________________________
Xxxxxx X. Xxxxx
CHARTERHOUSE EQUITY PARTNERS II, L.P.
By: CHUSA EQUITY INVESTORS II, L.P.
General Partner
By: CHARTERHOUSE EQUITY II, INC.
General Partner
By: ______________________________
Name:
Title:
CHEF NOMINEES LIMITED
By: ______________________________
Name:
Title:
A.S. ENTERPRISES, L.L.C.
By: Apparel Ventures, Inc.
By: ______________________________
Name:
Title:
______________________________
Xxxxxx X. Xxxxxx
______________________________
Xxxxxxx Xxxx Xxxxxx
______________________________
Xxxxxx X. Xxxxxx
______________________________
Xxxx X. Xxxxxx as Trustee f/b/o
Xxxxxx X. Xxxxxx and Xxxx X. Xxxxxx
______________________________
Xxxxxxx X. Xxxxxx
