PROFIT PARTICIPATION AGREEMENT
PROFIT PARTICIPATION INTEREST AGREEMENT (this "Agreement") dated as of
February 23, 2001 among Heartland Industrial Partners, L.P. ("Heartland") and
the other investor stockholders listed on Schedule 1 hereto (together with
Heartland, the "New Investors") and each of Xxxxxxx & Xxxxxx Corporation (the
"Company"), Blackstone Capital Company II, L.L.C. ("Blackstone") and
Xxxxxxxxxxx/C&A Holdings, L.L.C. ("Xxxxxxxxxxx," and together with the Company
and Blackstone, the "Sellers").
RECITALS
WHEREAS, the New Investors and the Sellers have entered into those certain
stock share purchase agreements dated January 12, 2001 relating to the sales by
the Sellers to the New Investors of 52,000,000 Shares (the "Purchase
Agreements") (capitalized terms used herein without definition have the meanings
given such terms in the Purchase Agreement); and
WHEREAS, as part of the consideration for the purchase of Shares from the
Sellers, the New Investors desire to grant the Sellers a participating interest
in their respective Realized Profits (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein set forth, the parties hereby agree as follows:
ARTICLE I
PROFIT PARTICIPATION
Section 1.1 Sellers' Interest in Realized Profits. If a New Investor
effects any Transfer of Shares held by it and the aggregate Transfer
Consideration received by such New Investor for all Shares subject to any such
Transfer exceeds an amount equal to the Base Price times such number of Shares
(any such excess amount, the "Realized Profit"), then such New Investor shall
pay at the time or times and in the method set forth in Section 1.2, on the
Settlement Date for each such Transfer, to each Seller, pro rata with respect to
the number of Shares sold by such Seller to such New Investor pursuant to the
Purchase Agreements, an amount equal to such Realized Profit up to a maximum
amount of (a) $13,000,000 ("Participating Profit") plus (b) the Attributable
Accretion.
Section 1.2 Time and Method of Payment. Any payments required under Section
1.1 shall be paid in the appropriate amounts to each Seller within three (3)
Trading Days
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of receipt of the Transfer Consideration by a New Investor (each such date, a
"Settlement Date"). In the event Transfer Consideration consists of more than
one type of consideration, the amount payable to a Seller shall consist of each
such type of consideration pro rata based on the percentage of the Transfer
Consideration that constitutes the aggregate amount of payments to which the
Seller is entitled to under Section 1.1; provided, the New Investor shall pay
the Seller in cash the amount of any Transfer Consideration constituting
liabilities assumed or paid by the transferee. Any New Investor making a payment
under this Article I shall at the time of such payment deliver a written
statement to each Seller setting forth the calculations, including any
adjustments pursuant to Article II, used to determine the amount of such payment
which in each case shall have been made in good faith by the mutual agreement of
all New Investors party hereto. Each payment made pursuant to Section 1.1 will
first be deemed to be a payment of accrued and unpaid Attributable Accretion and
then applied to reduce Participating Profit.
ARTICLE II
ADJUSTMENT OF BASE PRICE
Section 2.1 Adjustments Generally. The Base Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as provided
in this Article II.
Section 2.2 Shares Reorganization. If the Company shall after the date
hereof (A) subdivide, split or reclassify its outstanding Shares into a greater
number of shares or consolidate its outstanding Shares into a smaller number of
shares or (B) declare a dividend on the outstanding Shares payable in additional
Shares (any such event being called a "Shares Reorganization"), then, effective
immediately after the record date at which the holders of Shares are determined
for purposes of such Shares Reorganization, the Base Price shall be adjusted to
an amount in each case determined by multiplying the Base Price as in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Shares outstanding on such record date before giving
effect to such Shares Reorganization and the denominator of which shall be the
number of Shares outstanding after giving effect to such Shares Reorganization.
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Section 2.3 Distributions. If the Company shall after the date hereof issue
or distribute to holders of Shares evidences of indebtedness, any other
securities of the Company (other than Shares, but including any rights, warrants
or options for the purchase of Shares exercisable for a period of greater than
45 days), or any property, assets or cash (a "Distribution"), then the
Distribution shall be paid by the New Investors directly over to the Sellers and
the Fair Market Value of such Distribution shall first be deemed to be a payment
of accrued and unpaid Attributable Accretion and then applied to reduce
Participating Profit.
Section 2.4 Capital Reorganization. (a) If after the date hereof, there
shall be any consolidation or merger of an entity with or into the Company,
including, without limitation, a consolidation or a merger in which the Company
is a continuing corporation and which results in any reclassification of, or
change (other than a Shares Reorganization), in, outstanding Shares, or any sale
or conveyance of the property of the Company as an entirety or substantially as
an entirety (any such event being called a "Capital Reorganization"), then if
the holders of all of the outstanding Shares immediately prior to such Capital
Reorganization after giving effect thereto own in the aggregate less than a
majority of the voting power of all classes of capital stock having the power to
vote for the election of the directors of the surviving or transferee entity, a
Transfer shall be deemed to have occurred and the Transfer Consideration with
respect to each Share shall be deemed to be the Fair Market Value of the capital
stock and any property received therefor pursuant to the Capital Reorganization.
(b) If after the date hereof, there shall be any Capital Reorganization and
the holders of all the outstanding Shares immediately prior to such Capital
Reorganization, after giving effect thereto, own in the aggregate at least a
majority of the voting power of all classes of capital stock having the power to
vote for the election of the directors of such surviving or transferee entity,
(1) to the extent any property (other than common stock of such surviving or
transferee entity) is received by such holders in connection with such Capital
Reorganization, a Distribution shall be deemed to have occurred consisting of
such property and (2) the term "Shares" shall be deemed to include such common
stock as shall then be held by the New Investors and the aggregate unrecovered
Base Price shall be allocated to the number of shares of common stock received
by the New Investors.
Section 2.5 Other Adjustments. If the Company shall, after the date hereof,
distribute to the holders of the Shares, cash, equity (other than Shares) or
other property or take any other similar action with respect to its Shares,
other than any action of a type otherwise described in this Article II, then the
Base Price shall be adjusted to such extent, if any, and in such manner and at
such time as is required to provide to the Sellers with a profit participation
interest that is economically equivalent with the profit participation interest
held by the Sellers prior to any such action.
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Section 2.6 Adjustment Rules. (a) Any adjustments pursuant to this Article
II shall be made successively whenever an event referred to herein shall occur.
(b) If the Company shall set a record date to determine the holders of
Shares for purposes of a Shares Reorganization, Distribution or Capital
Reorganization, and shall legally abandon such action prior to effecting such
action, then the adjustment shall be rescinded as of the effective date of such
abandonment.
(c) No adjustment in the Base Price shall be made hereunder unless such
adjustment increases or decreases such amount or price by one percent or more,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which together with any
adjustments so carried forward shall serve to adjust such amount or price by one
percent or more.
ARTICLE III
TERMINATION
The obligations of each New Investor hereunder shall terminate (1) upon the
Transfer by such New Investor of the aggregate of (a) all Shares initially
acquired by such New Investor pursuant to the Purchase Agreement and the Primary
Share Purchase Agreement and (b) any other Shares received by such New Investor
in respect of such Shares pursuant to a Shares Reorganization or Capital
Reorganization and (2) the payment to the Sellers from Realized Profit on all
sales of Shares subject to this Agreement of the amounts required by Section 1.1
with respect to such sales. It is agreed that such New Investor shall not have
any obligation to pay any Unrealized Participating Profit and Unrealized
Accretion remaining upon termination.
ARTICLE IV
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
indicated:
"Attributable Accretion" means the amount in U.S. dollars which would have
accrued as interest from the Closing Date through the date of determination if
the Unrealized Participating Profit plus the Unrealized Accretion had been
accruing interest on a daily basis,
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compounded quarterly on each January 1, April 1, July 1 and October 1, at the
annual rate of 6.8%.
"Base Price" means an amount, initially equal to $5.00 per Share, as
adjusted from time to time pursuant to Article II.
"Fair Market Value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's length transaction, assuming each party acts with
full knowledge of the facts and without undue pressure or compulsion to complete
such transaction as determined, if the Sellers are unable to agree on such
valuation within 10 Business Days of the Transfer giving rise to such valuation,
by an independent investment banking firm of national reputation selected by
Heartland and reasonably acceptable to each Seller; provided, however, that the
Fair Market Value of any security for which a public market trading price is
available shall be the average of the closing prices of such security for the
five Trading Day period immediately preceding the date of the transaction to
which such Fair Market Value determination relates.
"Permitted Transferee" shall mean a person to whom a transfer of Shares has
been made pursuant to Section 2.2 of the New Master Shareholder Agreement and is
a Permitted Transferee as defined in such Agreement.
"Realized Profit" has the meaning given such term in Section 1.1 hereof.
"Settlement Date" has the meaning given such term in Section 1.2 hereof.
"Shares" shall mean shares of Common Stock, par value $.01 per share, of
the Company and shall include each Convertible Preferred Share which shall be
treated as 16.4 Shares.
"Trading Day" shall mean a day on which the New York Stock Exchange is open
for business.
"Transfer" means any sale, conveyance, assignment, disposition or other
transfer (each an "Assignment" or "Assign"), but does not include (1)
Assignments to Permitted Transferees or (2) a pledge or assignment of interests
or assets of any New Investor to a lender in the ordinary course of business
(and any subsequent exercise of remedies by such lender) shall not constitute a
transfer for purposes of this Agreement.
"Transfer Consideration" means the value of all cash and other property
actually paid, directly or indirectly, by a transferee to a New Investor in
connection with a Transfer, less any brokerage commissions, underwriting
discount, reasonable and customary fees or out-of-pocket expenses, in each case
payable to a non-affiliated person or entity payable by
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such New Investor in connection with such Transfer. The value of any non-cash
consideration shall be the Fair Market Value thereof and shall also include the
aggregate value of any liabilities assumed or paid, directly or indirectly, by
the transferee in connection with a Transfer.
"Unrealized Accretion" means the amount of Attributable Accretion accrued
as of any date less the amount of payments theretofore received by Sellers
pursuant to Section 1.1(b).
"Unrealized Participating Profit" means $13,000,000 less the amount of
payments theretofore received by Sellers pursuant to Section 1.1(a).
ARTICLE V
MISCELLANEOUS
Section 5.1 Obligations Several and Not Joint. The New Investors'
obligations under this Agreement are several in proportion to the Shares
acquired by such New Investors under the Purchase Agreement and not joint.
Section 5.2 Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by prepaid telex, cable or telecopy or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
shall be deemed given when so delivered by hand, telexed, cabled or telecopied,
or if mailed, three business days after mailing (one business day in the case of
express mail or overnight courier service), as follows:
If to Heartland:
Heartland Industrial Partners, L.P.
00 Xxxxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
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with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: W. Xxxxxx Xxxxx, Esq.
Xxxxxxxx X. Xxxxxxxxx, Esq.
if to Sellers:
Xxxxxxx & Xxxxxx Corporation
0000 Xxx Xxxx Xxxxx
Xxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, General Counsel
with copies to:
Morris, Nichols, Arsht & Xxxxxxx
0000 X. Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxx
Xxxxxx Xxxxxxx & Xxxx LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxxx
and:
Blackstone Capital Partners L.P.
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Fax: (000) 000-0000
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with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
and:
Xxxxxxxxxxx Xxxxxxx Management Partners
1301 Avenue of the Americas - 44th Floor
New York, New York 10019
Attn: Xxxxxxx X'Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxx
Fax: (000) 000-0000
Section 5.3 Expenses. Subject to the terms of the Purchase Agreement with
the Company, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid, whether or not the
transactions contemplated hereby are consummated, by the party incurring such
costs and expenses.
Section 5.4 Amendments and Waivers. (a) Any provision of this Agreement may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement, or in
the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 5.5 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors
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and assigns, provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent of
each other party hereto. Notwithstanding the foregoing, (1) Blackstone and
Xxxxxxxxxxx each may Assign its right to receive Participating Profit and
Attributable Accretion to any of its Affiliates (as defined in the New Master
Stockholder Agreement, (2) Shares are freely Assignable to a Permitted
Transferee with the party Assigning Shares retaining the obligation to pay the
related Participating Profit and Attributable Accretion and (3) Shares and the
obligation to pay Participating Profit and Attributable Accretion may be
Assigned to a Permitted Transferee provided the Sellers receive the written
agreement of such Permitted Transferee to assume such obligation and, in the
case of clause (3), the party Assigning such Shares shall no longer have the
obligation to pay Participating Profit and Attributable Accretion with respect
to such Shares.
Section 5.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
Section 5.7 Jurisdiction. The parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions contemplated
hereby may only be brought in the United States District Court for the Southern
District of New York or any New York State court sitting in New York City, and
each of the parties hereby consents to the jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 5.1 shall be deemed
effective service of process on such party.
Section 5.8 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 5.9 Counterparts; Third Party Beneficiaries. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement shall confer upon any person other than the parties
hereto any rights or remedies hereunder.
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Section 5.10 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
Section 5.11 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
Section 5.12 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be deemed to
be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforced in
accordance with its terms to the maximum extent permitted by law.
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IN WITNESS WHEREOF, each of the parties has duly executed this Agreement or
caused it to be duly executed as of the date first written above.
XXXXXXX & XXXXXX CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
BLACKSTONE CAPITAL COMPANY II, L.L.C.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Member
XXXXXXXXXXX/C&A HOLDINGS, L.L.C.
By: /s/ Xxxxxxx X. X'Xxxxxxx
-----------------------------------------------
Name: Xxxxxxx X. X'Xxxxxxx
Title: Member
S-2
HEARTLAND INDUSTRIAL PARTNERS, L.P.
By: Heartland Industrial Associates, L.L.C.
its general partner
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Member
HEARTLAND INDUSTRIAL PARTNERS (FF), L.P.
By: Heartland Industrial Associates, L.L.C.
its general partner
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Member
HEARTLAND INDUSTRIAL PARTNERS (E1), L.P.
By: Heartland Industrial Associates, L.L.C.
its general partner
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Member
HEARTLAND INDUSTRIAL PARTNERS (K1), L.P.
By: Heartland Industrial Associates, L.L.C.
its general partner
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Member
S-3
HEARTLAND INDUSTRIAL PARTNERS (C1), L.P.
By: Heartland Industrial Associates, L.L.C.
its general partner
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Member
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Schedule 1 - Heartland Investors
Heartland Industrial Partners (FF), L.P.
Heartland Industrial Partners (E1), L.P.
Heartland Industrial Partners (K1), L.P.
Heartland Industrial Partners (C1), L.P.
