Exhibit 11
PROFIT PARTICIPATION AGREEMENT
PROFIT PARTICIPATION INTEREST AGREEMENT (this "AGREEMENT") dated as
of February 23, 2001, among Heartland Industrial Partners, L.P. ("Heartland")
and 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 of receipt of the Transfer Consideration by a New Investor
(each such date, a "SETTLE-
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MENT 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:
BLACKSTONE CAPITAL COMPANY II, L.L.C.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------
Name: Xxxx X. Xxxxxxxx
Title: Authorized Signatory
XXXXXXXXXXX/C&A HOLDINGS, L.L.C.
By: /s/ Xxxxxxx X. X'Xxxxxxx
-------------------------
Name: Xxxxxxx X. X'Xxxxxxx
Title: President
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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:
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:
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:
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:
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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: