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Profit Participation Interest Agreement

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Sectors: Automotive and Transport Equipment
Governing Law: New York, View New York State Laws
Effective Date: February 23, 2001
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EXHIBIT 10.70


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 Collins & Aikman Corporation (the "Company"), Blackstone Capital Company II, L.L.C. ("Blackstone") and Wasserstein/C&A Holdings, L.L.C. ("Wasserstein," 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


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