UNION CAMP CORPORATION
1600 VALLEY ROAD
WAYNE, NEW JERSEY 07470
NORTH MERGER CORP.
C/O UNION CAMP CORPORATION
1600 VALLEY ROAD
WAYNE, NEW JERSEY 07470
April 13, 1996
The Alling & Cory Company
1059 West Ridge Road
P.O. Box 20403
Rochester, New York 14602-0403
re Certain Litigation Matters
Ladies & Gentlemen:
Reference is made to that certain Agreement and Plan of Merger, dated of
even date herewith (the "Merger Agreement"), by and among The Alling & Cory
Company, a New York corporation ("Alling & Cory"), Union Camp Corporation, a
Virginia corporation ("Parent"), and North Merger Corp., a New York
corporation ("Sub") pursuant to which Sub will be merged with and into Alling
& Cory, Alling & Cory will become a majority-owned subsidiary of Parent and
each outstanding share of Alling & Cory Common Stock will be converted into
the right to receive the Merger Consideration. This letter agreement (this
"Agreement") is the letter agreement referred to in Section 4.1(h) of the
Merger Agreement. Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Merger Agreement.
Each of Alling & Cory, Parent and Sub hereby agree that, consistent with
Section 4.1(h) of the Merger Agreement, Alling & Cory is hereby authorized to
settle that certain litigation (the "Litigation") entitled P.A. Building
Company v. Elwyn D. Lieberman, Inc., et. al., (No. 112301/93) and that Alling
& Cory shall use its best efforts to cause such litigation to be finally
settled for a reasonable amount prior to the Closing Date in a manner that
imposes no obligation (other than the obligation to pay a monetary settlement)
on Alling & Cory, Parent or the Surviving Corporation. If the Litigation is
finally settled on or prior to the Closing Date, then (a) if such final
settlement results in a liability of Alling & Cory, Parent or the Surviving
Corporation in excess of four hundred thousand dollars ($400,000.00), the
Attributed Value shall be reduced by an amount equal to the amount of such
final settlement minus four hundred thousand dollars ($400,000.00), (b) if
such final settlement results in a liability of Alling & Cory, Parent or the
Surviving Corporation which is less than four hundred thousand dollars
($400,000.00), the Attributed Value shall be increased by an amount equal to
four hundred thousand dollars ($400,000.00) minus an amount equal to the
amount of such final settlement, and (c) if such final settlement results in a
liability of Alling & Cory, Parent or the Surviving Corporation which is equal
to four hundred thousand dollars ($400,000.00), the Attributed Value shall not
be adjusted in any manner on account of this Agreement.
If the Litigation is not finally settled prior to the Closing Date, the
parties hereto hereby agree that Parent and Sub shall be entitled to withhold
a portion of the Merger Consideration (the "Withheld Consideration") in an
amount not to exceed three dollars and fifty cents ($3.50) per Alling & Cory
Share outstanding on the Closing Date (other than Dissenting Shares). Such
Withheld Consideration shall consist solely of cash and shall be withheld pro
rata from each holder of Alling & Cory Shares (other than Dissenting
Shareholders) in accordance with the number of Alling & Cory Shares held by
each such shareholder as of the Effective Time. The Withheld Consideration
shall be held in escrow by the Bank of New York or such other bank or other
financial institution as is reasonably acceptable to Parent and Alling & Cory
(the "Escrow Agent") pending the final settlement of, or issuance of a final
judgment which is not subject to further appeal in respect of, the Litigation.
Within 10 days after the final settlement or issuance of a final judgment
which is not subject to further appeal in respect to the Litigation, the
Parent shall provide the shareholders' representative designated in the escrow
agreement pursuant to which the escrow is created (the "Shareholders'
Representative"), a full accounting (the "Accounting") of the amount of such
final judgment or final settlement and all costs and expenses of litigation
(including reasonable attorneys' fees and costs of internal counsel; it being
understood that Parent or the Surviving Corporation may retain counsel or
additional counsel of its choice to defend, or participate in the defense of,
the Litigation) incurred by Parent or the Surviving Corporation and resulting
from or arising out of its defense or settlement of the Litigation (the sum of
all such amounts, the "Total Cost"). Upon delivery of the Accounting, the
Shareholder Representative shall have the opportunity to review the Accounting
and consult with Parent and the Surviving Corporation regarding the items
enumerated thereon. The Parent and the Shareholders' Representative will
cooperate in good faith to resolve any disputes concerning any item set forth
in the Accounting within fifteen days of the date on which the accounting is
delivered to the Shareholders' Representative (such period, the "Review
Period"). Notwithstanding any thing contained herein (or contained in the
Merger Agreement) to the contrary, the parties hereto hereby agree that, from
and after the Closing Date, Parent shall be entitled to direct the conduct of
the Litigation in its sole and absolute discretion and nothing contained in
this Agreement shall entitle the Shareholders' Representative to dispute
either (x) any decision by Parent to settle the Litigation or (y) the terms of
any such settlement; provided that the terms of such settlement shall not
impose on the former holders of Alling & Cory Shares any obligation (other
than the obligation to pay money damages pursuant to this Agreement). If
after the expiration of the Review Period, Parent and the Shareholders'
Representative agree upon the Total Cost, such agreed upon amount shall be
deemed to be the Total Cost for all purposes hereof; provided, however, that
if Parent and the Shareholders' Representative are unable to reach agreement
as to the amount which constitutes the Total Cost, the Total Cost for all
purposes hereof shall be deemed to be the Total Cost as originally set forth
on the Accounting as delivered by Parent to the Shareholders' Representative.
If the Total Cost exceeds four hundred thousand dollars ($400,000.00), the
Parent shall sign a statement instructing the Escrow Agent to forward to the
Parent an amount in cash (the "Parent Amount") equal to the amount by which
the Total Cost exceeds four hundred thousand dollars ($400,000.00). The
remainder of the Withheld Consideration shall be delivered to the Exchange
Agent (or to Parent after the termination of the Exchange Fund pursuant to
Section 1.5(e) of the Merger Agreement) by the Escrow Agent for distribution
to the former holders of Alling & Cory Shares (other than Dissenting
Shareholders) in accordance with the following paragraph.
Any Withheld Consideration remaining after the payment of any Parent
Amount shall be distributed in cash by the Exchange Agent or Parent, as the
case may be, to the former holders of Alling & Cory Shares (other than
Dissenting Shareholders) pro rata in accordance with the number of Alling &
Cory Shares formerly held by such holders, together with interest thereon from
the Closing Date through, but not including, the date on which such funds were
delivered to the Exchange Agent or Parent, as the case may be, at a rate equal
to the Interest Rate. In the event that the Total Cost is less than four
hundred thousand dollars ($400,000.00), Parent shall pay to the Exchange Agent
or, in the event that the Exchange Fund has been terminated, Parent shall set
aside for the benefit of the former holders of Alling & Cory Shares (other
than Dissenting Shareholders), an amount in cash (the "Additional Amount")
equal to the amount by which four hundred thousand dollars ($400,000.00)
exceeds the Total Cost. The Exchange Agent or Parent, as the case may be,
shall distribute the Additional Amount to the former holders of Alling & Cory
Shares (other than Dissenting Shareholders) pro rata in accordance with the
number of Alling & Cory Shares formerly held by such holders. No interest
shall be payable on the Additional Amount. For the purposes hereof, the
"Interest Rate" shall mean LIBOR as of the Closing Date; provided that on the
first day of each succeeding calendar quarter (or the first London business
day thereafter if such first day of the calendar quarter is not a London
business day), the Interest Rate shall be reset at LIBOR as of such date.
"LIBOR" as of any date shall mean that rate of interest determined on the
basis of the rate of deposits of U.S. dollars having a maturity of three
months commencing the first London business day immediately following such
determination date which appears on Telerate Page 3750 as of 11:00 A.M.,
London time, on such date. Telerate Page 3750 shall mean page 3750 or its
replacement as provided by the Dow Jones Telerate News Service.
This Agreement shall not be amended or modified except in writing signed
by the parties hereto.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, applicable to agreements made and to be
performed within such State.
If you are in agreement with the foregoing, please so indicate by signing
and returning one copy of this agreement, which will constitute our agreement
with respect to the matters set forth herein.
Very truly yours,
UNION CAMP CORPORATION
By: /s/ James M. Reed
Name: James M. Reed
Title: Vice Chairman of the
Board of Directors and
Chief Financial Officer
NORTH MERGER CORP.
By: /s/ Dirk R. Soutendijk
Name: Dirk R. Soutendijk
Title: Vice President, General
Counsel and Secretary
Accepted and Agreed to:
THE ALLING & CORY COMPANY
By: /s/ Samuel T. Hubbard, Jr.
Name: Samuel T. Hubbard, Jr.
Title: President and Chief
Executive Officer