1
EXHIBIT 10.12
FORM OF
TENNECO PACKAGING INC. RABBI TRUST
The Tenneco Packaging Inc. Rabbi Trust (the "Trust") is hereby
adopted by Tenneco Packaging Inc., (the "Company") and shall be maintained by
and between the Company and certain individuals as trustee (collectively the
"Trustee").
Effective on the date on which the stock of the Company is
distributed to the shareholders of Tenneco Inc. (the "Effective Date"), the
following rules shall govern:
WHEREAS, the Company has adopted the nonqualified compensation
plan(s) and supplemental pension arrangements as listed in Appendix A
(collectively the "Plans" and each a "Plan.") covering the benefit obligations
allocated to it under the Human Resources Agreement between and among Tenneco
Inc. and the Company (the "HR Agreement"), and
WHEREAS, the Company wishes to maintain the Trust and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's creditors in the event of the Company's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan(s); and
WHEREAS, it is the intention of the parties that this Trust
shall not affect the status of the Plan(s) as an unfunded plan maintained for
the purpose of providing deferred compensation for a select group of management
or highly compensated employees for purposes of Title I of the Employee
Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of funds to assist it
in the meeting of its liabilities under the Plan(s).
NOW, THEREFORE, the parties do hereby adopt the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
1. Establishment of Trust.
(a) Subject to the rules explicitly set forth herein, the Trust hereby
established is irrevocable.
(b) The Trust is intended to be a grantor trust, of which the Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(c) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Plan participants and general creditors as herein
set forth. Plan participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Plan(s) and this Trust Agreement shall be mere
-1-
2
unsecured contractual rights of Plan participants and their beneficiaries
against the Company. Any assets held by the Trust will be subject to the claims
of the general creditors of the Company and any of the Company's domestic
subsidiaries.
(d) The Company, in its sole discretion, may at any time, or from time
to time, make deposits of common stock of the Company or other property in trust
with the Trustee to augment the principal to be held, administered and disposed
of by the Trustee as provided in this Trust Agreement. Except as provided
herein, neither the Trustee nor any Plan participant or beneficiary shall have
any right to compel additional deposits.
2. Payments to Plan Participants and their Beneficiaries.
(a) At least annually, the Company shall deliver to the Trustee a
schedule (the "Payment Schedule") that indicates the amounts payable in respect
of each Plan participant (and his or her beneficiaries), that provides a formula
or other instructions acceptable to the Trustee for determining the amounts so
payable, the form in which such amount is to be paid (as provided for or
available under the Plan(s)), and the time of commencement for payment of such
amounts. To the extent that any amounts are due to an employee (or beneficiary
of an employee) of a subsidiary of the Company, and the subsidiary fails to make
such payment, the Company shall do so. Except as otherwise provided herein, if
the Company has failed to make payments to the Plan participants and their
beneficiaries in accordance with such Payment Schedule the Trustee shall do so.
The Company shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan(s) and shall pay
amounts withheld to the appropriate taxing authorities.
(b) The entitlement of a Plan participant or his or her beneficiaries
to benefits under the Plan(s) shall be determined by the Company or such party
as it shall designate under the Plan(s), and any claim for such benefits shall
be considered and reviewed under the procedures set out in the Plan(s).
Notwithstanding the foregoing, the Trustee may, without direction from the
Company, make payments to participants and beneficiaries in such manner and in
such amounts as the Trustee shall determine they are entitled to be paid under
the Plans (to the extent funded through the Trust) based on the most recent
information furnished to the Trustee by the Company and any supplemental
information furnished to the Trustee by a participant or beneficiary upon which
the Trustee may reasonably rely in making such determination. Notwithstanding
any other provision hereof, persons (other than persons covered by the Tenneco
Inc. Pilots' Supplemental Retirement Plan) who were employees of Tenneco
Management Company immediately prior to the Effective Date or who are treated as
such under the HR Agreement, though they may be participants in the plans listed
in Appendix A, shall not be entitled to payments under the Trust, and payments
shall be available for their benefit obligations through a separate rabbi trust.
(c) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan(s). The Company shall notify the Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable
-2-
3
to participants or their beneficiaries. In addition, if the principal of the
Trust, and any earnings thereon, are not sufficient to make payment of benefits
in accordance with the terms of the Plan(s), the Company shall make the balance
of each such payment as it falls due. The Trustee shall notify the Company where
principal and earnings are not sufficient.
(d) The Company shall cause its actuary to determine the projected
benefit obligation ("PBO") under all of the Plans as of each January 1,
commencing with January 1, 2000. To the extent that the value of the assets of
the Trust as of the January 1 in question is less than the total PBO under all
of the Plans as so determined, the Company shall contribute additional assets to
the Trust with a value equal to the difference. To the extent that the assets of
the Trust exceed 110% of the PBO, the Company may withdraw assets with a value
equal to the excess of the value of the Trust's assets over 110% of such PBO.
(e) Notwithstanding any other provision hereof, the Trustee may sell
Company common stock or other assets in order to provide cash to pay benefits
hereunder.
3. Trustee Responsibility Regarding Payments to Trust Beneficiary when the
Company is Insolvent.
(a) The Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Company is Insolvent. The Company shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) the Company
is unable to pay its debts as they become due, or (ii) the Company is subject to
a pending proceeding as a debtor under the United States Bankruptcy Code.
(b) In the event of Insolvency of the Company the following rules shall
apply.
(1) The Company shall inform the Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of the Company
alleges in writing to the Trustee that the Company has become Insolvent, the
Trustee shall determine whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
(2) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(3) If at any time the Trustee has determined that the Company
is Insolvent, the Trustee shall discontinue payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the benefit of
the Company's general creditors. Nothing in this Trust Agreement shall in any
way diminish any rights of Plan participants or their beneficiaries to
-3-
4
pursue their rights as general creditors of the Company with respect to benefits
due under the Plan(s) or otherwise.
(4) The Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has determined that the Company is not
Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan(s) for the
period of such discontinuance, less the aggregate amount of any payments made to
Plan participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
4. Payments to the Company.
Except as provided in Section 1(d), 2 or 3 hereof, the Company shall
have no right or power to direct the Trustee to return to the Company or to
divert to others any of the Trust assets before all payment of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms of
the Plan(s).
5. The Trustee's Powers of Investment and Management.
The Trustee shall have the following powers with respect to any and all
assets at any time held by it and constituting part of the Trust Fund:
(a) The Trust shall hold the assets of the Trust exclusively in shares
of the common stock of the Company, and any assets distributed with respect
thereto.
(b) All rights associated with any stock held in the Trust, including
voting rights, shall be exercised by the Trustee or the person designated by the
Trustee, and shall in no event be exercisable by or rest with Plan participants.
Voting rights are exercisable by the Trustee in a nonfiduciary capacity without
the approval or consent of any person in a fiduciary capacity.
6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested in Company common stock.
7. Accounting by the Trustee.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following
-4-
5
the close of each calendar year and within 60 days after the removal or
resignation of the Trustee, the Trustee shall deliver to the Company a written
account of its administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash and securities held in the Trust at the end of such year or as
of the date of such removal or resignation as the case may be.
8. Responsibility of the Trustee.
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity with, the terms of this Trust and is given in writing by the
Company. In the event of a dispute between the Company and a party, the Trustee
may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If the Company does not pay such costs, expenses and liabilities
in a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel (who may also be counsel
for the Company generally) with respect to any of its duties or obligations
hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
the Trustees by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(g) Any action required to be taken by the Company, or direction given
by the Company, shall be by resolution of the Compensation / Nominating /
Governance Committee of its board of directors or by written direction of one or
more of its president, any vice president or
-5-
6
treasurer. The Trustee may rely upon a resolution or direction filed with the
Trustee and shall have no responsibility for any action taken by the Trustee in
accordance with any such resolution or direction.
9. Compensation and Expenses of the Trustee.
The Company shall pay all reasonable administrative and the Trustee's
fees and expenses. If not so paid, the fees and expenses shall be paid from the
Trust. Notwithstanding the foregoing, individuals shall serve without fee but
shall be entitled to reimbursement of expenses.
10. Trustee Resignation or Removal.
(a) The Trustee or any individual who is one of a group of individuals
serving as Trustee may resign at any time by written notice to the Company,
which shall be effective 30 days after receipt of such notice unless the Company
and the Trustee (or individual as the case may be) agree otherwise.
(b) The Trustee or any individual who is one of a group of individuals
serving as Trustee may be removed by the Company on 30 days notice or upon
shorter notice acceptable by the Trustee (or individual as the case may be).
(c) Upon a Change in Control, as defined herein, the Trustee may not be
removed by the Company for two years.
(d) If the Trustee or any individual who is one of a group of
individuals serving as Trustee resigns within two years of a Change in Control,
as defined herein, the Trustee shall select a successor Trustee in accordance
with the provisions of Section 11 hereof prior to the effective date of the
Trustee's resignation; provided that if an individual who is one of a group of
individuals serving as Trustee resigns in such circumstances, the remaining
individuals serving as Trustee may but are not required to name a successor to
replace him.
(e) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee.
(f) For purposes hereof, death or incapacity shall be deemed an
immediately effective resignation.
11. Appointment of Successor.
(a) If the Trustee (or individual) resigns or is removed in accordance
with Section 10 hereof, the Trustee may appoint any third party as a successor
to replace the Trustee (or individual) upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee (or individual) shall
execute
-6-
7
any instrument necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to the
rules hereof. The successor Trustee shall not be responsible for and the Company
shall indemnify and defend the successor Trustee from any claim or liability
resulting from any action or inaction of any prior Trustee or from any other
past event or any condition existing at the time it becomes successor Trustee.
12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan(s) or shall make the Trust
revocable.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan(s). Upon termination of the Trust any assets remaining
in the Trust shall be returned to the Company.
(c) Upon written approval of Participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan(s), the Company may
terminate this Trust prior to the time all benefit payments under the Plan(s)
have been made. All assets in the Trust at termination shall be returned to the
Company.
(d) This Trust Agreement may not be amended by the Company for two
years following a Change in Control, as defined herein.
13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
(d) "Change in Control" shall mean the first to occur of the following
events (but no event other than the following events), except as otherwise
provided below:
(i) any person and any of their affiliates or associates
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing twenty-five percent
-7-
8
(25%) or more of the combined voting power of the Company's then outstanding
securities having general voting rights, and a majority of the Incumbent Board
(as hereinafter defined) does not approve the acquisition before the acquisition
occurs. Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur under this section (i) solely because twenty-five percent (25%) or more
of the combined voting power of the Company's then outstanding securities having
general voting rights is acquired by one or more employee benefit plans
maintained by the Company; or
(ii) members of the Incumbent Board cease to constitute a
majority of the board of Tenneco Packaging Inc. (as hereinafter defined); or
(iii) the consummation of any plan of merger, consolidation or
combination between the Company and any person including becoming a subsidiary
of any other person without members of the incumbent Board, as constituted
immediately prior to the merger, consolidation or combination constituting a
majority of the board of directors of (A) the successor corporation, or (B) if
the surviving or successor corporation is a majority-owned subsidiary of another
corporation or corporations, the ultimate parent company of the surviving or
successor corporation; or
(iv) the consummation of any sale, exchange or other
disposition of all or substantially all of the Company's assets without members
of the Incumbent Board immediately prior to any sale, exchange or disposition of
all or substantially all of the Company's assets constituting a majority of the
board of directors of (A) the corporation which holds such assets after such
disposition, or, (B) if such corporation is a majority-owned subsidiary of
another corporation or corporations, the ultimate parent company of the
successor corporation provided, that the Company Board may determine
conclusively that any transaction does not constitute a sale, exchange or other
disposition of substantially all of the Company's assets; or
(v) if any person and any of their affiliates and
associates, shall elect or have elected, during any period not exceeding 24
months, at least 25% of the members of the Tenneco Packaging Inc. board of
directors, without the approval of the Incumbent Board and such members are
comprised of persons not serving as members of the Tenneco Inc. board of
directors immediately prior to the formation of such group or the first
solicitation of proxies by such shareholder.
For purposes of this definition, the terms "person" and "beneficial
owner" shall have the meaning set forth in Sections 3(a) and 13(d) of the
Securities Exchange Act of 1934, as amended, in the regulations promulgated
thereunder. If the Trustee requests in writing that the Company determine or
furnish evidence to enable the Trustee to determine whether a Change in Control
has occurred, the Company shall do so in writing as soon as practicable
following receipt of such request.
(e) "Incumbent Board" shall mean (i) the members of the Company's board
of directors on Effective Date, to the extent that they continue to serve, and
(ii) any individual who becomes a member of the Company's board of directors
after Effective Date, if his election or
-8-
9
nomination for election as a director is approved by a vote of at least
three-quarters of the then Incumbent Board.
14. Corporate Restructuring.
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, extraordinary
dividend, spin-off, rights offering, share combination, or other change in the
corporate structure of the Company affecting its common stock, the Trustee may,
in its sole discretion, cause the transfer of all or a portion of the Trust's
assets to a comparable trust maintained by one or more of the resulting
corporate entities or otherwise cause such changes in the Trust or its assets as
it shall deem appropriate.
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Agreement to be executed on their behalf by their respective officers thereunto
duly authorized, on the day and year set forth below.
TENNECO PACKAGING INC.
-9-
10
APPENDIX A
Tenneco Packaging Inc. Deferred Compensation Plan
Tenneco Inc. Pilots' Supplemental Retirement Plan
Tenneco Packaging Inc. Supplemental Executive Retirement Plan
-10-
