AGREEMENT
Exhibit 10.1
THIS
AGREEMENT is made by and between The Pension Benefit Guaranty
Corporation (“PBGC”), a United States government corporation, and MAXXAM, Inc. (“MAXXAM”), a
Delaware corporation (collectively, “the Parties”).
WITNESSETH:
WHEREAS,
MAXXAM’s wholly-owned subsidiary, The Pacific Lumber Company (“Palco”), filed
for protection under Chapter 11 of the U.S. Bankruptcy Code on January 19, 2007
(the “Palco Bankruptcy Proceedings”); and
WHEREAS,
Palco is the Contributing Sponsor (as defined below) of The Palco Retirement
Plan (the “Plan”), a defined benefit pension plan insured by PBGC;
and
WHEREAS,
the Plan has Unfunded Benefit Liabilities (as defined below), measured on a
termination basis as of April 30, 2007, of approximately $24 million;
and
WHEREAS,
PBGC filed estimated contingent claims in the Palco Bankruptcy Proceedings
against Palco and each of its co-debtors for the Plan’s Unfunded Benefit
Liabilities (as defined below); and
WHEREAS,
MAXXAM is a member of Palco’s Controlled Group (as defined below);
and
WHEREAS,
as a member of Palco’s controlled group, MAXXAM is jointly and severally liable
for all required contributions to the Plan and, upon termination of the Plan,
the Plan’s Termination Liability (as defined below), and the Termination Premium
(as defined below); and
WHEREAS,
the Parties desire that the Plan remain ongoing after Palco emerges from the
Palco Bankruptcy Proceedings;
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Parties agree as follows:
Section
I
Definitions
When used
herein:
“Benefit
Liabilities” has the meaning ascribed thereto in ERISA §4001(a)(16), determined
as of a specified date.
“Contributing
Sponsor” has the meaning ascribed thereto in ERISA §4001(a)(13).
“Controlled
Group” has the meaning ascribed thereto in ERISA §4001(a)(14).
“Effective
Date” means the last date on which a Party signs this Agreement.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.
§§1001 et seq., and all
regulations issued thereunder. References to sections of ERISA shall
be construed to refer to any successor or substantially related sections of
similar import, and the regulations applicable thereto.
“IRC”
means the Internal Revenue Code of 1986, as amended, and all regulations
thereunder. References to sections of the Internal Revenue Code shall
be construed to refer to any successor or substantially related sections of
similar import, and the regulations applicable thereto.
“Palco”
means The Pacific Lumber Company as Contributing Sponsor (as defined above) of
the Plan or any new entity formed as a result of Palco’s emergence from
protection under Chapter 11 of the U.S. Bankruptcy Code that is a Contributing
Sponsor of the Plan.
“Termination
Date” has the meaning ascribed thereto in ERISA §4048.
“Termination
Liability” means the liabilities to PBGC described under ERISA
§4062(b).
“Termination
Premium” means the liability that arises under ERISA §4006(a)(7) for premiums
due and payable by a Contributing Sponsor and each member of its Controlled
Group, upon the termination of a pension plan under circumstances set forth in
ERISA §4006(a)(7)(A).
“Unfunded
Benefit Liabilities” has the meaning ascribed thereto in ERISA §4001(a)(18) and
its implementing regulations.
Section
II
Obligations &
Procedures
2.01 Termination Liability
Guaranty and Termination Premium Guaranty.
In the event that the Plan is
terminated in a distress termination under ERISA §4041(c) or in a
PBGC-initiated termination under ERISA §4042 during the
term of this Agreement, MAXXAM guarantees to PBGC the payment of the Unrecovered
Termination Liability and the Unrecovered Termination Premium, as described in
sections (a) and (b) below.
(a) The
Unrecovered Termination Liability is the Plan’s Unfunded Benefit Liabilities as
of the Termination Date, less the Controlled Group Termination Liability
Recovery Amount (as described below), plus Assessable Interest (as described
below), calculated from the date of PBGC’s demand for payment under section
2.02(b). The Controlled Group Termination Liability Recovery Amount
means the present value of the amounts, if any, that PBGC received or arranged
to receive from the Contributing Sponsor and each member of the Contributing
Sponsor’s Controlled Group (with the exception of MAXXAM) for payment of the
Plan’s Termination Liability.
(b) The
Unrecovered Termination Premium is the total, three-year Termination Premium due
PBGC under ERISA §4006(a)(7), less the Controlled Group Termination Premium
Recovery Amount (as described below), plus Assessable Interest (as described
below), calculated from the date of PBGC’s demand for payment under section
2.02(b). The Controlled Group Termination Premium Recovery Amount
shall mean the present value of the amounts, if any, that PBGC received, or
arranged to receive, from the Contributing Sponsor and each member of
the Contributing Sponsor’s Controlled Group (with the exception of MAXXAM) for
payment of the Plan’s Termination Premium.
(c) Assessable
Interest shall arise only after PBGC issues a demand under section
2.02(b). Assessable Interest shall be calculated using an annual rate
of interest equal to the annual short-term applicable Federal interest rate
under IRC §1274 in effect on the date PBGC issues its demand under section
2.02(b).
(d) For
purposes of calculating the Controlled Group Termination Liability Recovery
Amount and the Controlled Group Termination Premium Recovery Amount, PBGC shall
value any in-kind payments at their fair market value and shall determine the
present value of any deferred payment amounts under any payment agreements using
the same rate PBGC used to determine Benefit Liabilities for the
Plan. The fair market value of in-kind payments and the present value
of deferred payment amounts shall be established as of the Termination Date of
the Plan.
2.02 Conditions and Procedure for
Making a Demand for Unrecovered Termination Liability and Unrecovered
Termination Premium.
(a) Before
issuing a demand under paragraph (b) of this section, PBGC shall provide MAXXAM
with:
(1) Notice
that PBGC has received a distress termination notice pursuant to ERISA § 4041
(this notice shall be provided within twenty (20) days of PBGC’s receipt of the
distress termination notice); or
(2) Notice
that PBGC has decided in accordance with its administrative procedures (by
issuing a Notice of Determination) to initiate proceedings under ERISA § 4042 to
terminate the Plan (this notice shall be provided within twenty (20) days after
the Notice of Determination has been issued); and
(3) Notice
of the proposed Termination Date for the Plan; and
(4) As
to each person (with the exception of MAXXAM) described in ERISA §4062(a) as
being liable for the Termination Liability and as to each person described in
ERISA §4007(e) as being liable for the Termination Premium, evidence that PBGC
has either: (i) reached a final agreement resolving each such person’s
Termination Liability and Termination Premium, which said agreement includes a
release of claims for the Termination Liability and the Termination Premium; or
(ii) exhausted all reasonable efforts to obtain payment of the Termination
Liability and Termination Premium.
(b) No
later than ninety (90) days after PBGC has met the conditions set forth in
section 2.02(a), PBGC shall issue to MAXXAM a demand for the Unrecovered
Termination Liability and/or the Unrecovered Termination
Premium. Such demand shall include the following information (as
applicable):
(1) The
amount of the Termination Liability as of the Termination Date;
(2) The
Unfunded Benefit Liabilities of the Plan;
(3) The
Controlled Group Recovery Amount;
(4) The
amount of the Unrecovered Termination Liability;
(5) The
amount of the Termination Premium as of the Termination Date;
(6) The
Controlled Group Termination Premium Recovery Amount;
(7) The
amount of the Unrecovered Termination Premium;
(8) The
name, address, and contact person for each Contributing Sponsor, and each member
of such sponsor’s controlled group (with the exception of MAXXAM) as of the
Plan’s Termination Date, if known to PBGC; and
(9) If
applicable, a description of the manner in which PBGC has exhausted reasonable
efforts to obtain payment of the Termination Liability and the Termination
Premium.
2.03 Payment of Unrecovered
Termination Liability and Unrecovered Termination Premium.
MAXXAM shall pay the Unrecovered
Termination Liability and the Unrecovered Termination Premium within sixty (60)
days of receipt of the demand.
2.04 Request For Review of
Demand. Within thirty (30) days following receipt of a demand
under section 2.02(b), MAXXAM may request that PBGC review any calculation
contained in the demand, and request information supporting or relating to any
calculation contained in the demand. PBGC shall respond to such a
request in writing and provide relevant documents within thirty (30) days of
receipt of the request. MAXXAM does not have any obligation to make
payment of the Unrecovered Termination Liability or the Unrecovered Termination
Premium during this review process. Within thirty (30) days following
receipt of PBGC’s response, MAXXAM shall pay PBGC the Unrecovered Termination
Liability and the Unrecovered Termination Premium.
In objecting to a demand, MAXXAM shall
not question PBGC’s decision to terminate the Plan or raise issues concerning
the Plan’s Termination Date.
2.05 Assumption of the
Plan. If a
plan of reorganization confirmed by the bankruptcy court in the Palco Bankruptcy
Proceeding does not provide for the continuation of the Plan, MAXXAM intends to
assume sponsorship of the Plan. If a plan of reorganization confirmed
by the court does provide for the continuation of the Plan, MAXXAM may attempt
to assume sponsorship of the Plan at any time thereafter. PBGC shall
not oppose any efforts that MAXXAM may make to enter into an agreement to assume
sponsorship of the Plan.
Notwithstanding the above, PBGC does
not waive any of its rights under ERISA § 4042 to terminate the Plan or, any of
its rights under ERISA and the IRC generally in the event that MAXXAM assumes
sponsorship of the Plan.
Section
III
Representations and
Warranties
3.01 MAXXAM
represents and warrants as to itself as follows:
(a) That
it has full power and authority to enter into this Agreement and that this
Agreement constitutes a legal, valid, and binding obligation, enforceable
against it in accordance with its terms;
(b) That
the person executing this Agreement on its behalf has been duly authorized and
empowered to execute and deliver this Agreement on its behalf;
(c) That
the execution, delivery, and performance of this Agreement do not and will not
violate, conflict with, or result in a breach of any of the terms of any
indenture, agreement, or instrument to which it is party or by which it is
bound, or constitute a default thereunder and, to its best knowledge, do not and
will not violate any law, rule, regulation, order, writ, judgment, injunction,
decree, determination, or award currently in effect;
(d) The
execution, delivery, and performance of this Agreement do not and will not
violate any of the provisions of any of MAXXAM’s articles of incorporation or
by-laws.
3.02 The
PBGC represents and warrants as to itself as follows:
(a) That
it has full power and authority to enter into this Agreement and that this
Agreement constitutes a legal, valid, and binding obligation, enforceable
against it in accordance with its terms;
(b) That
the person executing this Agreement on its behalf has been duly authorized and
empowered to execute and deliver this Agreement on its behalf; and
(c) That
the execution, delivery, and performance of this Agreement do not and will not
violate, conflict with, or result in a breach of any of the terms of any
indenture, agreement or instrument to which it is bound, or constitute a default
thereunder, and to its best knowledge do not and will not violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award
currently in effect.
Section
IV
Miscellaneous
4.01 Governing
Law. This Agreement and the rights and obligations of the
parties hereunder shall, except to the extent preempted by federal law, be
governed by and construed in accordance with the laws of the District of
Columbia without giving effect to its conflict of laws principles.
4.02 Enforceability. Only
the Parties may enforce this Agreement. This Agreement is for the
sole benefit of the Parties, and is not intended to confer upon any other person
any rights or remedies hereunder, to amend the Plan, or to create any other plan
subject to ERISA.
4.03 Entire Agreement;
Amendments. This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter hereof and shall merge
and supersede all previous agreements, negotiations, commitments,
representations, writings, and discussions between them concerning such subject
matter. This Agreement cannot be changed or terminated orally and can
be modified only upon the written consent of all the parties to be bound by such
modification.
4.04 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of each of the
Parties. No Party may, without the written consent of the Party
affected, assign any of its rights or obligations under this Agreement, directly
or indirectly, whether by operation of law or otherwise.
4.05 Notices to
Parties. All notices and other communications hereunder shall
be in writing and shall be delivered to the intended recipient at the address so
specified below or at such other address as shall be designated by any of them
in a notice to each other party set forth therein. Notices shall be
effective three (3) days after mailing by certified mail and when received if
sent by any other means.
Addresses for
Notices:
To
MAXXAM:
0000 Xxxx
Xxx Xxxxxxxxx
Attention
Legal Department/Corporate Secretary
Xxxxx
0000
Xxxxxxx,
Xxxxx 00000
To PBGC:
Pension
Benefit Guaranty Corporation
0000 X
Xxxxxx, X.X.
Xxxxxxxxxx,
XX 00000
Attn: Director,
Department of Insurance Supervision & Compliance
Fax: (000)
000-0000
With a copy
to:
Pension
Benefit Guaranty Corporation
0000 X
Xxxxxx, X.X.
Xxxxxxxxxx,
XX 00000
Attn: Chief
Counsel, Office of the Chief Counsel
Fax: (000)
000-0000
4.06 Headings. The
titles and headings of the sections of this Agreement are for convenience of
reference only and will not control or affect in any way the scope, intent, or
interpretation of any of the provisions of this Agreement.
4.07 Counterparts. This
Agreement may be executed in one or more counterparts, all of which taken
together shall constitute one and the same instrument.
4.08 Press Releases &
Disclosure. PBGC shall not issue any press release in
connection with the existence, execution, or effectiveness of this Agreement or
knowingly disclose the existence, execution, or effectiveness of this Agreement
unless PBGC is required by law or public policy to do so, or unless PBGC is
expressly asked about the existence of this Agreement, or unless PBGC believes
that failure to disclose would be detrimental to PBGC’s ability to carry out its
statutory mission and functions. In the event of any such disclosure,
PBGC will make every effort to provide Maxxam with advance written notice of
such disclosure, but in any event, PBGC will provide written notice to MAXXAM as
soon as practicable after making such disclosure.
4.09
PBGC
Release. Except in connection with any rights provided PBGC
under this Agreement, in return for the promises, duties, and obligations of
MAXXAM set forth herein, PBGC hereby releases MAXXAM, as of the date Maxxam
ceases to be a member of the Controlled Group that includes the Contributing
Sponsor of the Plan, from any claims, causes of action, obligations,
liabilities, payments, expenses, fees, and costs (including attorneys’ fees),
relating to the termination of the Plan.
4.10 Agreement Survives
MAXXAM’s Membership in
Palco’s Controlled
Group. MAXXAM hereby acknowledges that it is currently a
member of Palco’s Controlled Group. This Agreement will survive and
remain binding in its entirety upon the Parties should MAXXAM cease to be a
member of Palco’s Controlled Group for any reason, except as specified in
section 4.11.
4.11 Term. This
Agreement shall terminate on the earliest of (i) the fifth (5th) anniversary of
the Effective Date, (ii) the date the Plan is assumed by MAXXAM, (iii) the date
the Plan is terminated under the standard termination procedures set forth in
ERISA § 4041(b), or (iv) the date the Plan is properly merged into another plan
in accordance with ERISA and the IRC.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of
the day and year first set forth above.
PENSION
BENEFIT GUARANTY CORPORATION
By:
/s/ Xxxxxx X. Xxxxx
Name: Xxxxxx
X. Xxxxx
Title:
Deputy Director, Department of Insurance Supervision &
Compliance
By:
/s/ Xxxxx Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
Chief Financial Officer, MAXXAM, Inc.
