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EXHIBIT 10.31
TENNECO PACKAGING INC.
1900 FIELD COURT
LAKE FOREST, ILLINOIS 60045
April 12, 1999
PCA Holdings, LLC
c/o Madison Dearborn Partners, Inc.
Three First National Plaza
Suite 3800
Chicago, IL 60602
Attn: Samuel M. Mencoff
Justin S. Huscher
Re: Contribution Agreement
Gentlemen:
Reference is made to that certain Contribution Agreement,
dated as of January 25, 1999 (the "Contribution Agreement"), among Tenneco
Packaging Inc. ("TPI"), PCA Holdings LLC ("PCA"), and Packaging Corporation of
America ("Newco"). Capitalized terms used in this letter agreement not defined
herein shall have the meanings set forth in the Contribution Agreement.
The purpose of this letter agreement is to correct certain
errors or ambiguities that were included in the Contribution Agreement, and to
reflect the parties' agreements with respect to certain other matters, to the
extent those agreements differ form the terms of the Contribution Agreement
1. The definition of "Assumed Indebtedness" in the
Contribution Agreement refers to the definition set forth in the
Preliminary Statements. The definition of "Assumed Indebtedness" in the
Preliminary Statements of the Contribution Agreement was inadvertently
deleted in preparing the Contribution Agreement. The parties agree
that, as used in the Contribution Agreement, the term "Assumed
Indebtedness" shall mean (i) the $1.21 billion borrowed by TPI under
the Term Loan Facilities and (ii) the $550 million promissory note
issued by TPI to J.P. Morgan Securities, Inc. (the "Morgan Interim
Note"), each of which will be assigned to and assumed by Newco at
Closing.
2. TPI, PCA, and Newco each hereby agree that the amount of
the Term Loan Facilities and the Senior Subordinated Notes, and the
terms of the Deferred-Pay Financing shall be on the terms set forth in
the Offering Memorandum dated March 30, 1999,
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notwithstanding that such amounts and terms differ from those set forth
in the Contribution Agreement.
3. TPI agrees that the Term Loan Facilities, pursuant to
which TPI will initially borrow $1.21 billion and which indebtedness
will be assigned to and assumed by Newco as part of the Assumed
Indebtedness, may, until the time of such assignment and assumption, be
secured by certain depositary accounts and timberland assets of TPI, on
terms satisfactory to TPI, notwithstanding that the Contribution
Agreement provides for such loan to be unsecured as to TPI and that
such security interest shall be released contemporaneously with the
assignment and assumption by Newco.
4. The parties agree that the Senior Subordinated Notes will
not be issued by TPI, but that TPI will instead borrow $550 million
pursuant to the Morgan Interim Note that will be assigned to and
assumed by Newco as part of the Assumed Indebtedness, and which
indebtedness will be repaid by Newco at the Closing.
5. PCA hereby waives its right to elect, pursuant to Section
5.16 of the Contribution Agreement, to instruct TPI to retain the
Campbell Road Property, and agrees that the Campbell Road Property
will, for purposes of the Contribution Agreement, constitute Owned Real
Property and will be conveyed to Newco at Closing.
6. Newco agrees that for a period of one year following the
Closing Date TPI may (a) continue to use the PCA Marks on Corrugated
Products purchased by TPI or its Affiliates from Newco pursuant to the
Supply Agreements, until changes can be made to plates, molds, and
similar items so as to allow Newco to produce such materials for TPI
and such Affiliates without such PCA Marks, and (b) use the PCA marks
on Corrugated Products that are in existence as of the Closing Date.
Subject to the preceding sentence, TPI shall cease using the PCA Marks
as soon as possible after Closing during such one year period and,
following such one year period, TPI shall cease all use of any PCA
Marks.
7. PCA waives the condition to Closing set forth in Section
6.2(g) of the Contribution Agreement, to the extent such closing
condition would require PCA and Mr. Stecko to enter into any agreement
beyond the letter agreement referred to therein, as such letter
agreement may be modified.
8. TPI hereby agrees and acknowledges that it has not
delivered a Dilution Notice pursuant to Paragraph E of the Preliminary
Statements of the Contribution Agreement. PCA and TPI hereby agree
that, notwithstanding anything in the Contribution Agreement to the
contrary, upon issuance of Management Stock during the 120-day period
following the Closing, Newco shall simultaneously redeem or purchase
from PCA and TPI an aggregate number of Common Stock shares equal to
the aggregate numbers of shares of Management Stock purchased during
such 120-day period in a ratio of 55 shares from PCA to 45 shares from
TPI at a price per share equal to the price per share paid by the
Persons purchasing such Management Stock (provided such price per share
is equal to the price per share paid for Common Stock purchased by PCA
at Closing).
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9. The following changes are made to the definition of
"Retained Liabilities": (A) paragraph (ix) is amended by adding the
words "subject to paragraph (xiv) of this definition" after the word
"Agreement" in clause (ii) thereof; and (B) a new paragraph (xiv) is
added, a follows: "(xiv) all liability to make severance payments to
seven named individuals who will be transferred to PCA and who have
been identified to Newco and TPI in an aggregate amount of up to
$385,000."
10. TPI has provided the Michigan Department of Natural
Resources with a letter of credit in connection with certain operations
at the Filer City Mill. TPI agrees to leave such letter of credit in
place for 30 days after Closing or until Newco provides the Michigan
Department of Natural Resources with a replacement letter of credit.
Newco agrees to obtain and post such a replacement letter of credit
within such 30-day period. Newco shall reimburse TPI for any draws made
under TPI's letter of credit from and after Closing.
11. PCA and Newco hereby waive the closing condition set forth
in Section 5.14(ii) of the Contribution Agreement, and TPI agrees at
its sole expense to implement the steps set forth in Rick West's
memorandum dated April 7, 1999, entitled "Form S-4 Exchange Option and
Quarterly Filings," relating to the preparation of the quarterly
financial statements referred to in Section 5.14(ii) of the
Contribution Agreement provided that TPI hereby covenants it will
deliver to PCA the financial statements referred to in Section 5.14(ii)
of the Contribution Agreement (a) for the quarter ended March 31, 1998,
no later than May 10, 1999 and (b) for each of the other quarters of
1998, no later than May 31, 1999. Newco agrees that it will cause its
appropriate financial officers and employees to provide reasonable
assistance to TPI in its preparation of the financial statements
referenced in this paragraph 11.
12. TPI hereby certifies that during the period from and
including January 25, 1999 and the Closing, TPI has complied in all
material respects with and not breached Section 5.2 of the Contribution
Agreement.
13. TPI agrees to obtain, at its expense, for Newco commencing
no later than the end of the term of the Technology, Financial and
Administrative Transition Services Agreement (the "Transition
Expiration Date"), licenses to use the following software, which
licenses shall be substantially commensurate with the licenses to such
software held by TPI or its Affiliates and used for the Containerboard
Business prior to Closing (including, without limitation, as to scope
and term as described in such existing licenses):
VENDOR NAME OF SOFTWARE
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Levi, Ray & Shoup VPS and DRS
GEAC Financial Applications (GL, AR, AP,
FA)
Comshare System W
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Hyperion Hyperion (NT)
XRT Treasury Workstation (Netware)
14. TPI agrees to obtain, for Newco commencing no later than
the Transition Expiration Date, licenses to use the following software,
which licenses shall be substantially commensurate with the licenses to
such software held by TPI or its Affiliates and used for the
Containerboard Business prior to Closing (including, without
limitation, as to scope and term as described in such existing
licenses):
VENDOR NAME OF SOFTWARE
------ ----------------
TSI Keymaster
Information Builders Focus
TPI shall pay 50% of the costs of obtaining such licenses and Newco
shall pay 50% of the costs of obtaining such licenses.
15. TPI's sole obligation pursuant to paragraphs 13 and 14
above shall be to purchase the licenses described in such paragraphs in
the name of Newco, and shall not extend to any other fees, maintenance,
costs, expenses or other payments required to be made pursuant to such
licenses in respect of periods commencing after the Transition
Expiration Date. The parties hereto hereby agree that neither TPI nor
any of its Affiliates shall be required pursuant to the Contribution
Agreement or any Ancillary Agreement to pay for any other license to
use software that is not Related to the Containerboard Business but is
used by TPI or its Affiliates to provide the services to Newco under
the Transition Services Agreement, other than those licenses expressly
described in paragraphs 13 or 14.
16. TPI , PCA and Newco hereby stipulate that the definition
of "Retained Liabilities" shall include all liabilities arising from,
related to or incurred in connection with any state of facts or
conditions or transactions (or series of facts, conditions or
transactions) related, under or otherwise in connection with (i) IFC
Credit Corporation v. Tenneco Packaging, Inc. filed in the Circuit
Court of Cook County, Illinois 99CH4738 (the "Lawsuit") or (ii) the
Master Lease Agreement between IFC Credit Corporation and TPI (f/k/a/
Packaging Corporation of America) that is the subject of the Lawsuit,
in each case other than liabilities to the extent arising from, related
to or incurred in connection with any breach by Newco of its
obligations under this paragraph 16. Newco agrees to cease using the
equipment that is the subject of the Lawsuit (the "Equipment") and
return the Equipment where directed by TPI as soon as reasonably
practical, and in no event will Newco use the Equipment after (and it
will return the Equipment by) June 30, 1999. Newco shall use its
reasonable efforts consistent with TPI's past practice to maintain the
Equipment in the
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operating condition and state of repair that it is in as of the date
hereof, ordinary wear and tear excepted.
17. The parties hereby acknowledge that following the date of
the Contribution Agreement and prior to the date hereof, approximately
5,963 acres of timberland located in Hamilton, Dixie and Taylor
Counties, Florida that were subject to the Existing Financing
Arrangements have been sold (the "Florida Property Transfer"). The
parties hereby agree that (i) no PCA Indemnified Party shall have,
assert or be entitled to assert any claim (and each of PCA and Newco
agrees that it shall not assert or permit to be asserted any claim)
against TPI or any of its Subsidiaries or Affiliates arising out of, in
connection with or related to the Florida Property Transfer, whether
pursuant to the Contribution Agreement or otherwise and (ii) Newco
assumes no liability with respect to the Florida Property Transfer.
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Please acknowledge your agreement to the foregoing by signing
below.
Sincerely,
TENNECO PACKAGING INC.
By: /s/ James V. Faulkner, Jr.
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Its: Vice President
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Agreed to:
PCA HOLDINGS LLC
By: /s/ Samuel M. Mencoff
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Samuel M. Mencoff
Managing Director
PACKAGING CORPORATION OF AMERICA
By: /s/ Richard B. West
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Its: Secretary
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Date: April 12, 1999
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