<PAGE>   1
                                                                   EXHIBIT 10.12

                          TENNECO RABBI TRUST AGREEMENT


         This Tenneco Rabbi Trust Agreement (the "Trust Agreement" or
"Agreement") is made and entered into as of this 3rd day of November, 1999.

         WHEREAS, the Tenneco Rabbi Trust (the "Trust") is being adopted as set
forth below by Pactiv Corporation ("Pactiv") and shall be maintained by and
between Pactiv and one or more individuals as trustees (each a "Trustee" and
collectively, the "Trustees") to effect certain terms of the Human Resources
Agreement between Tenneco Inc. and Pactiv Corporation f/k/a Tenneco Packaging
Inc. (the "HR Agreement") and certain charitable contribution commitments of
Tenneco Inc. (Terms not defined herein shall have the meaning set forth in or
incorporated by reference into the HR Agreement.);

         WHEREAS, effective on the date (the "Effective Date") on which the
common stock of Pactiv is distributed to the stockholders of Tenneco (the
"Spin-off"), Tenneco Management Company ("TMC") shall be obligated to make the
payments pursuant to the plans and agreements described on Appendix A
(collectively the "Plans" and each a "Plan") to satisfy certain obligations,
including obligations allocated to the Packaging Group under the HR Agreement;

         WHEREAS, Pactiv wishes to maintain the Trust assets, until paid as
specified herein;

         WHEREAS, it is the intention of the parties that this Trust shall not
affect the status of the Plan(s) as either a structure not subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or as an
unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of ERISA.

         NOW, THEREFORE, the parties do hereby agree as follows:

1.       ESTABLISHMENT OF TRUST.

         (a) The Trust is hereby adopted and shall be comprised, held and
disposed of as set forth in this Trust Agreement. Certain assets have been
contributed to the Trust. Subject to the terms and conditions explicitly set
forth herein, the Trust hereby established is irrevocable.

         (b) The Trust is intended to be a grantor trust, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, (the "Code") 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 Pactiv. Except as required by law or
otherwise expressly provided herein, Trust assets shall be used exclusively for
the uses and purposes of Plan participants. (Plan participants and their
beneficiaries are referred to collectively herein as the "Beneficiaries.") The
Beneficiaries shall have no beneficial ownership interest in any assets of the
Trust. Any rights of the Beneficiaries created under the Plan(s) shall be
unsecured contractual rights of the Beneficiaries. Notwithstanding any term or
provision of this Trust Agreement, this Trust Agreement shall not, and shall not
be




<PAGE>   2


deemed to, in any way amend, supersede or otherwise modify any term or provision
of any other agreement, including without limitation, the HR Agreement. In
addition, nothing in this provision shall be deemed to change any allocation
between Tenneco Inc. and Pactiv of any liabilities, costs or obligations set
forth in the Distribution Agreement entered into between the same parties in
connection with the Spin-off. Any rights or remedies of any Beneficiary shall be
cumulative and in addition to any rights or remedies under this Trust Agreement.

         (d) Any assets held by the Trust will be subject to the claims of the
general creditors of Pactiv and any of Pactiv's domestic subsidiaries in the
event of the insolvency of Pactiv as defined in Section 3 hereof.

         (e) Pactiv, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash in trust with the Trustees to augment the
principal to be held, administered and disposed of by the Trustees as provided
in this Trust Agreement.


2.       PAYMENTS TO BENEFICIARIES.

         (a) Tenneco Business Services Inc. or such other person or entity as
shall be designated by the Trustees in writing in their sole discretion ("TBS")
shall prepare for the Trustees a schedule (the "Payment Schedule"), which will
be revised from time to time as appropriate, that indicates the amounts payable
in respect of each Beneficiary, that provides a formula or other instructions
acceptable to the Trustees for determining the amounts so payable, the form in
which such amount is to be paid, and the time of commencement for payment of
such amounts. Except as otherwise provided herein, the Trustees shall cause the
Trust to make payments to the Beneficiaries in accordance with such Payment
Schedule, as approved or revised by the Trustees. TBS 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 payments made hereunder and shall advise
the Trustees in writing of the amounts to be withheld and paid to the
appropriate taxing authorities. The Trustees may rely upon the determination of
the TBS without independent verification.

         (b) The entitlement of a Plan participant or his or her beneficiaries
to benefits under the Plan(s) shall be determined by TBS or such party as it
shall designate under the Plan(s). Any claim for such benefits shall be
considered and reviewed under the procedures set forth in the Plan(s).
Notwithstanding the foregoing, the Trustees may, without direction, make
payments to Beneficiaries in such manner and in such amounts as the Trustees
shall determine they are entitled to be paid based on the most recent
information furnished to the Trustees upon which the Trustees may reasonably
rely in making such determination. Notwithstanding any other provision hereof
payments shall be available hereunder only to persons with respect to whom
liabilities are allocated to the Packaging Group under the HR Agreement but who
are excluded from coverage by the last sentence of Section 2.b. of the Pactiv
Corporation Rabbi Trust and to persons who were directors of Tenneco Inc., but
do not continue on the board of Tenneco Inc. or Pactiv after the Spin-off.
Notwithstanding any other provision hereof, the Vice President - Law of Tenneco
Europe Limited and the former general counsel of Tenneco Automotive Inc. shall
be covered by this Trust to the extent obligations under their severance
packages are allocated to the Packaging Group under the HR Agreement.


                                       -2-

<PAGE>   3


         (c) 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), Pactiv shall make the balance of each such payment as it falls due. The
Trustees shall notify Pactiv at any time the principal and earnings in the Trust
are not sufficient. Neither the existence of the Trust nor its termination shall
relieve Pactiv of any obligation, including any obligation allocated to the
Packaging Group under the HR Agreement, except to the extent that the obligation
has been discharged.

3.       TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN
         PACTIV IS INSOLVENT.

         (a) Pactiv shall be "insolvent" for purposes of this Trust Agreement if
(i) it is unable to pay its debts as they become due, or (ii) it is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.

         (b) If Pactiv determines that it has become insolvent, it shall
immediately notify the Trustees in writing of the insolvency. If a person
claiming to be a creditor of Pactiv alleges in writing to any Trustee that
Pactiv has become insolvent, the Trustees shall determine whether Pactiv is
insolvent and, pending such determination, the Trustees shall discontinue
payments to Beneficiaries from the Trust. The determination of the Trustees
shall be final and binding.

         (c) Unless any Trustee has actual knowledge of Pactiv's insolvency, or
has received notice from Pactiv or a person claiming to be a creditor alleging
that it is insolvent, no Trustee shall have a duty to inquire whether Pactiv is
insolvent. The Trustees may in all events rely on such evidence concerning the
company's solvency as may be furnished to the Trustees and that provides the
Trustees with a reasonable basis for making a determination concerning the
company's solvency.


         (d) If at any time the Trustees have determined that Pactiv is
insolvent, the Trustees shall discontinue payments to Beneficiaries from the
Trust and shall hold the assets of the Trust for the benefit of Pactiv's general
creditors. Nothing in this Trust Agreement shall in any way diminish any rights
of Beneficiaries to pursue their rights as general creditors.

         (e) The Trustees shall resume the payments to Beneficiaries in
accordance with Section 2 of this Trust Agreement only after the Trustees have
determined that Pactiv is not insolvent (or is no longer insolvent).

         (f) Provided that there are sufficient assets, if the Trustees
discontinue payments pursuant to Section 3(d) hereof and subsequently resume
such payments, the first payment following such discontinuance shall include the
aggregate amount of all payments due to Beneficiaries for the period of such
discontinuance.

4.       PAYMENTS TO PACTIV.


                                       -3-

<PAGE>   4


         Except as specifically provided herein, Pactiv shall have no right or
power to direct the Trustees to return to it or to divert to any other company
any of the Trust assets before all payments of benefits have been made to the
Beneficiaries.

5.       THE TRUSTEES' POWERS OF INVESTMENT AND MANAGEMENT.

         The Trustees shall have the power to hold any and all assets
constituting part of the Trust exclusively in cash and cash equivalents.
Notwithstanding any other provision hereof, the Trustees may place the Trust
assets with Bank of America N.A. ("B of A") under an Investment Management
Account, and the assets may be invested in its Short Term Asset Management
account or other investments consistent with the guidelines furnished by the
Trustees with the execution of their initial agreement with B of A.

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 held as described in Section 5.
hereof.

7.       ACCOUNTING BY THE TRUSTEES.

         The Trustees shall keep or cause to be kept accurate and detailed
records of all investments, receipts, disbursements, and all other transactions
required to be made. The Trustees shall upon reasonable request furnish Pactiv's
auditors sufficient information for purposes of the preparation of Pactiv's
financial statements. The Trustees may cause TBS to perform the duties described
in this Section 7 on behalf of the Trustees. The Trustees shall not be liable
for any action or omission of TBS with respect thereto or of Pactiv with respect
to its financial statements.

8.       RESPONSIBILITY OF THE TRUSTEES.

         (a) Except as provided herein or pursuant to procedures adopted by the
Trustees, the Trustees shall act by action of the majority of individuals then
serving as Trustees. No Trustee shall be liable for any action or inaction with
respect to the Trust except for gross negligence or willful misconduct.

         (b) If the Trustees undertake or defend any litigation arising in
connection with this Trust, Pactiv shall pay the cost thereof. The Trustees may
select counsel for such purpose.

         (c) The Trustees may consult with legal counsel (who may also be
counsel for Pactiv generally) with respect to any of their duties or obligations
hereunder.

         (d) The Trustees may hire agents, accountants, actuaries, investment
advisors, financial consultants, custodians or other professionals to assist it
in performing any of its duties or obligations hereunder. Such expense shall be
paid by Pactiv. The Trustees may rely on such persons and entities without
independent verification.


                                       -4-

<PAGE>   5


         (e) The Trustees 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 Trustees pursuant to this
Trust Agreement or to applicable law, the Trustees 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 Code.

         (g) Any action required to be taken by Pactiv, or direction given by
Pactiv, shall be by resolution of its board of directors or by written
direction of one or more of its president, any vice president or treasurer. The
Trustees may rely upon a resolution or direction filed with the Trustees and
shall have no responsibility for any action taken by the Trustees in accordance
with any such resolution or direction.

9.       COMPENSATION AND EXPENSES OF THE TRUSTEES.

         Pactiv shall be responsible for all reasonable administrative expenses
including without limitation the costs incurred by Trustees with respect to any
matter included in Sections 5, 6, 7 and 8 hereof, the Trustees' fees and
expenses and the office expenses described in Section 2.01 of the HR Agreement.
If not so paid, the fees and expenses shall be paid from the Trust. The Trustees
shall be entitled to reimbursement of expenses and fees as determined from time
to time by the Trustees.

10.      TRUSTEE RESIGNATION.

         (a) Any individual who is serving as a Trustee may resign at any time
by written notice to Pactiv, which shall be effective 30 days after receipt of
such notice unless Pactiv and the individual agree otherwise.

         (b) Any individual who is serving as a Trustee may not be removed by
Pactiv.

         (c) For purposes hereof, the death or incapacity of a Trustee shall be
deemed an immediately effective resignation.

         (d) Notwithstanding any such resignation, the individual shall be
entitled to the benefits of Section 14 and section 12(a) hereof.

11.      APPOINTMENT OF SUCCESSOR.

         (a) If an individual resigns in accordance with Section 10 hereof, the
remaining individuals acting as Trustees may appoint any other individual as
successor to replace him or her. The appointment shall be effective when
accepted in writing by the successor, who shall have all of the rights and
powers of the predecessor. The predecessor shall execute any instrument
necessary or reasonably requested by Pactiv or the successor to evidence the
transfer.


                                       -5-

<PAGE>   6


         (b) The successor need not examine records and acts of any predecessor
and may retain or dispose of existing Trust assets, subject to the rules hereof.
The successor shall not be responsible for and Pactiv shall indemnify and defend
the successor from any claim or liability resulting from any action or inaction
of any predecessor from any other past event or any condition existing at the
time he or she becomes a successor.

12.      AMENDMENT OR TERMINATION.

         (a) This Trust Agreement may be amended by a written instrument
executed by each individual then serving as a Trustee, and Pactiv.
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 terminate on the date on which Beneficiaries are no
longer entitled to payments hereunder or on the date determined by a unanimous
vote of the Trustees then serving; provided, however, that in no event shall the
Trust terminate prior to December 31, 2001. Upon termination of the Trust any
assets remaining shall be paid to Pactiv. From and after the date of such
termination, the Trustees shall forever be released from any liability under or
arising with respect to the Trust.

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 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 internal laws of the State of Illinois, without reference to
its choice of law rules.

         (d) The preamble and preliminary recitals set forth above are hereby
incorporated in and made part of this Trust Agreement.

14.      INDEMNIFICATION.

         Pactiv shall, to the fullest extent permitted by law, indemnify, defend
and save harmless the Trustees from and against any and all liability (including
any judgments, losses, damages, civil penalties, excise taxes, interest and any
other form of liability or expense of any kind) or claim of liability (as
defined above and including any investigatory action) to which they may be
subjected by reason of any act alleged to have been done or omitted to be done
in connection with their service as Trustees of the Trust, including all fees
and expenses reasonably incurred in their defense if Pactiv fails promptly to
provide and diligently pursue such defense after having been requested to do so
in writing. Regardless of whether Pactiv assumes such defense, counsel for such
defense shall be


                                       -6-

<PAGE>   7


selected by the indemnified Trustee. Defense costs shall be indemnified and paid
as incurred in the course of the defense or investigation. The remedies provided
by this Section 14 shall be cumulative and without prejudice to the assertion of
any other rights. To the extent that a Trustee receives payment under any
liability insurance or other indemnification arrangement with respect to a
matter covered by this Section 14, that Trustee shall reimburse the party which
has made payments to him or her hereunder, but no reimbursement shall be
required except to the extent that the total which he or she has received from
all sources is greater than the aggregate amount of his or her liability and
expense with respect to that matter. No compromise or settlement, or the consent
to the entering of a judgment in respect thereof, of any action, suit,
proceeding or claim involving or made against any Trustee shall be made without
the prior written consent of the Trustee. Pactiv agrees to purchase and keep in
force, or cause one of its subsidiaries to purchase and keep in force, insurance
policies fully covering the Trustees with respect to acts under and/or pursuant
to this Trust.

15.      TRUST ADMINISTRATION

         The Trustees shall appoint a Trust Administrator, who shall serve at
the pleasure of the Trustees. The Trust Administrator may resign or be removed,
in either case upon 30 days' notice, which notice requirement may be waived by
the Trustees in case of resignation or the Trust Administrator in the case of
removal. In the event of the removal, resignation, death or incapacity of the
Trust Administrator, the Trustees shall appoint a successor Trust Administrator.
Funds may be released for payments hereunder only upon written instructions (or
instructions via facsimile) signed by the Trust Administrator then acting and
one of the Trustees then acting. For these purposes, the signature of one
Trustee shall be deemed to be a signature on behalf of all of the Trustees.


                                       -7-

<PAGE>   8

         IN WITNESS WHEREOF, Pactiv has caused this Trust Agreement to be
executed on its behalf by its officer thereunto duly authorized and each of the
Trustees has duly executed this Trust Agreement, on the day and year first above
written.

                                          TRUSTEES:


                                              /S/ Dana G. Mead
                                          -------------------------------------
                                          Dana G. Mead


                                              /S/ Theodore R. Tetzlaff
                                          -------------------------------------
                                          Theodore R. Tetzlaff


                                              /S/ Karl A. Stewart
                                          -------------------------------------
                                          Karl A. Stewart


                                              /S/ Stephen J. Smith
                                          -------------------------------------
                                          Stephen J. Smith


                                              /S/ Robert T. Blakely
                                          -------------------------------------
                                          Robert T. Blakely

PACTIV CORPORATION


By   /S/ James V. Faulkner
     ------------------------------------
Its  Vice President and General Counsel
     ------------------------------------



                                       -8-

<PAGE>   9


                                   APPENDIX A

Pactiv Corporation Deferred Compensation Plan
Pactiv Corporation Supplemental Executive Retirement Plan
Obligations under severance packages.
Corporate charitable commitments.


                                       -9-