<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TENNECO INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
TENNECO INC
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000 [TENNECO LOGO]
April 4, 1997
To the Shareowners of Tenneco Inc.:
The Annual Meeting of Shareowners of the Company will be held Tuesday, May
13, 1997, at 10:30 a.m. in the First Chicago Center, Conference & Theatre Level,
One First National Plaza, Chicago, Illinois. A Notice of the meeting, a Proxy
and a Proxy Statement containing information about the matters to be acted upon
are enclosed.
Holders of Common Stock are entitled to vote at the Annual Meeting on the
basis of one vote for each share held.
A record of the Company's activities for the year 1996 is contained in the
Annual Report to Shareowners. We urge each shareowner who cannot attend the
Annual Meeting to please assist us in preparing for the meeting by completing,
executing and returning your Proxy promptly.
Very truly yours,
Dana G. Mead
DANA G. MEAD
Chairman and Chief Executive
Officer
<PAGE> 3
TENNECO INC
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000 TENNECO LOGO
NOTICE OF
ANNUAL MEETING OF SHAREOWNERS
MAY 13, 1997
The Annual Meeting of Shareowners of Tenneco Inc. will be held in the First
Chicago Center, Conference & Theatre Level, One First National Plaza, Chicago,
Illinois, on Tuesday, May 13, 1997, at 10:30 a.m., Chicago time.
The purposes of the meeting are:
1. To elect four Directors for a term to expire at the 2000 Annual Meeting
of Shareowners;
2. To approve the appointment of Arthur Andersen LLP as independent public
accountants for the year 1997; and
3. To act upon such other matters as may be properly brought before the
meeting affecting the business and affairs of the Company.
The Board of Directors knows of no other matters at this time that may be
brought before the meeting. Holders of Common Stock of record at the close of
business on March 14, 1997, are entitled to vote at the meeting. A list of these
shareowners will be available for inspection for 10 days preceding the meeting
at the First Chicago Center, Theatre Office, Suite 0399, One First National
Plaza, Chicago, Illinois, and will also be available for inspection at the
meeting.
Each shareowner who does not expect to attend the meeting is urged to
complete, date, and sign the enclosed Proxy and return it to the Company in the
enclosed envelope, which requires no postage if mailed in the United States.
By Order of the Board of Directors
KARL A. STEWART
Secretary
Greenwich, Connecticut
April 4, 1997
<PAGE> 4
TENNECO INC Tenneco Logo
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000
April 4, 1997
PROXY STATEMENT
This statement is furnished in connection with the solicitation on behalf
of the Board of Directors of the Company of Proxies to be voted at the Annual
Meeting of Shareowners on May 13, 1997, for the purposes set forth in the
accompanying Notice of the meeting. Holders of Common Stock of record at the
close of business on March 14, 1997, will be entitled to vote at the Annual
Meeting. Each share is entitled to one vote. Shares represented by Proxies will
be voted at the Annual Meeting. At March 14, 1997, there were 171,655,955 shares
of Common Stock outstanding and entitled to vote. This Proxy Statement is first
being mailed to shareowners on or about April 4, 1997.
The Company was incorporated on August 26, 1996, under the name "New
Tenneco Inc." as a wholly owned indirect subsidiary of the company then known as
Tenneco Inc. ("Old Tenneco"). During the latter portion of 1996, Old Tenneco
undertook a series of transactions whereby the businesses and assets of Old
Tenneco were restructured so that the assets, liabilities and operations of Old
Tenneco's automotive parts and packaging operations and Old Tenneco's
administrative services businesses were owned and operated by the Company, and
the assets, liabilities and operations of Old Tenneco's shipbuilding business
were owned and operated by Newport News Shipbuilding Inc., another wholly owned
subsidiary of Old Tenneco ("Newport News"). Following this internal
restructuring, on December 11, 1996, Old Tenneco spun-off the Company and
Newport News by distributing all of the common stock of each company to Old
Tenneco's shareowners (the "Distribution"). Following the Distribution, on
December 12, 1996, a wholly owned indirect subsidiary of El Paso Natural Gas
Company ("El Paso") was merged (the "Merger") into Old Tenneco (which then
consisted solely of Old Tenneco's remaining active businesses and certain
discontinued operations), with Old Tenneco surviving the merger as a subsidiary
of El Paso, and with the Company succeeding to the name "Tenneco Inc." Unless
the context otherwise requires, references to the "Company" for periods prior to
the Distribution are to Old Tenneco.
1
<PAGE> 5
ELECTION OF DIRECTORS
(ITEM 1)
The Board of Directors presently consists of 11 members, divided into three
classes. The following four nominees (Class I), each of whom currently serves as
a director of the Company, are proposed to be elected at this Annual Meeting to
serve for a term to expire at the 2000 Annual Meeting of Shareowners and until
their successors are chosen and have qualified. Seven directors will continue to
serve as set forth below. The persons named as proxy voters in the accompanying
Proxy, or their substitutes, will vote for the nominees for directors, each of
whom has been designated as such by the Board of Directors. If, for any reason
not presently known, any of the nominees is not available for election, another
person or other persons who may be nominated will be voted for at the discretion
of the proxy voters. Directors are elected by the affirmative vote of the
holders of a majority of the shares present, in person or by proxy, and
authorized to vote on the matter.
Brief statements setting forth the age (at April 4, 1997), the principal
occupation, employment during the past five years, the year in which first
elected a director, and other information concerning each nominee and the
remaining directors appear below.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING OF STOCKHOLDERS
(CLASS I)
[Mark Andrews photo] Mark Andrews has been Chairman of Andrews
Associates, Inc., a government consulting firm,
since February 1987. From 1963 to 1980, he
served in the U.S. House of Representatives, and
from 1980 to 1986 he served in the U.S. Senate.
He is also a Director of Union Storage Co. and
Case Corporation. Mr. Andrews is 70 and has been
a Director of the Company since 1987. He is a
member of the Compensation and Benefits
Committee and the Nominating and Management
Development Committee.
2
<PAGE> 6
[W. Michael Blumenthal photo] W. Michael Blumenthal was a senior advisor to
Lazard Freres & Co. L.L.C., an investment
banking firm, from 1995 through 1996 and was a
limited partner of that firm from April 1990
through December 1994. Prior to that time he was
Chairman of Unisys Corporation, a manufacturer
of business information systems, and had been an
executive officer of that company for more than
five years. He is also a director of
Daimler-Benz InterServices (debis) AG. Mr.
Blumenthal is 71 and has been a Director of the
Company since 1985. He is a member and the
Chairman of the Nominating and Management
Development Committee.
------------------------------------
[Belton Johnson Photo] Belton K. Johnson is engaged in investments and
has pursued such interests for more than five
years. He is also a director of AT&T Corp.
Mr. Johnson is 67 and has been a Director of the
Company since 1979. He is a member of the
Executive Committee and the Compensation and
Benefits Committee.
------------------------------------
[William Weiss Photo] William L. Weiss has been Chairman Emeritus of
Ameritech Corporation, a telecommunications and
information services company, since 1994,
formerly serving as Chairman and Chief Executive
Officer of that company for more than ten years.
Mr. Weiss is a director of Abbott Laboratories,
Inc., Merrill Lynch & Co., Inc. and the Quaker
Oats Company.
Mr. Weiss is 67 and has been a Director of the
Company since 1994. He is a member of the Audit
Committee.
3
<PAGE> 7
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS (CLASS II)
<TABLE>
<S> <C>
Kathryn Eickhoff Photo M. Kathryn Eickhoff has been President of Eickhoff
Economics, Inc., a consulting firm, since 1987. From 1985 to
1987, she was Associate Director for Economic Policy for the
U.S. Office of Management and Budget, and prior to 1985 was
Executive Vice President and Treasurer of Townsend-Greenspan
& Co., Inc., an economic consulting firm. She is also a
director of AT&T Corp., Pharmacia & Upjohn, Inc. and Fleet
Bank, NA.
Ms. Eickhoff is 57 and has been a Director of the Company
since 1987 and is a member of the Executive Committee, Audit
Committee, and Nominating and Management Development
Committee. She previously served as a member of the Board of
Directors from 1982 until her resignation to join the Office
of Management and Budget in 1985.
------------------------------------
Peter Flawn Photo Peter T. Flawn is a former President of The University of
Texas at Austin, having served in such capacity for more
than five years preceding his retirement in 1985. He is also
a director of El Paso Energy, Inc., National Instruments
Corp., Harte-Hanks Communications, Inc., Global Marine Inc.
and Input/Output, Inc.
Dr. Flawn is 71 and has been a Director of the Company since
1980. He is a member of the Executive Committee and is a
member and the Chairman of the Audit Committee.
------------------------------------
John McCoy Photo John B. McCoy is Chairman and Chief Executive Officer of
Banc One Corporation, a bank holding company, and has served
in that position since 1987, prior to which he was President
of that company from 1983. He is a director of Cardinal
Health, Inc., the Federal Home Loan Mortgage Corporation,
and Ameritech Corporation.
Mr. McCoy is 53 and has been a Director of the Company since
1992. He is a member of the Compensation and Benefits
Committee.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
Dana G. Mead is Chairman and Chief Executive Officer of the
Dana Mead Photo Company and has served as an executive officer of the
Company since April 1992, when he joined the Company as
Chief Operating Officer. Prior to joining the Company, Mr.
Mead served as an Executive Vice President of International
Paper Company, a manufacturer of paper, pulp and wood
products, from 1988, and served as Senior Vice President of
that company from 1981. He is also a director of Unisource
Worldwide, Inc., Baker Hughes Incorporated, Textron Inc.,
Newport News Shipbuilding Inc., and Case Corporation.
Mr. Mead is 61 and has been a Director of the Company since
1992. He is a member and the Chairman of the Executive
Committee.
</TABLE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE 1999 ANNUAL MEETING OF STOCKHOLDERS (CLASS III)
<TABLE>
<S> <C>
Henry U. Harris, Jr., since 1992, has been Vice Chairman
Henry Harris Photo Emeritus of Smith Barney Inc., an investment banking firm,
and for more than five years prior to which he served as an
executive officer of that firm.
Mr. Harris is 70 and has been a Director of the Company
since 1968. He is a member of the Audit Committee, the
Executive Committee, and the Nominating and Management
Development Committee.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
Clifton R. Wharton, Jr., served as Chairman and Chief
Clifton Wharton Photo Executive Officer of Teachers Insurance and Annuity
Association and the College Retirement Equities Fund from
1987 to 1993 and as Deputy Secretary of State, U.S.
Department of State, from January to November of 1993. From
1978 to 1987, he served as Chancellor of the State
University of New York System. From 1970 to 1978, Dr.
Wharton served as President of Michigan State University.
Prior to 1970 he spent 22 years working in foreign economic
and agricultural development in Latin America and Southeast
Asia for the Rockefeller family philanthropic interests. He
is also a director of the TIAA Board of Overseers, Ford
Motor Company, the New York Stock Exchange, Inc., and
Harcourt General, Inc.
Dr. Wharton is 70 and has been a Director of the Company
since 1994. He is a member and the Chairman of the
Compensation and Benefits Committee.
</TABLE>
------------------------------------
<TABLE>
<S> <C>
Sir David Plastow is Chairman of the Medical Research
David Plastow Photo Council, which promotes and supports research and
post-graduate training in the biomedical and other sciences.
He served as Chairman of Inchcape plc from June 1992 to
December 1995 and Chairman and Chief Executive Officer of
Vickers plc, an engineering and manufacturing company
headquartered in London, from January 1987 to May 1992. He
is also a director of Lloyds TSB Group Plc and FT Everard &
Sons Limited.
Sir David Plastow is 64 and has been a Director of the
Company since May 1996, and previously served as a member of
the Board of Directors from 1985 until 1992. He is a member
of the Compensation and Benefits Committee and the
Nominating and Management Development Committee.
</TABLE>
6
<PAGE> 10
STOCK OWNERSHIP
MANAGEMENT
At January 31, 1997, the number of shares of Common Stock of the Company
beneficially owned by (i) each director or nominee for director, (ii) each of
the executive officers whose names are set forth on the Summary Compensation
Table at page 11, and (iii) all executive officers, directors, and nominees for
director as a group, were as follows:
<TABLE>
<CAPTION>
SHARES OF COMMON
DIRECTORS STOCK OWNED(1)(2)(3)
--------- --------------------
<S> <C>
Mark Andrews................................................ 11,271
W. Michael Blumenthal....................................... 10,058
M. Kathryn Eickhoff......................................... 6,980
Peter T. Flawn.............................................. 4,150
Henry U. Harris, Jr......................................... 11,827
Belton K. Johnson........................................... 11,939
John B. McCoy............................................... 4,758
Dana G. Mead................................................ 450,928
Sir David Plastow........................................... 2,400
William L. Weiss............................................ 3,825
Clifton R. Wharton, Jr...................................... 4,590
EXECUTIVE OFFICERS
- ------------------
Paul T. Stecko.............................................. 72,810
Theodore R. Tetzlaff........................................ 87,623
Stacy S. Dick............................................... 72,951
Robert T. Blakely........................................... 95,097
All executive officers and directors or nominees as a
group(4).................................................. 1,202,669
</TABLE>
- ------------
(1) Each director or nominee and executive officer has sole voting and
investment power over the shares beneficially owned (or has the right to
acquire shares as set forth in note (2) below) as set forth in this column,
except for (i) shares that are held in trust for each director and executive
officer under the Company's restricted stock plans, and (ii) shares that
executive officers of the Company have the right to acquire pursuant to the
Company's Stock Ownership Plan.
(2) Includes shares that are: (i) held in trust under the Company's restricted
stock plan; at January 31, 1997, Messrs. Mead, Tetzlaff, Dick, and Blakely
held 21,015; 5,535; 5,535 and 4,425 restricted shares, respectively, under
the Company's restricted stock plans, and Ms. Eickhoff and Messrs. Andrews,
Blumenthal, Flawn, Harris, Johnson, McCoy, Weiss, and
(Notes continued on following page)
8
<PAGE> 11
Wharton held 3,283; 5,867; 6,503; 300; 300; 5,828; 1,908; 1,975; and 2,240
restricted shares, respectively, under the Company's Directors restricted
stock program and (ii) subject to options, which were granted under the
Company's stock option plan, and are exercisable at January 31, 1997, or
within 60 days of said date, for Messrs. Mead, Stecko, Tetzlaff, Dick, and
Blakely, to purchase 348,307; 52,633; 44,118; 38,316; and 42,193 shares,
respectively.
(3) Less than one percent of the outstanding shares of the Company's Common
Stock.
(4) Includes 720,397 shares that are subject to options that are exercisable
within 60 days of January 31, 1997, by all executive officers and directors
of the Company as a group, and includes 64,724 shares that are held in trust
under the Company's restricted stock plan, and the Company's Directors
restricted stock program, for all executive officers and directors of the
Company as a group.
CERTAIN STOCKHOLDERS
The following table sets forth, as of March 14, 1997, the name, address and
Common Stock ownership for each person known by the Company to be the beneficial
owner of more than five percent of the Company's outstanding Common Stock (the
only class of voting securities outstanding).
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF COMMON PERCENT OF COMMON
OF BENEFICIAL OWNER(1) STOCK OWNED(1) STOCK OUTSTANDING
---------------------- ---------------- -----------------
<S> <C> <C>
Oppenheimer Group, Inc............................ 19,128,142(2) 11.1%(2)
Oppenheimer Tower
World Financial Center
New York, New York 10281
The Capital Group Companies, Inc.................. 9,286,300(3) 5.4%(3)
and Capital Research and
Management Company
333 South Hope Street
Los Angeles, California 90071
Barrow, Hanley, Mewhinney......................... 9,295,200(4) 5.4%(4)
& Strauss, Inc.
One McKinney Plaza
3232 McKinney Avenue
15th Floor
Dallas, Texas 75204-2429
</TABLE>
(Notes on following page)
9
<PAGE> 12
- ------------
(1) The foregoing information is based on information contained in filings made
with the Securities and Exchange Commission.
(2) Includes 19,062,721 shares beneficially owned by Oppenheimer Capital.
Oppenheimer Group, Inc. and Oppenheimer Capital have each indicated that
they have shared voting and shared dispositive power with respect to the
Common Stock beneficially owned by them.
(3) Capital Research and Management Company ("Research") is a subsidiary of The
Capital Group Companies, Inc. ("Capital"). Capital and Research have each
indicated that they have sole dispositive power (but not sole or shared
voting power) over the shares beneficially owned by them.
(4) Barrow, Hanley, Mewhinney & Strauss, Inc. has indicated that it has sole
voting power over 2,404,900 shares, shared voting power over 6,890,300
shares, and sole dispositive power over 9,295,200 shares.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1996 the Board of Directors held one meeting and on three occasions
took action by unanimous written consent. Each director attended more than 75%
of the aggregate of all meetings of the Board of Directors and all meetings of
the committees of the Board on which the director served. In addition, during
1996 the members of the Company's Board of Directors served as directors of Old
Tenneco, and held Board and Committee meetings as set forth on the following
page.
There are four standing committees of the Board of Directors, which have
the following described responsibilities and authority.
The Audit Committee has the responsibility, among other things, to (i)
recommend the selection of the Company's independent public accountants, (ii)
review and approve the scope of the independent public accountants' audit
activity and extent of non-audit services, (iii) review with management and the
independent public accountants the adequacy of the Company's basic accounting
system and the effectiveness of the Company's internal audit plan and
activities, (iv) review with management and the independent public accountants
the Company's certified financial statements and exercise general oversight of
the Company's financial reporting process and (v) review with the Company
litigation and other legal matters that may affect the Company's financial
condition and monitor compliance with the Company's business ethics and other
policies. No meetings of the Audit Committee were held in 1996 (see following
page for information concerning committee meetings of Old Tenneco during 1996).
The Compensation and Benefits Committee has the responsibility, among other
things, to (i) establish the salary rate of officers and employees of the
Company and its subsidiaries, (ii) examine periodically the compensation
structure of the Company and (iii) supervise the welfare and pension plans and
compensation plans of the Company. One meeting of the
9
<PAGE> 13
Compensation and Benefits Committee was held in 1996, and on one occasion the
Compensation and Benefits Committee took action by unanimous written consent
(see below for information concerning committee meetings of Old Tenneco during
1996).
The Nominating and Management Development Committee has the responsibility,
among other things, to (i) review possible candidates for members of the Board
of Directors and recommend a slate of nominees for election as directors at the
Company's annual shareowners' meeting, (ii) review the function and composition
of the other committees of the Board of Directors and recommend membership on
such committees and (iii) review the qualifications and recommend candidates for
election as officers of the Company. No meetings of the Nominating and
Management Development Committee were held in 1996 (see below for information
concerning committee meetings of Old Tenneco during 1996).
The Executive Committee has, during the interval between the meetings of
the Board of Directors, the authority to exercise all the powers of the Board
that may be delegated legally to it by the Board in the management and direction
of the business and affairs of the Company. No meetings of the Executive
Committee were held in 1996.
Also, during 1996 and prior to the Distribution, the members of the
Company's Board of Directors served as directors of Old Tenneco which held 13
meetings of the Board of Directors, six meetings of the Audit Committee, four
meetings of the Compensation and Benefits Committee, and two meetings of the
Nominating and Management Development Committee (see page 1 of this proxy
statement for a discussion of the reorganization of Old Tenneco).
A shareowner of the Company may nominate persons for election to the Board
of the Company if the shareowner submits such nomination, together with certain
related information required by the Company's By-Laws, in writing to the
Secretary of the Company not less than 50 days nor more than 75 days prior to
the date of any annual meeting of shareowners.
10
<PAGE> 14
EXECUTIVE COMPENSATION
The following table sets forth the remuneration paid by the Company (i) to
the Chairman of the Board and Chief Executive Officer and (ii) to each of the
four most highly compensated key executive officers of the Company, other than
the Chairman of the Board and Chief Executive Officer, whose salary and bonus
exceeded $100,000, for the years indicated. The table shows amounts earned by
such persons in all capacities in which they served and includes compensation
paid or accrued by Old Tenneco or by subsidiaries of Old Tenneco (including the
Company and certain subsidiaries of the Company) prior to the effective date of
the Distribution (see page 1 of this proxy statement for a discussion of the
reorganization of Old Tenneco).
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- ------------------------------------
AWARDS PAYOUTS
----------------------- ----------
OTHER LONG-TERM ALL
ANNUAL RESTRICTED INCENTIVE OTHER
COMPEN- STOCK PLAN COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS SATION(2) AWARDS(3) OPTIONS(4) PAYOUTS(5) SATION(6)
--------------------------- ---- --------- ----- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dana G. Mead 1996 $990,375 $900,000 $815,217 -- 213,000 $2,500,000 $153,256(7)
Chairman and Chief 1995 $957,375 $800,000 $310,436 -- 100,000(7) -- $149,972(7)
Executive Officer 1994 $878,178 $900,000 $149,109 $647,256 100,000 -- $142,967
Paul T. Stecko 1996 $426,258 $450,000 $32,400 -- 120,000 $1,200,000 $ 32,767
Chief Operating 1995 $381,546 $300,000 $21,027 -- 24,000 -- $ 31,975
Officer(8) 1994 $320,004 $200,000 $200,725 $269,690 16,000 -- $ 30,606
Theodore R. Tetzlaff 1996 $400,000 $350,000 $28,350 -- 93,300 $1,050,000 $ 25,782(7)
General Counsel 1995 $400,000 $350,000 $14,400 -- 18,000(7) -- --(7)
1994 $400,000 $300,000 $ 307 $539,380 16,000 -- --
Stacy S. Dick 1996 $412,833 $280,000 $414,164 -- 93,300 $1,050,000 $ 43,178
Executive Vice President 1995 $377,737 $280,000 $32,473 -- 14,000 -- $ 31,433
1994 $343,560 $235,000 $ 583 $215,752 12,000 -- $ 24,927
Robert T. Blakely 1996 $433,300 $250,000 $404,015 -- 80,000 $ 900,000 $ 62,308
Executive Vice President 1995 $422,760 $230,000 $18,838 -- 16,000 -- $ 44,571
and Chief Financial Officer 1994 $407,640 $230,000 $ 583 $230,585 15,675 -- $ 44,144
</TABLE>
- ------------
(1) Includes base salary plus amounts paid in lieu of Company matching
contributions to the Thrift Plan.
(2) Includes amounts attributable to (i) the value of personal benefits provided
by the Company to its executive officers, which have an aggregate value in
excess of $50,000, such as the personal use of Company owned property,
membership dues, assistance provided to such persons with regard to
financial, tax and estate planning, and relocation expenses, (ii)
reimbursement for taxes, and (iii) amounts paid as dividend equivalents on
performance share equivalent units under the Company's Stock Ownership Plan
("Dividend Equivalents"). The amount of each such personal benefit that
exceeds 25% of the estimated value of the total personal benefits provided
by the Company, reimbursement for taxes and amounts paid as
(Notes continued on following page)
11
<PAGE> 15
Dividend Equivalents to the individuals named in the table was as follows:
During 1996: $378,755 in relocation expenses, $247,105 for reimbursement for
taxes, and $67,500 in Dividend Equivalents paid to Mr. Mead; $32,400 and
$28,350 in Dividend Equivalents for Messrs. Stecko and Tetzlaff,
respectively; $68,652 for use of Company owned property, $165,499 in
relocation expenses, $134,447 for reimbursement for taxes, and $28,350 in
Dividend Equivalents paid to Mr. Dick; and $257,407 in relocation expenses,
$66,356 in reimbursement for taxes, and $24,300 in Dividend Equivalents paid
to Mr. Blakely. During 1995: $137,552 for use of Tenneco owned property,
$96,605 for reimbursement for taxes, and $40,000 in Dividend Equivalents
paid to Mr. Mead; $1,827, $18,073, and $4,438 for reimbursement for taxes
and $19,200, $14,400, and $14,400 in Dividend Equivalents for Messrs.
Stecko, Dick, and Blakely, respectively; and $14,400 in Dividend Equivalents
paid to Mr. Tetzlaff; During 1994: $57,540 for use of Tenneco owned property
and $50,606 for reimbursement for taxes for Mr. Mead; $100,795 in relocation
expenses, and $59,954 in reimbursement for taxes for Mr. Stecko; and $307,
$583, and $583 for reimbursement for taxes for Messrs. Tetzlaff, Dick, and
Blakely, respectively.
(3) Includes the dollar value of grants of restricted stock made pursuant to Old
Tenneco's benefit plans based on the price of that company's common stock on
the date of grant. On November 1, 1996, all restricted shares of Old Tenneco
common stock and all performance share unit equivalents relating to Old
Tenneco common stock were vested and distributed to the plan participants in
accordance with the terms of the Amended and Restated Merger Agreement,
among El Paso, El Paso Subsidiary and Old Tenneco, dated as of June 19,
1996, (the "Merger Agreement"), and the Distribution Agreement, among Old
Tenneco, the Company, and Newport News, dated as of November 1, 1996, as
amended (the "Distribution Agreement").
(4) The number of options granted in 1996 to each of the persons named
represents two-thirds of a three year award. The remaining one-third will be
granted in 1997. No future option awards are planned for these persons until
the year 2000. For 1996 the number of options does not include options
previously granted by Old Tenneco (the "Previously Granted Options") and
converted (the "Converted Options") into options to purchase shares of the
Company's Common Stock. A description of the Converted Options is set forth
under footnotes (1) and (5) to the table entitled "Option Grants in 1996" on
page 14. For 1995 and 1994 the number of options reflects unconverted
Previously Granted Options.
(5) For 1996 the amounts attributed to LTIP Payouts represent the value of
performance share equivalent units for Old Tenneco that were vested and
distributed as shares of Old Tenneco common stock on November 1, 1996,
pursuant to the Merger Agreement and the Distribution Agreement. The value
stated is the average of the high and low trading prices of a share of Old
Tenneco common stock on November 1, 1996, the date the performance
restrictions were removed. Messrs. Mead, Stecko, Tetzlaff, Dick, and Blakely
received 50,000; 24,000; 21,000; 21,000; and 18,000 shares of Old Tenneco
common stock,
(Notes continued on following page)
12
<PAGE> 16
respectively, as a result of the Distribution (of such amount, certain
shares were acquired by the Company in satisfaction of tax obligations and
the remainder of such shares, now Common Stock of the Company, are held by
the named individual). Under current guidelines for stock ownership, Mr.
Mead is required to own shares of the Company's Common Stock approximately
equal to seven times his salary; and Messrs. Stecko, Tetzlaff, Dick, and
Blakely are required to own shares approximately equal to four times their
respective salaries.
(6) Includes amounts attributable during 1996 to benefit plans of the Company as
follows:
(a) The amounts contributed pursuant to the Thrift Plan for the accounts of
Messrs. Mead, Stecko, Dick, and Blakely were $4,750; $5,350; $4,833;
and $9,500, respectively.
(b) The amounts accrued under the Deferred Compensation Plan, together with
adjustments based upon changes in the Consumer Price Index for All
Urban Households, as computed by the Bureau of Labor Statistics, for
Messrs. Mead, Stecko, Tetzlaff, Dick, and Blakely were $113,744;
$24,118; $25,782; $33,167; and $43,780, respectively.
(c) Amounts imputed as income for federal income tax purposes under the
Company group life insurance plan for Messrs. Mead, Stecko, Dick, and
Blakely were $34,762; $3,299; $5,178; and $5,083, respectively.
(d) The amount paid pursuant to the Benefits Equalization Plan to Mr.
Blakely was $3,945.
(7) Prior to March 13, 1996, Case Corporation (an affiliate of the Company until
March 13, 1996, when the Company and its subsidiaries sold their remaining
ownership interest in Case Corporation in an underwritten public offering)
paid Messrs. Mead and Tetzlaff, as directors of Case Corporation, a
director's meeting attendance fee of $1,000. During 1995 Messrs. Mead and
Tetzlaff, were granted an option to purchase 1,000 shares of Case
Corporation common stock ("Case Common Stock") at a purchase price of
$21.125 per share. These options become exercisable on January 1, 1998, and
expire January 1, 2005. Also, during 1995, as directors of Case Corporation,
Messrs. Mead and Tetzlaff each received an annual director's fee of $20,000
and meeting attendance fees of $4,000. In addition, Mr. Tetzlaff received
from Case Corporation an additional $3,000 for attendance at the Case
Compensation Committee meetings. Messrs. Mead and Tetzlaff elected to
receive their annual director fees in Case Common Stock. The amounts in the
above table do not include the payments from Case Corporation to Tenneco.
(8) Mr. Stecko was elected as Chief Operating Officer of the Company on January
21, 1997, and also continues to serve as President and Chief Executive
Officer of Tenneco Packaging Inc., holding such office since December 1993.
With his appointment as Chief Operating Officer of the Company, the
packaging and automotive parts businesses of the Company report to Mr.
Stecko.
------------------------
13
<PAGE> 17
OPTION GRANTS IN 1996
The following table sets forth the number of stock options that were
granted by the Company during 1996 to the persons named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
% OF TOTAL
OPTIONS OPTIONS
GRANTED GRANTED TO
(NO. OF EMPLOYEES EXERCISE OR
SHARES) IN FISCAL BASE PRICE EXPIRATION GRANT DATE
NAME (1)(2)(5) YEAR PER SHARE(3) DATE PRESENT VALUE(4)
---- --------- ---------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C>
Dana G. Mead........... 213,000 3.7% $45.31 2016 $3,188,610
Paul T. Stecko......... 120,000 2.1% $45.31 2016 $1,796,400
Theodore R. Tetzlaff... 93,300 1.6% $45.31 2016 $1,396,701
Stacy S. Dick.......... 93,300 1.6% $45.31 2016 $1,396,701
Robert T. Blakely...... 80,000 1.4% $45.31 2016 $1,197,600
</TABLE>
- ------------
(1) The options reported in this column and in the Summary Compensation Table
consist of Non-Qualified Options granted under the Company's Stock Ownership
Plan. The options become fully exercisable on the fourth anniversary of the
grant, subject, however, to partial earlier vesting in increments of one
third in the event that certain stock price performance objectives are
achieved prior to the fourth anniversary of the Grant. The number of options
granted to each of the persons named represents two-thirds of a three year
award. The remaining one-third will be granted in 1997. No future option
awards are planned for these persons until the year 2000. This front-loaded
stock option award is intended to provide a significant incentive for
enhancing shareholder value. In addition, such front-loaded awards are often
found in the marketplace among companies that have experienced a significant
financial restructuring as the Company did in 1996. These numbers do not
include options (the "Previously Granted Options") previously granted by Old
Tenneco and converted (the "Converted Options") into options to purchase
shares of the Company's Common Stock. The conversion was made pursuant to a
formula under which the excess of the fair market value of the shares
subject to the options immediately after the grant over the aggregate option
price is not more than the excess of the aggregate fair market value of all
Old Tenneco shares subject to his Old Tenneco stock options immediately
before such cancellation over the aggregate option price under such Old
Tenneco options. The Converted Options become exercisable at the same time
that the Previously Granted Options would have become exercisable if they
had remained outstanding. Accordingly, Converted Options expiring in 2003
were fully exercisable when granted; Converted Options expiring in 2004 were
granted with two-thirds exercisable and one-third becoming exercisable on
the anniversary date of the Grant in calendar year 1997; Converted Options
expiring in 2005 were granted with one-third exercisable, one-third becoming
exercisable on the anniversary date of the Grant in calendar year 1997 and
one-third becoming exercisable on the
14
<PAGE> 18
anniversary date of the grant in calendar year 1998; Converted Options
expiring in 2006 were granted with one-third becoming exercisable on the
anniversary date of the grant in calendar year 1997, one-third becoming
exercisable on the anniversary date of the grant in calendar year 1998,
and one-third becoming exercisable on the anniversary date of the grant in
calendar year 1999. Messrs. Mead, Stecko, Tetzlaff, Dick, and Blakely
received 580,509; 92,881; 74,304; 70,822; and 71,605 Converted Options,
respectively.
(2) These options provide that a grantee who delivers shares of Common Stock to
pay the option exercise price will be granted, upon such delivery and
without further action by the Company, an additional option to purchase the
number of shares so delivered. These "reload" options are granted at 100% of
the fair market value (as defined in the plan) on the date they are granted,
become exercisable six months from that date and expire coincident with the
options they replace. Grantees are limited to 10 reload options and the
automatic grant of such reload options is limited to twice during any one
calendar year.
(3) All options were granted at 100% of the fair market value on the date of
grant.
(4) The Black-Scholes model was used to determine the grant date present value
of the stock options. This method requires the use of certain assumptions
that affect the value of the option. The assumptions used in this model are
the volatility of the Company's stock price, an estimate of the risk-free
interest rate and expected dividend yield. For purposes of this model, a
volatility factor of 24.4%, a 6.15% risk-free interest rate, and a 2.5%
expected dividend rate were used. No adjustments were made for
non-transferability or for risk of forfeiture of the stock options. This
model assumed all of the options are exercised by the 10th year. There is no
assurance that these assumptions will prove true in the future. The actual
value of the options depends on the market price of the Common Stock at the
date of exercise, which may vary from the theoretical valued indicated in
the table.
(5) As discussed in footnote (1) above, all Old Tenneco stock options held by
employees of the Company were cancelled as of December 11, 1996, upon the
consummation of the Distribution. The Company has adopted a plan (the
"Company Stock Ownership Plan"), which is substantially similar to the Old
Tenneco Stock Ownership Plan. Prior to the Distribution, Old Tenneco
approved the Company's Stock Ownership Plan as the sole shareholder of the
Company. Options (the "Converted Options") were granted under the Company
Stock Ownership Plan as of December 12, 1996, to all employees of the
Company who formerly held Old Tenneco options. Each such employee received
Converted Options of the Company under which the excess of the fair market
value of the shares subject to the options immediately after the grant over
the aggregate option price is not more than the excess of the aggregate fair
market value of all Old Tenneco shares subject to his Old Tenneco stock
options immediately before such cancellation over the aggregate option price
under such Old Tenneco options. The terms of the Converted Options are the
same as if the Old Tenneco options had remained outstanding except to the
extent that the Company Stock Ownership Plan reflects plan enhancements
adopted after the Old Tenneco
15
<PAGE> 19
options were granted. The Converted Options provide that a grantee who
delivers shares of Company's Common Stock to pay the option exercise price
will be granted, upon such delivery and without further action by the
Company, an additional option to purchase the number of shares so delivered.
These "reload" options are granted at 100% of the fair market value (as
defined in the Company Stock Ownership Plan) on the date they are granted,
become exercisable six months from that date and expire at the same time as
the options they replace. Grantees are limited to 10 reload options and the
automatic grant of such reload options is limited to twice during any one
calendar year.
OPTIONS EXERCISED IN 1996 AND
1996 YEAR-END VALUES
The following table sets forth the number of stock options held, as of
December 31, 1996, by the persons named in the Summary Compensation Table. No
options to acquire shares of the Company's Common Stock were exercised during
1996.
<TABLE>
<CAPTION>
TOTAL NO. OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS HELD
DECEMBER 31, 1996 AT DECEMBER 31, 1996
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dana G. Mead....................... 174,155 619,354 $502,376 $1,669,657
Paul T. Stecko..................... 21,672 191,209 $ 76,141 $ 317,887
Theodore R. Tetzlaff............... 19,350 148,254 $ 57,102 $ 238,417
Stacy S. Dick...................... 14,706 149,416 $ 44,414 $ 233,753
Robert T. Blakely.................. 18,325 133,280 $ 50,758 $ 225,730
</TABLE>
16
<PAGE> 20
PENSION PLAN TABLE
The following table sets forth the aggregate estimated annual benefits
payable upon normal retirement pursuant to the Company's Retirement Plan,
Benefit Equalization Plan, and Supplemental Executive Retirement Plan ("SERP")
to persons in specified remuneration and years of credited participation
classifications.
<TABLE>
<CAPTION>
YEARS OF CREDITED PARTICIPATION
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- ---------- ----------
<C> <C> <C> <C> <C> <C>
$450,000 $106,100 $141,400 $176,800 $212,100 $247,500
500,000 117,900 157,100 196,400 235,700 275,000
550,000 129,600 172,900 216,100 259,300 302,500
600,000 141,400 188,600 235,700 282,900 330,000
650,000 153,200 204,300 255,400 306,400 357,500
700,000 165,000 220,000 275,000 330,000 385,000
750,000 176,800 235,700 294,600 353,600 412,500
800,000 188,600 251,400 314,300 377,100 440,000
850,000 200,400 267,100 333,900 400,700 467,500
900,000 212,100 282,900 353,600 424,300 495,000
950,000 223,900 298,600 373,200 447,900 522,500
1,000,000 235,700 314,300 392,900 471,400 550,000
1,100,000 259,300 345,700 432,100 518,600 605,000
1,200,000 282,900 377,100 471,400 565,700 660,000
1,300,000 306,400 408,600 510,700 612,900 715,000
1,400,000 330,000 440,000 550,000 660,000 770,000
1,500,000 353,600 471,400 589,300 707,100 825,000
1,600,000 377,100 502,900 628,600 754,300 880,000
1,700,000 400,700 534,300 667,900 801,400 935,000
1,800,000 424,300 565,700 707,100 848,600 990,000
1,900,000 447,900 597,100 746,400 895,700 1,045,000
2,000,000 471,400 628,600 785,700 942,900 1,100,000
2,100,000 495,000 660,000 825,000 990,000 1,155,000
2,200,000 518,600 691,400 864,300 1,037,100 1,210,000
</TABLE>
- ------------
NOTES:
1. The benefits set forth above are computed as a straight life annuity and are
based on years of credited participation in the Retirement Plan and the
employee's average base salary during the final five years of credited
participation in the Plan; such benefits are not subject to any deduction
for Social Security or other offset amounts. The years of credited
participation under the Retirement Plan (or any supplemental plan) for
Messrs. Mead, Stecko, Dick, and Blakely, are 4, 3, 3, and 15, respectively
(see: Note 2 below for additional information relating to Messrs. Mead,
Stecko, Dick and Blakely; and the "Summary Compensation Table" on page 11
for salary and bonus information for Messrs. Mead, Stecko, Dick, and
Blakely).
17
<PAGE> 21
2. Pursuant to the employment agreement with Mr. Stecko described under the
heading "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements", the Company has agreed to pay him such
supplemental payments (in addition to any benefits payable under the
Company's qualified and non-qualified pension plans) as may be necessary to
make his total payments equal to the amount he would have received had he
continued to be covered under the pension plan maintained by his former
employer.
Under separate appendixes to the SERP, Messrs. Blakely and Dick are entitled
to supplemental pension benefits determined by including their bonuses in
compensation for pension purposes, and with respect to Messrs. Stecko and
Dick, by recognizing actual service plus an additional one year and five
years, respectively.
Mr. Mead is not covered by the Retirement Plan, the Benefit Equalization
Plan, or the SERP. Under a separate pension agreement, Mr. Mead is entitled
to a pension determined under a formula that counts both salary and bonus
earned under the Executive Incentive Compensation Plan and that recognizes
actual service plus an additional 14 2/3 years.
3. The Company provides Mr. Tetzlaff with an individual pension benefit. It is
based on Mr. Tetzlaff's salary and bonus and also provides for guaranteed
graduated minimum annual benefits of $100,000 beginning in 1998, $200,000
per year beginning in 2003, and $300,000 per year beginning in 2008 (see:
"Summary Compensation Table" on page 11 for salary and bonus information on
Mr. Tetzlaff).
------------------------
COMPENSATION OF DIRECTORS
All directors who are not also officers of the Company or its subsidiaries
(except as relates to Case Corporation discussed below) annually are each paid a
director's fee of $32,000 per annum and receive 300 restricted shares of the
Company's Common Stock (discussed below) and are paid an attendance fee of
$1,500 plus expenses for each meeting of the Board of Directors attended. Each
director who serves as a Chairman of the Audit, Compensation and Benefits, or
Nominating and Management Development Committees of the Board of Directors is
paid an additional fee of $7,000 per Chairmanship, and directors who serve as
members of such committees are paid an additional fee of $4,000 per committee
membership. Members of the Executive Committee receive an additional $1,500
attendance fee plus expenses for each meeting of that committee attended.
Payment of all or a portion of such fees, together with interest and/or
earnings, may be deferred at the election of the director until the earliest of
(i) the year next following the date upon which he or she ceases to be a
director of the Company or, (ii) the year selected by the director for
commencement of payment of the deferred amount.
During 1996 the Board eliminated the retirement plan for directors who are
not also officers of the Company, which provided retirement benefits based on
years of service and the aggregate amount of director and committee fees being
received at the time of retirement. Subsequent to
18
<PAGE> 22
completion of the Distribution (as described on page 1), in December 1996, the
Company distributed 2,643; 5,227; 5,863; 5,528; 1,268; 1,335; and 1,600
restricted shares of Common Stock to Ms. Eickhoff and Messrs. Andrews,
Blumenthal, Johnson, McCoy, Weiss, and Wharton, respectively: such shares
represent the accrued value of their vested benefit under the prior retirement
plan as of December 31, 1995 (Messrs. Flawn and Harris are fully vested in the
retirement plan and will receive benefits upon retirement).
Directors who are not also officers of the Company receive annually 300
restricted shares of the Company's Common Stock, and an additional 340
restricted shares of Common Stock are received annually by Ms. Eickhoff and
Messrs. Andrews, Blumenthal, McCoy, Weiss, and Wharton for future amounts
applicable to the discontinued retirement plan. Such restricted shares may not
be sold, transferred, assigned, pledged, or otherwise encumbered and are subject
to forfeiture should the director cease to serve on the Board prior to the
expiration of the restricted period that ends upon such director's normal
retirement from the Board, unless such director is disabled, dies, or the
Compensation and Benefits Committee of the Board, at its discretion, determines
otherwise. During such restricted period, holders of restricted shares are
entitled to vote the shares and receive dividends.
Messrs. Mark Andrews, Dana G. Mead, and Theodore R. Tetzlaff each served as
directors of Case Corporation in 1996 (Case Corporation was an affiliate of the
Company until March 13, 1996, when the Company and its subsidiaries sold their
remaining ownership interest in Case Corporation in an underwritten public
offering). Mr. Mead also served as a member of the Case Corporation Nominating
Committee. Mr. Andrews also served as Chairman of the Audit Committee of Case
Corporation and was a member of the Case Corporation Compensation Committee. Mr.
Tetzlaff also served as a member of the Case Corporation Compensation Committee.
During 1996, prior to the sale of the Company's remaining interest in Case
Corporation, Mr. Andrews, as a director of Case Corporation, was paid a meeting
attendance fee of $1,000. For information as to the amounts received by Messrs.
Mead and Tetzlaff from Case Corporation, see footnote (7) to the "Summary
Compensation Table" above.
19
<PAGE> 23
------------------------
The report of the Compensation and Benefits Committee and the performance
graph that appear immediately below are not deemed to be soliciting material or
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 or the Securities Exchange Act of 1934 or incorporated by reference in
any document so filed.
------------------------
TENNECO INC. COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The executive compensation philosophy, policies, plans, and programs of the
Company are under the supervision of the Compensation and Benefits Committee
(the "Committee"), which is composed of the directors named below, none of whom
is an officer or employee of the Company. The Committee has furnished the
following report on executive compensation:
Compensation Philosophy
The basic philosophy underlying Tenneco's executive compensation policies,
plans, and programs is that executive and shareowner financial interests should
be aligned as closely as possible, and the compensation package should be based
on delivering pay in line with performance.
Accordingly, the executive compensation program for the Company's Chief
Executive Officer ("CEO") and the other executives named in this proxy statement
("Named Executives"), as well as other executives of the Company, has been
structured to:
-- Reinforce a results-oriented management culture with executive pay that
varies according to overall corporate, division, and individual
performance against aggressive goals.
-- Focus on annual and long-term business results that lead to improvement
in shareowner value. These include financial measures, such as EVA*,
earnings per share, net income, cost of quality, and working capital
reduction, and non-financial measures, such as those that reflect
performance in safety, environmental, equal employment opportunity, and
effective leadership.
-- Provide incentives, in the form of substantial long-term reward
potential, for high performing senior executives to remain employees of
the Company.
-- De-emphasize fixed compensation in the form of base salary and place
greater emphasis on variable performance-based and long-term
compensation.
-- Align the interests of the Company's executives and shareowners by
accelerating the acquisition and requiring the retention of Tenneco
shares by senior executives.
-- Provide plans that are simple and easy to describe and understand.
Based on these objectives, the executive compensation program has been
designed to generate compensation from several sources: salaries, annual cash
incentive awards, stock ownership opportunities, and other benefits typically
offered to executives by major corporations.
- ---------------
* EVA is after-tax operating profit minus the annual cost of capital. By
increasing EVA, management believes it will build value for shareowners.
20
<PAGE> 24
The Company's policy is to provide total compensation to its executives
based on performance that is competitive and at market levels, for companies of
comparable size, when financial and qualitative targets are met. Tenneco's
compensation plans provide that as an executive's level of responsibility
increases, (i) a greater portion of his/her potential total compensation is
based on performance (both individual and corporate), and a lesser portion is
comprised of salary, causing potentially greater variability in the individual's
total compensation from year-to-year, and (ii) the mix of compensation for that
executive shifts to a greater portion being derived from compensation plans that
result in stock ownership.
In designing and administering the components of the executive compensation
program, the Committee strives to balance short and long-term incentive
objectives and to employ prudent judgment when establishing performance
criteria, evaluating performance, and determining actual incentive payments.
The following is a description of each of the components of the executive
compensation program along with a discussion of the decisions and action taken
by the Committee with regard to 1996 compensation; there also follows a
discussion regarding the CEO's compensation.
Annual Cash Compensation Program
An executive's annual cash compensation consists of a base salary plus
amounts paid in lieu of Company matching contributions to the Thrift Plan and
bonuses under the Company's Executive Incentive Compensation Plan. Each year the
Committee reviews with the CEO and the senior human resources executive of the
Company an annual salary plan for the Company's executives and other key
management personnel (excluding the CEO), following which the Committee approves
that plan with changes that the Committee deems appropriate. The salary plan
that is developed is based in part on competitive market data and on assessments
of past and anticipated future performance. The Committee employs competitive
market data for directional and guideline purposes in combination with
corporate, divisional, and individual performance results. The competitive
market data used by the Committee includes several of the companies comprising
the Peer Group on the Performance Graph, which follows this report. However,
their inclusion in this data is a function of their participation in the various
nationally recognized compensation surveys in which the Company participates,
rather than an alignment of companies in similar industry groups. Salary levels
are structured within a range of reputable survey data for comparable companies
without regard to the performance of the companies surveyed. The range is used
to allow judgments as to the quality of Tenneco's performance and individual
executive performance. The Committee also reviews, with the assistance of the
senior human resources executive, and sets the salary of the CEO based on
similar information and criteria and the Committee's assessment of his past
performance and its expectations as to his future contribution in leading the
Company.
21
<PAGE> 25
Annual performance goals (net income, working capital reduction, EVA and
other qualitative objectives that have been assigned to division and individual
participants) are established under the Executive Incentive Compensation Plan at
the beginning of each year for purposes of determining incentive awards for that
year. At the conclusion of each year, the Committee approves incentive award
payments to executives based on the degree of achievement of the goals
established at the beginning of that year and on judgments of individual
performance. Using net income, working capital reduction, and EVA as a starting
point, each organization receives incentive compensation funds based on
judgmental considerations including the degree of difficulty in meeting targets,
contribution to overall corporate performance, capital and asset management,
safety performance, quality and risk management initiatives, equal employment
opportunities performance, and leadership. The Committee does not place a
greater value on any particular one of these considerations; rather, the
performance against such goals is considered as part of the overall information
considered by the Committee. The Committee makes individual awards based upon
its evaluation of the individual's contribution to the overall performance
results of his/her division. It is the Committee's assessment that the Company
performed very well in relation to the goals set for 1996, as set out on pages
23 and 24.
The CEO, the Named Executives and other senior executives of the Company,
its subsidiaries and divisions may receive performance units under the 1996
Stock Ownership Plan. The performance units will permit these executives to earn
cash bonuses based upon the attainment of specified goals relating to earnings
per share from continuing operations or shareowner returns.
Long-Term Incentives -- Stock Awards
The Company's long-term stock incentive plan (1996 Stock Ownership Plan) is
designed to align a significant portion of the executive compensation plan with
shareowner interests. This plan permits the granting of a variety of long-term
awards including stock options, restricted stock, and performance shares. Shares
of stock are awarded based on an analysis of competitive levels of stock awards
and an assessment of individual performance. As an individual's level of
responsibility increases, a greater portion of variable performance related
compensation will be in the form of stock. For example, at the senior officer
level 50-55% of total compensation is in the form of stock options and
performance shares, while at lower levels 25-30% of the total is in stock. In
addition, the Company maintains requirements or guidelines for stock ownership
depending on an individual's organization level for executives of the Company
and its subsidiaries. The Chairman and CEO is required to hold seven times
salary and other senior officers three to four times salary.
22
<PAGE> 26
CEO Compensation
The Committee determined that the level of the Company's performance during
1996 represented significant achievements. Factors considered by the Committee
included the following achievements and improvements:
- Successful completion of the corporate transformation of Tenneco from a
highly diversified industrial corporation to a global manufacturing
company focused on its Automotive and Packaging businesses which
included:
-- The sale of Tenneco's remaining investment in Case Corporation,
generating proceeds of approximately $788 million and an after-tax
gain of $340 million.
-- The successful auction of the Tenneco Energy Business, generating
value for Tenneco shareowners in excess of $4 billion.
-- The completion of the spin-off of Newport News to Tenneco shareowners,
which generated value for Tenneco shareowners in excess of $500
million. Newport News also returned $600 million to Tenneco as a
result of the spin-off.
- The separation of the energy, shipbuilding, and industrial businesses of
Tenneco generated opportunities for shareowners to realize greater value
from the three separate companies as analysts, investors, and shareowners
can more readily evaluate the separate operations of the businesses.
- In connection with the spin-off and merger transactions Tenneco's debt
levels were reduced $3.3 billion allowing it the opportunity to expand
the Automotive and Packaging businesses through internal growth and
strategic acquisitions, generating opportunities to create shareowner
value.
- The annual return to shareowners on Tenneco's common stock has averaged
15% since January 1, 1992, compared with Standard & Poor's 500 return of
15.2% over the same period.
- Strong performance at both Tenneco Packaging and Tenneco Automotive, each
of which posted record revenues during 1996. Tenneco Automotive also
posted record operating income and both divisions exceeded the average
performance of their industry peer groups.
- Continued focus on redeployment opportunities and growth through
strategic acquisitions, reducing Packaging's exposure to the cyclical
recycling business through a sale to a joint venture and providing growth
opportunities through Tenneco Automotive's acquisition of Clevite,
National Springs, and Luis Minuzzi e Hijos and Tenneco Packaging's
purchase of Amoco Foam Products. These acquisitions are targeted where
Tenneco sees
23
<PAGE> 27
the greatest opportunity for growth in its two businesses in order to
create shareowner value.
- Tenneco continued to identify and remove cost of quality across the
organization and initiated a company-wide effort to reduce divisional
working capital by nearly $300 million over the three-year period 1996
through 1998. During 1996 Tenneco eliminated approximately $230 million
in failure cost, such as rework, scrap and defects, while adding about
$150 million to operating income or a total of approximately $.50 per
share. The working capital effort will reduce financing costs for Tenneco
and contribute to growth in earnings per share.
- Tenneco Business Services (TBS) continued to make significant progress on
its mission, contributing an overall benefit of $35 million, or more than
$.10 per share, in operating income across Tenneco during 1996.
- Recognition by Industry Week magazine of Tenneco as one of the 100 best
managed companies in the world and of Tenneco Packaging's Counce,
Tennessee, mill as one of the ten best plants in America and recognition
of Tenneco's safety and health programs at Tenneco Automotive's
Paragould, Arkansas, plant earned the Occupational Safety and Health
Administration's Star Award. Tenneco also reduced overall company-wide
injury rates 15% while performing in the top tier of its industry group.
The Committee's assessment is that the Company, under the leadership of its
CEO, and the initiatives and programs he put in place have produced significant
improvements in Tenneco's overall performance including the factors set forth
above, which were specifically considered by the Committee in formulating his
compensation.
In 1996 the incentive award to the CEO was $900,000, which was deferred
until Mr. Mead's retirement. The CEO also received in 1996 a $100,000 deferred
compensation award (this deferred compensation plan for senior executives has
since been eliminated). The size of these awards is consistent with awards to
other senior executives and reflects the Committee's judgment based on its
evaluation of Mr. Mead's contribution to the Company's operating results, which
are set out above.
In December 1996 Mr. Mead was awarded 213,000 options to purchase shares of
stock in the new Tenneco (which resulted from the reorganization). The number of
options granted in 1996 represents two-thirds of a three-year award to Mr. Mead.
The remaining one-third (107,000 options) will be granted in 1997. No future
option awards are planned until the year 2000. This front-loaded stock option
award is intended to provide a significant incentive for enhancing shareholder
value. In addition, such front-loaded awards are often found in the marketplace
among companies that have experienced a significant financial restructuring as
Tenneco did in 1996. A multi-year option award of this kind is not unusual in
situations involving a spin-out of a new company.
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<PAGE> 28
In January 1996, the CEO received a grant of performance shares and an
option to purchase shares of Common Stock in amounts consistent with awards
given to other senior executives and reflecting the Committee's judgment based
on its evaluation of Mr. Mead's contribution to the Company. In conjunction with
the Company's reorganization that was approved by shareholders in December 1996,
all stock options granted prior to the reorganization have been converted to
options to purchase stock in the new Tenneco. The options were converted in a
manner that maintained the aggregate option value immediately after the
restructuring at the same value as it was immediately before the restructuring.
In addition, prior to the effective date of the restructuring, all outstanding
performance shares and restricted shares were vested and delivered to Mr. Mead
as unrestricted shares. This was done in order for Mr. Mead and other executives
to participate in the Company's reorganization in the same manner as other
shareowners.
Effective January 1, 1997, Mr. Mead's base salary was increased from
$950,000 to $970,000. The amount of his increase was consistent with the salary
increases for other senior corporate executives in the Company, but was below
the average merit increase budget for other executives and managers, both in the
market and at Tenneco. The amount of Mr. Mead's increase was based on the
Company's belief that CEO compensation should primarily consist of
performance-based incentives.
$1 Million Tax Limitation
Effective in 1994, the Internal Revenue Code of 1986, as amended, imposed a
$1 million limit on the amount that a publicly-traded corporation may deduct for
compensation paid to the CEO or a Named Executive who is employed on the last
day of the year; provided, however, "performance-based compensation" is excluded
from this $1 million limitation.
The 1996 Stock Ownership Plan subjects stock options, stock appreciation
rights, stock equivalent units, and performance unit grants to certain
conditions designed to make the cash or stock that an executive receives under
such awards "performance-based compensation"; however, restricted stock awards
under that Plan will not qualify as "performance-based compensation" and will
therefore be subject to the $1 million limitation.
Compensation and Benefits Committee
Clifton R. Wharton, Jr.--Chairman
Mark Andrews
Belton K. Johnson
John B. McCoy
Sir David Plastow
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<PAGE> 29
PERFORMANCE GRAPH
The following performance graph compares the Cumulative Total Return (as
defined below for the following graph) on a $100 investment on December 31,
1991, in shares of common stock of Old Tenneco with (i) the Standard & Poor's
500 Stock Index; and (ii) an industry peer group that includes representative
companies from the industries in which the Company's automotive and packaging
divisions compete.
Performance Graph
BASE-DECEMBER 31, 1991=100
(Notes on following page)
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<PAGE> 30
- ------------
NOTES:
1. "Cumulative Total Return" of Old Tenneco is based on share price
appreciation plus dividends for the five years from December 31, 1991,
through December 31, 1996 (assuming the reinvestment of dividends over
such period and the reinvestment of the value of the Newport News
Shipbuilding Inc. shares, received as part of the Distribution, and the
El Paso shares, received as a result of the Merger, into shares of the
Company's Common Stock).
2. The Peer Group, constructed by the Company and comprised of the
following companies (which are competitors of the Company's automotive
and packaging divisions), is based on market capitalization weighted
Cumulative Total Return of the companies comprising the Automotive Parts
Portfolio and the Packaging/Forest & Paper Products Portfolio,
respectively. Each portfolio is then weighted to reflect Tenneco's
revenues within such industry for each year.
Automotive Parts Portfolio: Allied Signal Inc., Arvin Industries, Inc.,
Cooper Industries, Inc., Dana Corporation, Echlin Inc., ITT Industries,
Inc., Magna International Inc., and TRW Inc.; and Packaging/Forest &
Paper Products Portfolio: AEP Industries Inc., Bemis Company, Inc.,
First Brands Corporation, Great Pacific Enterprises Inc.,
Georgia-Pacific Corporation, International Paper Company, James River
Corporation of Virginia, Jefferson Smurfit Corporation, Sonoco Products
Company, Stone Container Corporation, The Carlisle Companies Inc. and
Temple-Inland Inc.
3. The stock performance shown on this graph is not necessarily indicative
of future performance of the Company's Common Stock.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has an agreement with Mr. Mead for his employment with the
Company providing for the payment to Mr. Mead of a salary of not less than
$575,000 per year (with such increases as determined by the Compensation and
Benefits Committee of the Board). Also the Company has agreed that in the event
Mr. Mead's employment is terminated for any reason other than for cause, death,
or permanent disability, the Company will pay to Mr. Mead an amount equal to
three times his annual salary plus $300,000. In the event of Mr. Mead's death
prior to retirement, all restrictions remaining on any outstanding awards under
the Restricted Stock Plan will lapse, and the shares will be distributed to his
estate or his beneficiary, as so designated.
27
<PAGE> 31
The Company has an agreement with Mr. Dick for his employment with the
Company providing for the payment to Mr. Dick of a salary of not less than
$325,000 per year (with such increases as determined by the Compensation and
Benefits Committee of the Board). Also, the Company has agreed that in the event
Mr. Dick's employment is terminated for any reason other than for cause, death,
or permanent disability, the Company will pay to Mr. Dick an amount equal to his
annual salary.
The Company has an agreement with Mr. Stecko for his employment with
Tenneco Packaging Inc. providing for the payment to Mr. Stecko of a salary of
not less than $320,000 per year (with such increases as determined by the
Compensation and Benefits Committee of the Board). The Company has also agreed
that, in the event Mr. Stecko's employment is terminated for any reason other
than for cause, death, or permanent disability, the Company will pay to Mr.
Stecko an amount equal to three times his base salary and will purchase his home
in accordance with the Company's home purchase program. Additionally, in the
event Mr. Stecko's employment is terminated within three years of the date of a
change in control of Tenneco Packaging, the Company will pay Mr. Stecko an
amount equal to three times his base salary.
The Company has established a Benefits Protection Program (the "Program")
to enable the Company to continue to attract, retain, and motivate highly
qualified employees by eliminating (to the maximum practicable extent) any
concern on the part of such employees that their job security or benefit
entitlements will be jeopardized by a "Change-in-Control" of the Company (as
such term is defined in the Program). The Program is designed to achieve this
purpose through (i) the establishment of a severance plan for the benefit of
certain employees and officers whose position is terminated under certain
circumstances following such Change-in-Control, and (ii) the establishment of a
trust fund designed to ensure the payment of benefits accrued under certain
plans. Under the Program, Messrs. Mead, Stecko, Tetzlaff, Dick, and Blakely
would have become entitled to receive payments from the Company in the amount of
$5,451,000; $2,196,000; $2,199,000; $1,995,000 and $1,941,000 respectively, had
their position been terminated on December 31, 1996, and, in addition,
restricted shares held in the name of such individuals under the Company's
Restricted Stock Plans would have automatically reverted to the Company, and the
Company would have been obliged to pay such individuals the fair market value
thereof all as provided by such plans. The performance share equivalent units
would also have been fully vested and paid.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1996 the Company and its subsidiaries paid the law firm of Jenner &
Block, of which Theodore R. Tetzlaff, General Counsel of the Company, is a
partner, approximately $16.9 million for legal services (pursuant to an
agreement with the Company, Mr. Tetzlaff has agreed to devote whatever time is
necessary to attend to the responsibilities of General Counsel of the Company,
and will not receive from Jenner & Block any part of the fees paid by the
Company to
28
<PAGE> 32
that firm during such period he serves as General Counsel). All such
transactions discussed above were in the ordinary course of business.
During fiscal year 1996, certain executive officers of the Company were
indebted to the Company. Such indebtedness was incurred in connection with
relocation of such persons and all amounts outstanding are secured by a
subordinated mortgage note, which accrues interest at the rate of 3% per year on
the unpaid balance and matures at the earlier of the individual's termination of
employment or the year 2026. Principal is payable in full at maturity and the
payment of interest has been deferred for 1997. The Company has provided low
interest loans in the past in connection with executive relocations. The
following sets forth the approximate aggregate amount outstanding as of December
31, 1996, (and is the largest aggregate amount outstanding during 1996); Dana G.
Mead, $400,659; Stacy S. Dick, $408,043; Robert T. Blakely, $406,626; Barry R.
Schuman, $413,351; John L. Howard, $306,428; Jack Lascar, $405,670; Mark A.
McCollum, $408,274; Karen R. Osar, $407,153; Stephen J. Smith, $410,285; and
Karl A. Stewart, $413,582.
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL
Financial statements of the Company and its consolidated subsidiaries are
included in the Company's Annual Report furnished to all shareowners. Upon
recommendation of the Audit Committee of the Board of Directors, the Board of
Directors has appointed Arthur Andersen LLP as independent public accountants
for the Company to examine its consolidated financial statements for the year
ended December 31, 1997, and has determined that it would be desirable to
request that the shareowners approve such appointment. If the shareowners should
not approve such appointment, the Audit Committee and the Board would reconsider
the appointment. Arthur Andersen LLP also acted as the Company's principal
accountants for the fiscal year ended December 31, 1996. Representatives of
Arthur Andersen LLP are expected to be present at the Annual Meeting and will
have the opportunity to make a statement if they desire to do so and are also
expected to be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any other matters that may properly
come before the Annual Meeting. However, should any such matters come before the
Annual Meeting, it is the intention of the persons named in the enclosed form of
Proxy to vote all proxies (unless otherwise directed by shareowners) in
accordance with their judgment on such matters.
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<PAGE> 33
EFFECT OF ABSTENTIONS AND BROKER NON-VOTE
The Company's By-Laws require a majority of the shares authorized to vote
at the Annual Meeting of Shareowners be present, in person or by Proxy, to
establish a quorum. Shares abstaining with regard to a matter to be presented to
the shareowners constitute part of the quorum present with respect to such
matter; however, shares for which voting power has been withheld, such as broker
non-votes, do not constitute part of the quorum present with respect to such
matter. Consequently, the number of shares representing the quorum present for
the meeting may be greater than the shares present for action on a particular
proposal.
SOLICITATION OF PROXIES AND VOTING
A Proxy may be revoked by notice in writing to the Secretary at any time
prior to the exercise thereof.
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers, and
employees, personally, or by telephone, telecopy or telegram. Proxy cards and
material also will be distributed to beneficial owners of stock through brokers,
custodians, nominees, and other like parties, and the Company expects to
reimburse such parties for their charges and expenses. Georgeson & Co. Inc., New
York, New York, has been retained to assist the Company in the solicitation of
proxies at a fee estimated not to exceed $25,000.
SUBMISSION OF SHAREOWNER PROPOSALS
Any proposal to be presented by a shareowner at the Company's 1998 Annual
Meeting of Shareowners must be received by the Company by December 5, 1997, so
that it may be considered by the Company for inclusion in its proxy statement
and form of proxy relating to that meeting.
KARL A. STEWART
Vice President and Secretary
------------------------
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO
KARL A. STEWART, VICE PRESIDENT AND SECRETARY, TENNECO INC., 1275 KING STREET,
GREENWICH, CONNECTICUT 06831-2946.
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<PAGE> 34
NOTICE OF ANNUAL
MEETING AND
PROXY STATEMENT
-------------------------------------
ANNUAL MEETING
OF SHAREOWNERS
MAY 13, 1997
TENNECO INC
1275 KING STREET, GREENWICH,
CONNECTICUT 06831-2946
TENNECO LOGO
<PAGE> 35
TENNECO INC
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000 TENNECO LOGO
April 4, 1997
Dear Benefit Plan Participant:
The Annual Meeting of Shareowners of Tenneco Inc. is scheduled to be held
in Chicago, Illinois, at 10:30 a.m., on Tuesday, May 13, 1997. A copy of the
Notice and Proxy Statement, which is being sent to all registered shareowners in
connection with the Annual Meeting is enclosed for your information.
Also enclosed with this letter is a form of proxy card, which designates
the number of shares held in your benefit plan account. By executing this proxy
card you instruct the benefit plan trustee (the "Trustee") how to vote the
shares of Tenneco Inc. stock in your account which you are entitled to vote. The
Trustee will vote all shares eligible to be voted by benefit plan participants
in accordance with their instructions.
If you return your form of proxy executed but without furnishing voting
instructions, the eligible shares in your account will be voted by the Trustee,
as holder of record of the shares in your account, FOR the election of the
nominees for Directors named in the Proxy Statement, FOR the approval of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the year 1997, and as recommended by Management on all other
matters to be considered at the Annual Meeting.
If you do not return your executed form of proxy to the Trustee, then your
shares can be voted by the Trustee only in accordance with the requirements of
your benefit plan, which may or may not reflect your views.
YOUR VOTE IS IMPORTANT. PLEASE SEND YOUR EXECUTED FORM OF PROXY CARD WITH
YOUR VOTING INSTRUCTIONS AT YOUR EARLIEST OPPORTUNITY. For your convenience, a
return envelope is enclosed.
YOUR BENEFITS COMMITTEE
<PAGE> 36
[TENNECO INC. LOGO]
TENNECO INC
ANNUAL MEETING OF SHAREOWNERS MAY 13, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned does hereby appoint D.G. MEAD, P.T. FLAWN and K.A. STEWART and
any of them, with full power of substitution, as Proxies to vote, as directed
on the reverse side of this card, or, if not so directed, in accordance with the
Board of Directors' recommendations, all shares of Tenneco Inc. held of record
by the undersigned at the close of business on March 14, 1997, and entitled to
vote at the Annual Meeting of Shareowners of Tenneco Inc. to be held at 10:30
a.m., May 13, 1997, in the First Chicago Center, Conference & Theatre Level,
One First National Plaza, Chicago, Illinois, or at any adjournment thereof, and
to vote, in their discretion, upon such other matters as may properly come
before the Annual Meeting.
Election of Directors-Nominees:
Mark Andrews
W. Michael Blumenthal
Belton K. Johnson
William L. Weiss
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxies cannot vote your
shares unless you sign and return this card.
[X] Please mark your
votes as in this
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2
1. Election of Directors FOR WITHHELD
(SEE REVERSE) / / / /
For, except vote withheld from the following nominees(s):
_______________
2. Approval of Independent FOR AGAINST ABSTAIN
Accountants for year 1997 / / / / / /
3. In the discretion of the Proxies named herein,
the Proxies are authorized to vote upon other
matters as may properly come before the meeting.
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any
adjournments thereof.
NOTE: Please sign exactly as name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor, administrator,
trustee, or guardian, please give full
title as such.
______________________________________________
______________________________________________
SIGNATURE DATE
