<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 1-12387
---------------------------
TENNECO INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0515284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1275 KING STREET, GREENWICH, CT
(Address of principal executive 06831
offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 863-1000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common Stock, par value $.01 per share: 170,136,624 shares as of September
30, 1998.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Tenneco Inc. and Consolidated Subsidiaries--
Statements of Income.............................. 2
Statements of Cash Flows.......................... 3
Balance Sheets.................................... 4
Statements of Changes in Shareowners' Equity...... 5
Notes to Financial Statements..................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk........................................... *
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.............................. *
Item 2. Changes in Securities.......................... *
Item 3. Defaults Upon Senior Securities................ *
Item 4. Submission of Matters to Vote of Security
Holders............................................... *
Item 5. Other Information.............................. *
Item 6. Exhibits and Reports on Form 8-K............... 16
</TABLE>
- ------------
* No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
CAUTIONARY STATEMENT AND "SAFE HARBOR" OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-Q contains forward-looking statements
regarding: (i) capital resources; (ii) the development of strategic alternatives
to include among the options the separation of the automotive and packaging
businesses and the separation of the containerboard packaging business from the
specialty packaging business; (iii) a cost reduction program and the expected
savings therefrom; (iv) the adoption of a new accounting standard regarding
start-up costs; and (v) the Year 2000 issue (relating to potential equipment and
computer failures by or at the change in the century). See "Liquidity and
Capital Resources -- Capitalization", "Strategic Alternatives Analysis and
Expected Fourth Quarter Charges", "Changes in Accounting Principles", and "Year
2000" under "Management's Discussion and Analysis of Financial Condition and
Results of Operations." These forward-looking statements are based on the
current expectations of Tenneco (as defined below). Because forward-looking
statements involve risks and uncertainties, Tenneco's plans, actions and actual
results could differ materially. Among the factors that could cause plans,
actions and results to differ materially from current expectations are: (i) the
general economic, political and competitive conditions in markets and countries
where Tenneco operates, including currency fluctuations and other risks
associated with operating in foreign countries and changes in distribution
channels; (ii) governmental actions, including the ability to receive regulatory
approvals and the timing of such approvals; (iii) changes in capital
availability or costs; (iv) results of analysis regarding strategic
alternatives; (v) changes in consumer demand and prices, including decreases in
demand for Tenneco products and its customers' products and the resulting
negative impact on Tenneco's revenues and margins from such products; (vi) the
cost of compliance with changes in regulations, including environmental
regulations; (vii) workforce factors such as strikes or labor interruptions;
(viii) material substitutions or increases in the costs of Tenneco's raw
materials; (ix) Tenneco's ability to integrate operations of acquired businesses
quickly and in a cost-effective manner; (x) new technologies; (xi) the ability
of Tenneco and those with whom it conducts business to timely resolve the Year
2000 issue, unanticipated costs of, problems with or delays in resolving the
Year 2000 issue, and the costs and impacts if the Year 2000 issue is not timely
resolved; (xii) changes by the Financial Accounting Standards Board or other
accounting regulatory bodies of authoritative generally accepted accounting
principles or policies; and (xiii) the timing and occurrence (or non-occurrence)
of transactions and events which may be subject to circumstances beyond
Tenneco's control.
1
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues--
Automotive....................... $ 804 $ 785 $ 2,468 $ 2,436
Packaging........................ 1,113 1,045 3,255 2,916
Intergroup sales and other....... (2) 1 (3) --
----------- ----------- ----------- -----------
1,915 1,831 5,720 5,352
Other income, net..................... 15 24 51 65
----------- ----------- ----------- -----------
1,930 1,855 5,771 5,417
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)........... 1,342 1,311 3,985 3,840
Engineering, research, and
development......................... 13 20 43 54
Selling, general, and
administrative...................... 254 208 740 653
Depreciation, depletion, and
amortization........................ 115 90 335 273
----------- ----------- ----------- -----------
1,724 1,629 5,103 4,820
----------- ----------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE, INCOME
TAXES, AND MINORITY INTEREST............. 206 226 668 597
Interest expense (net of interest
capitalized)........................ 61 59 178 157
Income tax expense.................... 34 56 151 138
Minority interest..................... 8 6 24 17
----------- ----------- ----------- -----------
NET INCOME................................. $ 103 $ 105 $ 315 $ 285
=========== =========== =========== ===========
PER SHARE
Average shares of common stock
outstanding--
Basic............................ 167,985,657 169,953,649 168,929,776 170,419,819
Diluted.......................... 168,282,244 170,922,477 169,383,927 170,952,697
Earnings per average share of common
stock--
Basic............................ $ .62 $ .62 $ 1.87 $ 1.67
=========== =========== =========== ===========
Diluted.......................... $ .62 $ .62 $ 1.86 $ 1.67
=========== =========== =========== ===========
Cash dividends per share of common
stock............................... $ .30 $ .30 $ .90 $ .90
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of income.
2
<PAGE> 4
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
1998 1997
----- -----
(MILLIONS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 315 $ 285
Adjustments to reconcile net income to net cash provided
(used) by operating activities--
Depreciation, depletion, and amortization.............. 335 273
Deferred income taxes.................................. 150 148
(Gain)/loss on sale of businesses and assets, net...... (17) 14
Changes in components of working capital--
(Increase) decrease in receivables................ (177) (114)
(Increase) decrease in inventories................ (29) (40)
(Increase) decrease in prepayments and other
current assets................................... (13) (63)
Increase (decrease) in payables................... (21) (71)
Increase (decrease) in taxes accrued.............. (33) (48)
Increase (decrease) in interest accrued........... 30 58
Increase (decrease) in other current
liabilities...................................... (36) (113)
Other.................................................. (139) (108)
----- -----
Net cash provided (used) by operating activities............ 365 221
----- -----
INVESTING ACTIVITIES
Net proceeds from sale of businesses and assets............. 22 17
Expenditures for plant, property, and equipment............. (340) (324)
Acquisition of businesses................................... (81) (308)
Investments and other....................................... (78) (61)
----- -----
Net cash provided (used) by investing activities............ (477) (676)
----- -----
FINANCING ACTIVITIES
Issuance of common and treasury shares...................... 39 35
Purchase of common stock.................................... (104) (90)
Issuance of long-term debt.................................. 3 596
Retirement of long-term debt................................ (18) (9)
Net increase (decrease) in short-term debt excluding current
maturities on long-term debt.............................. 328 55
Dividends on common stock................................... (152) (154)
----- -----
Net cash provided (used) by financing activities............ 96 433
----- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments................................ 3 --
----- -----
Increase (decrease) in cash and temporary cash
investments............................................... (13) (22)
Cash and temporary cash investments, January 1.............. 41 62
----- -----
Cash and temporary cash investments, September 30 (Note).... $ 28 $ 40
===== =====
Cash paid during the period for interest.................... $ 162 $ 113
Cash paid during the period for income taxes (net of
refunds).................................................. $ 25 $ 61
</TABLE>
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Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.
The accompanying notes to financial statements are an integral part of these
statements of cash flows.
3
<PAGE> 5
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
------------- ------------ -------------
1998 1997 1997
------------- ------------ -------------
(MILLIONS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments..................... $ 28 $ 41 $ 40
Receivables--
Customer notes and accounts, net................... 875 729 795
Income taxes....................................... 27 63 67
Other.............................................. 101 17 29
Inventories--
Finished goods..................................... 482 467 495
Work in process.................................... 144 100 95
Raw materials...................................... 235 265 247
Materials and supplies............................. 134 118 117
Deferred income taxes................................... 33 63 99
Prepayments and other................................... 277 252 206
------ ------ ------
2,336 2,115 2,190
------ ------ ------
Other assets:
Long-term notes receivable, net......................... 47 49 43
Goodwill and intangibles, net........................... 1,609 1,577 1,628
Deferred income taxes................................... 50 55 56
Pension assets.......................................... 819 747 707
Other................................................... 385 334 418
------ ------ ------
2,910 2,762 2,852
------ ------ ------
Plant, property, and equipment, at cost..................... 5,640 5,284 5,141
Less--Reserves for depreciation, depletion, and
amortization.......................................... 2,050 1,829 1,795
------ ------ ------
3,590 3,455 3,346
------ ------ ------
$8,836 $8,332 $8,388
====== ====== ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities on
long-term debt)....................................... $ 629 $ 278 $ 370
Trade payables.......................................... 710 687 608
Taxes accrued........................................... 27 96 110
Accrued liabilities..................................... 394 344 295
Other................................................... 204 256 316
------ ------ ------
1,964 1,661 1,699
------ ------ ------
Long-term debt.............................................. 2,623 2,633 2,638
------ ------ ------
Deferred income taxes....................................... 729 614 619
------ ------ ------
Postretirement benefits..................................... 244 228 211
------ ------ ------
Deferred credits and other liabilities...................... 188 244 310
------ ------ ------
Commitments and contingencies
Minority interest........................................... 424 424 313
------ ------ ------
Shareowners' equity:
Common stock............................................ 2 2 2
Premium on common stock and other capital surplus....... 2,704 2,679 2,670
Cumulative translation adjustments...................... (84) (122) (101)
Retained earnings....................................... 253 89 111
------ ------ ------
2,875 2,648 2,682
Less--Common stock held as treasury stock, at cost...... 211 120 84
------ ------ ------
2,664 2,528 2,598
------ ------ ------
$8,836 $8,332 $8,388
====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
4
<PAGE> 6
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------
1998 1997
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------ ----------- ------
(MILLIONS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
COMMON STOCK
Balance January 1.................................. 172,569,889 $ 2 171,567,658 $ 2
Issued pursuant to benefit plans.............. 918,710 -- 795,108 --
----------- ------ ----------- ------
Balance September 30............................... 173,488,599 2 172,362,766 2
=========== ------ =========== ------
PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS
Balance January 1.................................. 2,679 2,642
Premium on common stock issued pursuant to
benefit plans............................... 25 28
------ ------
Balance September 30............................... 2,704 2,670
------ ------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance January 1.................................. (122) 23
Translation of foreign currency statements.... 38 (139)
Hedges of net investment in foreign
subsidiaries (net of income taxes).......... -- 15
------ ------
Balance September 30............................... (84) (101)
------ ------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance January 1.................................. 89 (21)
Net income.................................... 315 285
Dividends on common stock..................... (151) (153)
------ ------
Balance September 30............................... 253 111
------ ------
LESS -- COMMON STOCK HELD AS TREASURY STOCK, AT
COST
Balance January 1.................................. 2,928,189 120 -- --
Shares acquired............................... 2,765,808 107 2,288,200 90
Shares issued pursuant to benefit and dividend
reinvestment plans.......................... (402,916) (16) (169,410) (6)
----------- ------ ----------- ------
Balance September 30............................... 5,291,081 211 2,118,790 84
=========== ------ =========== ------
Total......................................... $2,664 $2,598
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of changes in shareowners' equity.
5
<PAGE> 7
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) In the opinion of Tenneco Inc. (the "Company"), the accompanying
unaudited consolidated financial statements of Tenneco Inc. and its consolidated
subsidiaries ("Tenneco") contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, changes in shareowners' equity, and cash flows for the periods
indicated. The unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles. The consolidated
financial statements of Tenneco include all majority-owned subsidiaries of the
Company. Investments in 20% to 50% owned companies where the Company has the
ability to exert significant influence over operating and financial policies are
carried at cost plus equity in undistributed earnings and cumulative translation
adjustments since date of acquisition.
Prior year's financial statements have been reclassified where appropriate
to conform to 1998 presentations.
(2) Tenneco continues to develop a broad range of strategic alternatives
designed to better realize the long-term value of its businesses for shareowners
as originally announced on July 21, 1998. Among the options are the separation
of the automotive and packaging businesses and the separation of the
containerboard packaging business from the specialty packaging business. The
options for separation of the containerboard business include a sale, merger,
spin-off, initial public offering, or strategic alliance. Tenneco intends to
publicly announce any transactions which may result from the strategic
alternatives analysis as those transactions develop.
Additionally, Tenneco announced that it expects to record a $95 to $105
million pre-tax charge in the fourth quarter of 1998 to recognize the expense of
a planned cost reduction program.
(3) Tenneco is a party to various legal proceedings arising from its
operations. Tenneco believes that the outcome of these proceedings, individually
and in the aggregate, will not have a material adverse effect on its financial
position or results of operations.
(4) Tenneco is subject to a variety of environmental and pollution control
laws and regulations in all jurisdictions in which it operates. Tenneco has
provided reserves for compliance with these laws and regulations where it is
probable that a liability exists and where Tenneco can make a reasonable
estimate of the liability. The estimated liabilities recorded are subject to
change as more information becomes available regarding the magnitude of possible
clean-up costs and the timing, varying costs, and effectiveness of alternative
clean-up technologies. However, Tenneco believes that any additional costs which
may arise as more information becomes available will not have a material adverse
effect on its financial position or results of operations.
(5) In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which establishes
new accounting and reporting standards for the costs of computer software
developed or obtained for internal use. This statement will be applied
prospectively and is effective for fiscal years beginning after December 15,
1998. The impact of this new standard is not expected to have a significant
effect on Tenneco's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement is effective for fiscal years beginning after
December 15, 1998. The statement requires capitalized costs related to start-up
activities to be expensed as a cumulative effect of a change in accounting
principle when the statement is adopted. Tenneco capitalizes certain costs
related to start-up activities, primarily engineering costs for new automobile
original equipment platforms. Tenneco expects to record an after-tax charge for
the cumulative effect of this change in accounting principle upon adoption that
it estimates will be in the range of $75 to $85 million. Tenneco currently
expects to adopt this new accounting principle in the first quarter of 1999.
6
<PAGE> 8
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new accounting
and reporting standards requiring that all derivative instruments (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. This statement is effective for
all fiscal years beginning after June 15, 1999. Tenneco is currently evaluating
the new standard but has not yet determined the impact it will have on its
financial position or results of operations.
(6) Earnings per share of common stock outstanding were computed as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Basic Earnings Per Share--
Net income........................... $ 103 $ 105 $ 315 $ 285
----------- ----------- ----------- -----------
Average shares of common stock
outstanding........................ 167,985,657 169,953,649 168,929,776 170,419,819
=========== =========== =========== ===========
Earnings per average share of common
stock.............................. $ .62 $ .62 $ 1.87 $ 1.67
=========== =========== =========== ===========
Diluted Earnings Per Share--
Net income........................... $ 103 $ 105 $ 315 $ 285
----------- ----------- ----------- -----------
Average shares of common stock
outstanding........................ 167,985,657 169,953,649 168,929,776 170,419,819
Effect of dilutive securities:
Restricted stock................ 40,697 3,228 44,438 --
Stock options................... 30,450 883,202 164,921 450,480
Performance shares.............. 225,440 82,398 244,792 82,398
----------- ----------- ----------- -----------
Average shares of common stock
outstanding including dilutive
securities......................... 168,282,244 170,922,477 169,383,927 170,952,697
=========== =========== =========== ===========
Earnings per average share of common
stock.............................. $ .62 $ .62 $ 1.86 $ 1.67
=========== =========== =========== ===========
</TABLE>
In August 1998, Tenneco established a grantor trust and issued 1.9 million
shares of common stock to the trust. The trust is consolidated in Tenneco's
financial statements and the shares are reflected in the financial statements as
treasury stock. Consequently, the shares of common stock issued to the trust are
not considered to be outstanding in the computation of earnings per share.
On September 9, 1998, Tenneco adopted a Qualified Offer Rights Plan and
established an independent Board committee to review the Plan every three years.
The Qualified Offer Rights Plan was adopted to deter coercive takeover tactics
and to prevent a potential acquiror from gaining control of Tenneco in a
transaction which is not in the best interests of Tenneco shareholders.
Generally, under the Plan, if a person becomes the beneficial owner of 20% or
more of Tenneco's outstanding common stock, other than pursuant to a "qualified
offer", each right will entitle its holder to purchase, at the right's exercise
price, a number of shares of common
7
<PAGE> 9
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
stock of Tenneco or, under certain circumstances, of the acquiring person having
a market value of twice the right's exercise price. Rights held by the 20
percent holder will become void and will not be exercisable.
The rights will not become exercisable in connection with a "qualified
offer," which is an all-cash tender offer for all outstanding common stock that
is fully financed, remains open for a period of at least 60 business days,
results in the offeror owning at least 85% of the common stock after
consummation of the offer, assures a prompt second-step acquisition of shares
not purchased in the initial offer at the same price as the initial offer and
meets certain other requirements.
In connection with the adoption of the Qualified Offer Rights Plan, the
Board of Directors also adopted a "TIDE" (Three-year Independent Director
Evaluation) mechanism. Under the TIDE mechanism, an independent Board committee
will review, on an ongoing basis, the Qualified Offer Rights Plan and
developments in rights plans generally, and, if it deems appropriate, recommend
modification or termination of the Qualified Offer Rights Plan. The independent
committee will report to Tenneco's Board at least every three years as to
whether the Qualified Offer Rights Plan continues to be in the best interests of
Tenneco's shareholders.
(7) Tenneco adopted FAS No. 130, "Reporting Comprehensive Income," in the
first quarter of 1998. FAS No. 130 establishes new accounting standards for
reporting and display of comprehensive income and its components. Comprehensive
income is the total of net income and all other non-owner changes in equity in a
given period. For the three months ended September 30, 1998 and 1997, Tenneco's
comprehensive income is $161 million and $95 million, respectively. For the nine
months ended September 30, 1998 and 1997, Tenneco's comprehensive income is $353
million and $161 million, respectively.
The above notes are an integral part of the foregoing financial statements.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 1998 AND 1997
Tenneco Inc. and its consolidated subsidiaries ("Tenneco") reported net
income of $103 million, or 62 cents per share on a diluted basis, for the
quarter ended September 30, 1998. (All references to earnings per share in this
Management's Discussion and Analysis are on a diluted basis unless otherwise
noted.) Net income for the third quarter of 1997 was $105 million, or 62 cents
per share. Tenneco Packaging showed a 29% increase in its income before
interest, taxes, and minority interest ("operating income"), while Tenneco
Automotive's operating income declined by 28%. Costs in Tenneco's Other category
increased by $18 million. As a result, operating income declined by 9% for the
three months ended September 30, 1998 compared to the year earlier period. These
operating income changes were offset by a lower effective tax rate in the 1998
third quarter.
Revenues
<TABLE>
<CAPTION>
THIRD QUARTER
----------------------------
1998 1997 % CHANGE
------ ------ --------
(MILLIONS)
<S> <C> <C> <C>
Tenneco Automotive.................................. $ 804 $ 785 2%
Tenneco Packaging................................... 1,113 1,045 7%
Intergroup sales and other.......................... (2) 1 --
------ ------
$1,915 $1,831 5%
====== ======
</TABLE>
Tenneco Automotive's third quarter 1998 revenue increase primarily
reflected the volume growth in the original equipment portion of Automotive's
business, partially offset by continued weakness in the aftermarket portion of
the business. Despite lower shipments to GM in the quarter due to the effects of
the GM strike, Automotive's volume growth in original equipment contributed $48
million in increased revenues for the third quarter of 1998. Revenue growth in
the quarter also came from $3 million in revenues earned by companies acquired
since the third quarter of 1997. Lower volumes shipped to Automotive's
aftermarket customers during the quarter, reflecting softness particularly in
the North American aftermarket and continued high levels of customer inventory,
reduced third quarter 1998 revenues by approximately $35 million. The remainder
of the third quarter revenue change resulted from several factors, the most
significant of which was a product mix change. This reflects Automotive's
introduction of entry level and mid-priced products to serve additional segments
of the marketplace.
Tenneco Packaging's specialty and paperboard packaging businesses both
contributed revenue increases during the third quarter of 1998 compared to the
same period in 1997. Specialty packaging's revenue grew from $679 million in the
three months ended September 30, 1997, to $701 million in the 1998 period.
Specialty packaging showed unit volume growth in most product lines. Volume
growth, however, was not fully reflected in revenue growth as declining resin
costs resulted in lower product pricing to customers. Acquisitions made since
the third quarter of 1997, primarily Richter Manufacturing, a leading producer
of protective packaging for the western United States which was acquired in May
1998, contributed $15 million to the revenue increase.
Revenues in the paperboard packaging business increased by $46 million to
$412 million in the third quarter of 1998 over the comparable 1997 period.
Pricing improvements contributed $28 million to 1998 third quarter revenue
improvements. Volume increases, primarily at the corrugated box plants,
contributed the remainder of the revenue improvement.
9
<PAGE> 11
Operating Income
<TABLE>
<CAPTION>
THIRD QUARTER
----------------------------
1998 1997 % CHANGE
---- ---- ---------
(MILLIONS)
<S> <C> <C> <C>
Tenneco Automotive.................................. $ 86 $119 (28%)
Tenneco Packaging................................... 138 107 29%
Other............................................... (18) -- NM
---- ----
$206 $226 (9%)
==== ====
</TABLE>
Tenneco Automotive's operating income performance for the third quarter of
1998 compared to the same period in 1997 reflected the same primary factors as
revenues. Despite the effects of the GM strike, the original equipment business
showed strong volume, partially offsetting the impact of the weak aftermarket.
Overall, volume changes from the third quarter of 1997 to the third quarter of
1998 reduced operating income by $13 million. Higher promotional costs and
product mix and pricing changes, mostly in the aftermarket, further reduced
operating income by $8 million in the third quarter of 1998. Operating income in
the third quarter of 1997 included $10 million related to the favorable
resolution of a legal action and a net reduction of $4 million in certain
reserves, primarily related to ongoing reorganization initiatives which had
proceeded more rapidly and efficiently than planned, allowing Automotive to
adjust its cost estimates for completing the initiatives. Cost savings in the
third quarter of 1998 accounted for the balance of the quarter-over-quarter
change in operating income at Tenneco Automotive.
Tenneco Packaging's operating income improvement occurred primarily in the
paperboard packaging business. Paperboard packaging posted operating income of
$52 million in the third quarter of 1998 compared to $23 million in the same
period in 1997. Results for 1998 included a $17 million gain on the sale of non-
strategic timberland assets while a similar transaction in 1997 contributed $5
million. The remainder of the operating income increase for paperboard packaging
is attributable to the pricing and volume gains discussed under Revenues above.
The specialty packaging business reported operating income of $86 million
in the third quarter of 1998, up from $84 million in the third quarter of 1997.
Volume growth, as discussed under Revenues above, was partially offset by weak
performance in the UK plastics and German based non-medical flexible businesses.
In addition, the specialty packaging business incurred approximately $5 million
in one-time costs related to a systems project in North America.
Tenneco's Other expenses increased in the third quarter of 1998 over the
1997 period primarily as a result of higher costs for its new data center.
Tenneco began consolidating its North American data center operations in 1998
and plans for the effort to be substantially complete by the end of the year.
The operating cost of the data center will continue beyond year-end.
Interest Expense (net of interest capitalized)
Interest expense increased by $2 million for the third quarter of 1998
compared to the same period in 1997. This increase is primarily attributable to
debt issued to finance Tenneco's capital needs, including acquisitions and its
share repurchase activity.
Income Taxes
Tenneco's effective tax rate for the third quarter of 1998 was 23 percent
compared to 34 percent in the 1997 third quarter. The third quarter 1998 tax
rate was significantly lower as a result of lower foreign tax rates, a reduction
in Tenneco's estimated tax liabilities related to certain global tax audits, and
the availability of tax credits in certain foreign jurisdictions.
10
<PAGE> 12
Minority Interest
Minority interest primarily represents dividends on the preferred stock of
a subsidiary. The $2 million increase in the 1998 third quarter resulted from
dividends paid on additional subsidiary preferred stock, which was issued in
December 1997.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1998 1997 % CHANGE
---- ---- --------
(MILLIONS)
<S> <C> <C> <C>
Tenneco Automotive................................ $2,468 $2,436 1%
Tenneco Packaging................................. 3,255 2,916 12%
Intergroup sales and other........................ (3) -- --
------ ------
$5,720 $5,352 7%
====== ======
</TABLE>
Through the first three quarters of 1998, Tenneco Automotive's strong
original equipment sales volume more than offset the weaknesses experienced in
the aftermarket. Growth in the original equipment portion of the business
contributed $155 million in additional 1998 revenues through the end of
September. Acquisitions also contributed $34 million to revenue growth.
Partially offsetting revenue growth in the original equipment portion of
the business and from acquisitions, the weak aftermarket and high levels of
customer inventory reduced aftermarket sales volume, causing a decline in
year-to-date revenues of $105 million. While the U.S. dollar weakened against
major currencies in the third quarter and had a negligible impact on
quarter-to-quarter revenue changes, on a year-to-date basis, the strong U.S.
dollar has reduced revenue by $58 million. Finally, pricing and volume mix
changes accounted for the majority of the remainder of the year-to-date revenue
change.
Tenneco Packaging's specialty and paperboard packaging businesses both
contributed revenue increases in the nine-month period ended September 30, 1998.
Specialty packaging's revenues increased to $2,062 million in the first nine
months of 1998 from $1,852 million in the year earlier period. Acquisitions,
including revenue earned by the flexible and protective packaging businesses
acquired from NV Koninklijke KNP BT ("KNP BT"), through the date of the first
anniversary of its acquisition, contributed $183 million to the revenue growth.
Volume growth, particularly in consumer products, food service and institutional
sales, and foam products, contributed the majority of the remaining increase.
Paperboard packaging's revenues increased from $1,064 million in the first
nine months of 1997 to $1,193 million in the same period of 1998. As with the
third quarter results above, improved pricing during the 1998 period contributed
the majority of the improvement while corrugated box volume also improved year-
over-year.
Operating Income
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1998 1997 % CHANGE
---- ---- --------
(MILLIONS)
<S> <C> <C> <C>
Tenneco Automotive.................................. $305 $330 (8%)
Tenneco Packaging................................... 396 269 47%
Other............................................... (33) (2) NM
---- ----
$668 $597 12%
==== ====
</TABLE>
11
<PAGE> 13
Tenneco Automotive's volume changes discussed under Revenues above resulted
in a net reduction to operating income of $34 million on a year-to-date basis.
While the strong sales volume in the original equipment portion of the business
more than offset the volume reduction in aftermarket at the revenue line, the
shift from higher margin aftermarket sales to lower margin original equipment
sales resulted in the negative impact on operating income. Similar to the
revenue discussion above, while the U.S. dollar had a minor impact on third
quarter results, its strength in 1998 relative to 1997 has reduced operating
income by $10 million. As discussed under the third quarter results, the 1997
year-to-date period included the effects of the legal resolution and the
reduction in reserves. The remainder of the change in Automotive's year-to-date
operating income is due to several factors, primarily the cost reduction
efforts.
Tenneco Packaging's operating income growth occurred in both the specialty
and paperboard packaging businesses. Specialty packaging's operating income on a
year-to-date basis was $261 million, an improvement of $38 million over the year
ago period. Acquisitions, including the operating income earned by the
protective and flexible packaging businesses of KNP BT prior to the first
anniversary of that acquisition, contributed $21 million to year-to-date
earnings growth. Strong volume growth year-to-date has contributed $18 million
in additional operating income through September 30, 1998. Lower resin costs
during the first nine months of 1998 resulted in variable cost savings, which
were offset by lower prices to customers as resin cost savings were passed
through. Specialty packaging also incurred a higher level of fixed costs,
partially due to the one-time systems costs initiatives discussed above.
Paperboard packaging reported operating income of $135 million for the
first nine months of 1998 compared to $46 million for the 1997 period. Pricing
improvements were primarily responsible for the operating income growth while
corrugated box volumes also grew. The 1998 period included the $17 million gain
on the timberland management transaction previously discussed as well as a $15
million gain on the sale of paperboard's remaining 20 percent interest in a
recycled paperboard joint venture with Caraustar Industries. The 1997 period
included the previously discussed $5 million timberland management transaction
as well as a $38 million gain on a mill lease refinancing transaction.
Interest Expense (net of interest capitalized)
Interest expense for the first three quarters of 1998 increased by $21
million over the same period in 1997. The increase in interest expense results
from higher debt levels used to finance Tenneco's capital needs, including
acquisitions and its share repurchase program.
Income Taxes
Tenneco's effective tax rate for the nine months ended September 30, 1998,
was 31 percent, approximately the same as the 1997 nine-month period. The 1998
year-to-date tax rate was lower than the statutory rate as a result of certain
non-recurring foreign and state tax benefits, lower foreign tax rates, a
reduction in Tenneco's estimated tax liabilities related to certain global tax
audits, and the availability of tax credits in certain foreign jurisdictions.
The 1997 effective tax rate primarily reflects certain non-recurring foreign tax
benefits recognized during 1997.
Minority Interest
Minority interest primarily represents dividends on the preferred stock of
a subsidiary. The increase of $7 million for the first nine months of 1998
compared to the comparable 1997 period is due to dividends paid on additional
subsidiary preferred stock, which was issued in December 1997.
12
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1998 1997
----- -----
(MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities...................................... $ 365 $ 221
Investing activities...................................... (477) (676)
Financing activities...................................... 96 433
</TABLE>
Cash flow from operating activities improved by $144 million for the first
nine months of 1998 compared to the same period in 1997. Income before non-cash
depreciation and deferred income tax charges and gains or losses on sale of
businesses and assets increased by $63 million for the first three quarters of
1998 compared to the 1997 period. Additionally, cash used in the components of
working capital declined during the nine months ended September 30, 1998,
compared to the same period in 1997, contributing $112 million to the operating
cash flow improvement. Although accounts receivable grew at a faster rate in
1998 than in 1997, lower use of cash for prepayments and other current assets as
well as the payment of accounts payable and other current liabilities
contributed to the operating cash flow improvement.
Cash flow used in investing activities declined by $199 million in the
first nine months of 1998 compared to the same period in 1997. Lower acquisition
activity is the primary contributor to this change. During 1997, Tenneco spent
$308 million of cash on acquisitions of businesses during the first nine months.
The most significant 1997 acquisition was the protective and flexible packaging
businesses of KNP BT in April 1997. During 1998, Tenneco acquired Richter
Manufacturing for $58 million in May and the Belvidere, Illinois, ovenable
paperboard tray manufacturing facility of Champion International for $23 million
in the third quarter. Capital expenditures for Tenneco Automotive were $120
million for the first nine months of 1998, down from $126 million during the
comparable 1997 period. For the same periods, Tenneco Packaging's capital
expenditures increased to $210 million from $197 million. In addition, Tenneco
spent $9 million in capital during the first nine months of 1998 related to its
data center consolidation effort and spent $1 million in capital related to
other projects in both the 1998 and 1997 periods. Tenneco spent $78 million on
other investing activities in the first nine months of 1998 compared to $61
million in the same period of 1997. These expenditures are primarily related to
costs for software being developed for Tenneco's internal use. Expenditures for
these efforts were $32 million in the 1998 year-to-date period compared to $48
million in the 1997 period. Tenneco Automotive also incurred $26 million in the
first nine months of 1998 related to engineering costs for new original
equipment automobile platforms.
Cash provided by financing activities was $337 million lower during the
first nine months of 1998 compared to the same 1997 period, reflecting lower
incremental borrowing needs primarily as a result of the lower acquisition
activity discussed in the preceding paragraph. Tenneco issued $331 million in
debt through September 30, 1998, down from $651 million through September 30,
1997. Scheduled debt retirements were $18 million during the 1998 period
compared to $9 million during the 1997 period. Tenneco issued $39 million in
common stock and repurchased $104 million in common stock through the end of
September 1998. For the comparable 1997 period, $35 million in common stock was
issued while $90 million was repurchased. Tenneco paid $152 million in common
stock dividends through the first nine months of 1998 and $154 million in the
1997 period.
13
<PAGE> 15
Capitalization
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(MILLIONS)
<S> <C> <C>
Short-term debt...................................... $ 629 $ 278
Long-term debt....................................... 2,623 2,633
Minority interest.................................... 424 424
Shareowners' equity.................................. 2,664 2,528
------ ------
$6,340 $5,863
====== ======
</TABLE>
The increase in Tenneco's level of outstanding debt for the first nine
months of 1998 represents the use of cash for acquisitions (primarily the June
1998 acquisition of Richter's protective packaging operations), share
repurchases, and other activity described above under Cash Flow. Shareowners'
equity increased as net income, shares issued pursuant to employee benefit
plans, and the effect of recent weakness in the U.S. dollar on cumulative
translation adjustments more than offset the amounts Tenneco paid for dividends
and share repurchases. As a result of these debt and equity changes, Tenneco's
debt to capitalization ratio at September 30, 1998 increased to 51.3 percent
from 49.7 percent at December 31, 1997.
Tenneco believes it has adequate capital resources available to meet its
future capital needs, including strategic acquisitions and announced share
repurchases.
STRATEGIC ALTERNATIVES ANALYSIS AND EXPECTED FOURTH QUARTER CHARGES
Tenneco continues to develop a broad range of strategic alternatives
designed to better realize the long-term value of its businesses for shareowners
as originally announced on July 21, 1998. Among the options are the separation
of the automotive and packaging businesses and the separation of the
containerboard packaging business from the specialty packaging business. The
options for separation of the containerboard business include a sale, merger,
spin-off, initial public offering, or strategic alliance. Tenneco intends to
publicly announce any transactions which may result from the strategic
alternatives analysis as those transactions develop.
Additionally, Tenneco announced that it expects to record a $95 to $105
million pre-tax charge in the fourth quarter of 1998 to recognize the expense of
a planned cost reduction program. The actions in the cost reduction program are
expected to result in savings of $130 to $145 million on an annual basis when
fully implemented.
CHANGES IN ACCOUNTING PRINCIPLES
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which establishes
new accounting and reporting standards for the costs of computer software
developed or obtained for internal use. This statement will be applied
prospectively and is effective for fiscal years beginning after December 15,
1998. The impact of this new standard is not expected to have a significant
effect on Tenneco's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement is effective for fiscal years beginning after
December 15, 1998. The statement requires capitalized costs related to start-up
activities to be expensed as a cumulative effect of a change in accounting
principle when the statement is adopted. Tenneco capitalizes certain costs
related to start-up activities, primarily engineering costs for new automobile
original equipment platforms. Tenneco expects to record an after-tax charge for
the cumulative effect of this change in accounting principle upon adoption that
it estimates will be in the range of $75 to $85 million. Tenneco currently
expects to adopt this new accounting principle in the first quarter of 1999.
14
<PAGE> 16
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes new accounting and reporting
standards requiring that all derivative instruments (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. This statement is effective for all fiscal years
beginning after June 15, 1999. Tenneco is currently evaluating the new standard
but has not yet determined the impact it will have on its financial position or
results of operations.
YEAR 2000
Many computer software systems, as well as certain hardware and equipment
utilizing date-sensitive data, were structured to use a two-digit date field
meaning that they will not be able to properly recognize dates in the Year 2000.
Tenneco's significant technology transformation projects are addressing the Year
2000 issue in those areas where replacement systems are being installed for
other business reasons. Where existing systems and equipment are expected to
remain in place beyond 1999, Tenneco has a detailed process in place to identify
and assess Year 2000 issues and to remediate, replace or establish alternative
procedures addressing non-Year 2000 compliant systems, hardware, and equipment.
Tenneco has substantially completed inventorying its systems and equipment
including computer systems and business applications as well as date-sensitive
technology embedded in its equipment and facilities. Tenneco continues to plan
for and undertake remediation, replacement, or alternative procedures for non-
compliant Year 2000 systems and equipment; and test remediated, replaced, or
alternative procedures for systems and equipment. Tenneco has confirmed that
none of its products are date-sensitive. Remediation, replacement, or
alternative procedures for systems and equipment are being undertaken on a
business priority basis. This is ongoing and has been completed at some plants.
The process will continue and, depending upon the business unit, is targeted to
be completed, in most cases, sometime during the fourth quarter of 1998 and the
first through the third quarters of 1999 with testing to occur in the same time
frame. Also, Tenneco is contacting its major customers, suppliers, financial
institutions, and others with whom it conducts business to determine whether
they will be able to resolve in a timely manner Year 2000 problems affecting
Tenneco. As part of its planning and readiness activities, Tenneco is beginning
to address and develop Year 2000 contingency plans for critical business
processes.
Based upon current estimates, Tenneco believes it will incur costs which
may range from approximately $50 to $60 million during 1998 and 1999 to address
Year 2000 issues and implement the necessary changes to its existing systems and
equipment. As of September 30, 1998, approximately $7 million of the costs have
already been incurred. These costs are being expensed as they are incurred,
except that in certain instances Tenneco may determine that replacing existing
computer systems or equipment may be more effective and efficient, particularly
where additional functionality is available. These replacements would be
capitalized and would reduce the estimated 1998 and 1999 expense associated with
Year 2000 issues.
In the event Tenneco is unable to complete the remediation, replacement, or
alternative procedures for critical systems and equipment in a timely manner or
if those with whom Tenneco conducts business are unsuccessful in implementing
timely solutions, Year 2000 issues could have a material adverse effect on
Tenneco's results of operations. At this time, the potential effect in the event
Tenneco and/or third parties are unable to timely resolve Year 2000 problems is
not determinable; however, Tenneco believes it will be able to resolve its own
Year 2000 issues.
15
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The exhibits filed herewith are listed in the exhibit index which
follows the signature page and immediately precedes the exhibits filed.
(b) Reports on Form 8-K.
On August 3, 1998, the Company filed a Current Report on Form 8-K with
respect to: (i) a press release issued on July 21, 1998 announcing the
Company's earnings for the quarter ended June 30, 1998 and other matters,
and (ii) a press release issued on July 21, 1998 announcing strategic
actions.
On September 24, 1998, the Company filed a Current Report on Form 8-K
to report that its Board of Directors had approved the adoption of a
Qualified Offer Rights Plan which authorized the issuance of one preferred
share purchase right for each outstanding share of common stock, par value
$.01 per share, of the Company.
16
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TENNECO INC.
By: /s/ ROBERT T. BLAKELY
------------------------------------
Robert T. Blakely
Executive Vice President and
Chief Financial Officer
Date: November 10, 1998
17
<PAGE> 19
EXHIBITS
The following exhibits are filed with Tenneco Inc.'s Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998, or incorporated therein by
reference (exhibits designated by an asterisk are filed with the Report; all
other exhibits are incorporated by reference):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C> <C>
2 -- None.
3.1(a) -- Restated Certificate of Incorporation of Tenneco Inc. dated
December 11, 1996 (incorporated herein by reference from
Exhibit 3.1(a) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997).
3.1(b) -- Certificate of Amendment, dated December 11, 1996
(incorporated herein by reference from Exhibit 3.1(c) of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997).
3.1(c) -- Certificate of Ownership and Merger, dated July 8, 1997
(incorporated herein by reference from Exhibit 3.1(d) of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997).
* 3.1(d) -- Certificate of Designation of Series B Junior Participating
Preferred Stock dated September 9, 1998.
* 3.1(e) -- Certificate of Elimination of the Series A Participating
Junior Preferred Stock of Tenneco Inc. dated September 11,
1998.
3.2 -- Amended and Restated By-laws of Tenneco Inc. (incorporated
herein by reference from Exhibit 3.2 of Tenneco Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
* 4.1 -- Form of Specimen Stock Certificate of Tenneco Inc. Common
Stock.
4.2 -- Qualified Offer Plan Rights Agreement dated as of September
9, 1998 by and between Tenneco Inc. and First Chicago Trust
Company of New York, as Rights Agent (incorporated herein by
reference from Exhibit 4.1 of Tenneco Inc.'s Current Report
on Form 8-K dated September 24, 1998, File No. 1-12387).
4.3(a) -- Indenture, dated as of November 1, 1996, between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.1 of Tenneco Inc.'s Form S-4, Registration No.
333-14003).
4.3(b) -- First Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(b) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(c) -- Second Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(c) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(d) -- Third Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(d) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(e) -- Fourth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(e) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C> <C>
4.3(f) -- Fifth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(f) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(g) -- Sixth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(g) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(h) -- Seventh Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(h) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(i) -- Eighth Supplemental Indenture, dated as of April 28, 1997,
to Indenture, dated as of November 1, 1996, between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.1 of Tenneco Inc.'s Current Report on Form 8-K
dated April 23, 1997, File No. 1-12387).
4.3(j) -- Ninth Supplemental Indenture, dated as of April 28, 1997, to
Indenture, dated as of November 1, 1996, between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.2 of Tenneco Inc.'s Current Report on Form 8-K
dated April 23, 1997, File No. 1-12387).
4.3(k) -- Tenth Supplemental Indenture, dated as of July 16, 1997, to
Indenture, dated as of November 1, 1996, between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.1 of Tenneco Inc.'s Current Report on Form 8-K
dated June 11, 1997, File No. 1-12387).
10.1 -- Distribution Agreement, dated November 1, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Tenneco Inc. (formerly New Tenneco Inc.), and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 2 of Tenneco Inc.'s Form 10, File No. 1-12387).
10.2 -- Amendment No. 1 to Distribution Agreement, dated as of
December 11, 1996, by and among El Paso Tennessee Pipeline
Co. (formerly Tenneco Inc.), Tenneco Inc. (formerly New
Tenneco Inc.), and Newport News Shipbuilding Inc.
(incorporated herein by reference from Exhibit 10.2 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
10.3 -- Debt and Cash Allocation Agreement, dated December 11, 1996,
by and among El Paso Tennessee Pipeline Co. (formerly
Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.), and
Newport News Shipbuilding Inc. (incorporated herein by
reference from Exhibit 10.3 of Tenneco Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1996, File No.
1-12387).
10.4 -- Benefits Agreement, dated December 11, 1996, by and among El
Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco
Inc. (formerly New Tenneco Inc.), and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 10.4 of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
10.5 -- Insurance Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Tenneco Inc. (formerly New Tenneco Inc.), and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 10.5 of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C> <C>
10.6 -- Tax Sharing Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Newport News Shipbuilding Inc., Tenneco Inc. (formerly New
Tenneco Inc.), and El Paso Natural Gas Company (incorporated
herein by reference from Exhibit 10.6 of Tenneco Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.7 -- First Amendment to Tax Sharing Agreement, dated as of
December 11, 1996 among El Paso Tennessee Pipeline Co.
(formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco
Inc.) and Newport News Shipbuilding Inc. (incorporated
herein by reference from Exhibit 10.7 of Tenneco Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.8 -- Transition Services Agreement, dated June 19, 1996, by and
among, Tenneco Business Services, Inc., El Paso Tennessee
Pipeline Co. (formerly Tenneco Inc.) and El Paso Natural Gas
Company (incorporated herein by reference from Exhibit 10.8
of Tenneco Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
10.9 -- Trademark Transition License Agreement, dated December 11,
1996, by and between Newport News Shipbuilding Inc. and
Tenneco Inc. (formerly New Tenneco Inc.) (incorporated
herein by reference from Exhibit 10.9 of Tenneco Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.10 -- Trademark Transition License Agreement, dated December 11,
1996, by and between Tenneco Inc. (formerly New Tenneco
Inc.) and El Paso Tennessee Pipeline Co. (formerly Tenneco
Inc.) (incorporated herein by reference from Exhibit 10.10
of Tenneco Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
10.11 -- 1997 Tenneco Inc. Board of Directors Deferred Compensation
Plan (incorporated herein by reference from Exhibit 10.11 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997).
10.12 -- Executive Incentive Compensation Plan (incorporated herein
by reference from Exhibit 10.12 of Tenneco Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997).
10.13 -- Tenneco Inc. Deferred Compensation Plan (incorporated herein
by reference from Exhibit 10.13 of Tenneco Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997).
*10.14 -- Tenneco Inc. Supplemental Executive Retirement Plan (as
amended and restated generally effective as of January 1,
1997).
10.15 -- Amended and Restated Tenneco Inc. Change in Control
Severance Benefit Plan for Key Executives (incorporated
herein by reference from Exhibit 10.16 of Tenneco's Form 10,
File No. 1-12387).
10.16 -- Amended and Restated Tenneco Benefits Protection Trust
(incorporated herein by reference from Exhibit 10.18 of
Tenneco's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998).
10.17 -- Employment Agreement, dated March 12, 1992 between Dana G.
Mead and Tenneco Inc. (incorporated herein by reference from
Exhibit 10.19 of Tenneco's Form 10, File No. 1-12387).
10.18 -- Employment Agreement, dated December 3, 1993 between Paul T.
Stecko and Tenneco Packaging Inc. (incorporated herein by
reference from Exhibit 10.20 of Tenneco's Form 10, File No.
1-12387).
10.19 -- Agreement, dated September 9, 1992 between Theodore R.
Tetzlaff and Tenneco Inc. (incorporated herein by reference
from Exhibit 10.21 of Tenneco's Form 10, File No. 1-12387).
10.20 -- Release Agreement dated July 6, 1998 between Stacy S. Dick,
Pamela Dick and Tenneco Management Company (incorporated
herein by reference from Exhibit 10.22 of Tenneco's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998)
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C> <C>
10.21 -- 1996 Tenneco Inc. Stock Ownership Plan, as amended
(incorporated herein by reference from Exhibit 10.23 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997).
*10.22 -- Tenneco Inc. Rabbi Trust.
*10.23 -- Letter Agreement dated September 24, 1998 between Robert T.
Blakely and Tenneco Inc.
*10.24 -- Tenneco Benefits Protection Trust Appointment of Successor
Trustee dated September 28, 1998.
10.25 -- Amended and Restated Mill I Lease, dated as of November 4,
1996, between Credit Suisse Leasing 92A, L.P. and Tenneco
Packaging Inc. (incorporated herein by reference from
Exhibit 10.28 of Tenneco Inc.'s Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
10.26 -- Amended and Restated Mill II Lease, dated as of November 4,
1996, between Credit Suisse Leasing 92A, L.P. and Tenneco
Packaging Inc. (incorporated herein by reference from
Exhibit 10.29 of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
10.27 -- Timberland Lease, dated January 31, 1991, by and between
Four States Timber Venture and Packaging Corporation of
America, as amended (incorporated herein by reference from
Exhibit 10.26 of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997).
10.28 -- Professional Services Agreement, dated August 22, 1996, by
and between Tenneco Business Services Inc. and Newport News
Shipbuilding and Dry Dock Company (incorporated herein by
reference from Exhibit 10.28 of Tenneco Inc.'s Form 10, File
No. 1-12387).
10.29 -- Termination Agreement, dated April 23, 1998, by and between
Tenneco Business Services Inc. and Newport News Shipbuilding
and Dry Dock Company, a wholly-owned subsidiary of Newport
News Shipbuilding Inc., relating to Professional Services
Agreement, dated August 22, 1996 (incorporated herein by
reference from Exhibit 10.28 of Tenneco's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998).
11 -- None.
*12 -- Computation of Ratio of Earnings to Fixed Charges.
15 -- None.
18 -- None.
19 -- None.
22 -- None.
24 -- None.
*27.1 -- Financial Data Schedule.
28 -- None.
99 -- None.
</TABLE>
- -------------------------
Note: Exhibits designated by an asterisk are filed with this Report; all others
are incorporated by reference.
21
<PAGE> 23
[TENNECO LOGO]
<PAGE> 1
EXHIBIT 3.1 (d)
CERTIFICATE OF DESIGNATION
of
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
TENNECO INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
TENNECO INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Restated Certificate of Incorporation of
the said Corporation, the said Board of Directors on September 9, 1998 adopted
the following resolution creating a series of 2,000,000 shares of Preferred
Stock designated as "Series B Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Restated Certificate of Incorporation, a series of Preferred Stock, par
value $.01 per share, of the Corporation be and hereby is created, and
that the designation and number of shares thereof and the voting and
other powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications, limitations
and restrictions thereof are as follows:
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred Stock
that shall be designated as "Series B Junior Participating Preferred Stock,"
and the number of shares constituting such series shall be 2,000,000. Such
number of shares may be increased or decreased by resolution of the Board of
Directors; provided, however, that no decrease shall reduce the number of
shares of Series B Junior Participating Preferred Stock to less than the number
of shares then issued and outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
<PAGE> 2
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of
any shares of any class or series of stock of the Corporation ranking prior and
superior to the shares of Series B Junior Participating Preferred Stock with
respect to dividends, the holders of shares of Series B Junior Participating
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Series B Junior Participating
Preferred Stock in respect thereof, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of January,
April, July and October, in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series B Junior Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $25.00 or (b) the
Adjustment Number (as defined below ) times the aggregate per share amount of
all cash dividends, and the Adjustment Number times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, par value $.01 per share, of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series B Junior Participating
Preferred Stock. The "Adjustment Number" shall initially be 1000. In the event
the Corporation shall at any time after September 21, 1998 (i) declare and pay
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the Adjustment Number in
effect immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series B Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series B Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such
shares of Series B Junior Participating Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series B Junior Participating Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
2
<PAGE> 3
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the shares of
Series B Junior Participating Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series B Junior Participating Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 60 days prior to the date fixed for the payment
thereof.
3. Voting Rights. The holders of shares of Series B Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series B Junior Participating Preferred Stock
shall entitle the holder thereof to a number of votes equal to the Adjustment
Number on all matters submitted to a vote of the stockholders of the
Corporation.
(B) Except as otherwise provided herein, in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series B Junior Participating Preferred Stock
and the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(C) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether or
not consecutive) payable on any share or shares of Series B Junior
Participating Preferred Stock are in default, the number of directors
constituting the Board of Directors of the Corporation shall be increased by
two. In addition to voting together with the holders of Common Stock for the
election of other directors of the Corporation, the holders of record of the
Series B Junior Participating Preferred Stock, voting separately as a class to
the exclusion of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at each subsequent annual meeting of
stockholders), unless all dividends in arrears have been paid or declared and
set apart for payment prior thereto, to vote for the election of two
additional directors of the Corporation, the holders of any Series B Junior
Participating Preferred Stock being entitled to cast that number of votes per
share of Series B Junior Participating Preferred Stock as specified in clause
(A) of this Section 3. Each such additional director shall not be a member of
Class I, Class II or Class III of the Board of Directors of the Company, but
shall serve until the next annual meeting of stockholders for the election of
directors, or until his successor shall be elected and shall qualify, or until
his right to hold such office terminates pursuant to the provisions of this
Section 3(C). Until the default in payments of all dividends which permitted
the election of said directors shall cease to exist, any director who shall
have been so elected pursuant to the next preceding sentence may be removed at
any time without cause only by the affirmative vote of the holders of the
shares of Series B Junior Participating Preferred Stock at the time entitled to
cast a majority of the votes entitled to be cast for the election of any such
director at a special meeting of such holders called for that purpose, and any
vacancy thereby created may be filled by the vote of such holders. If and when
such default shall cease to exist,
3
<PAGE> 4
the holders of the Series B Junior Participating Preferred Stock shall be
divested of the foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of dividends. Upon
the termination of the foregoing special voting rights, the terms of office of
all persons who may have been elected directors pursuant to said special voting
rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(C) shall be in addition to any other voting rights granted to the
holders of the Series B Junior Participating Preferred Stock in this Section 3.
(D) Except as required by law, by Section 3(C) and by Section
10 hereof, holders of Series B Junior Participating Preferred Stock shall have
no special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series B Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series B
Junior Participating Preferred Stock, except dividends paid ratably on the
Series B Junior Participating Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; or
(iii) purchase or otherwise acquire for consideration any
shares of Series B Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series B Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of Series B Junior
Participating Preferred Stock, or to such holders and holders of any such
shares ranking on a parity therewith, upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
4
<PAGE> 5
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series B Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired promptly after the acquisition thereof. All
such shares shall upon their retirement become authorized but unissued shares
of Preferred Stock and may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors,
subject to any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation,
dissolution or winding up of the Corporation, voluntary or otherwise, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series B Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Series B Junior Participating Preferred Stock shall have
received an amount per share (the "Series B Liquidation Preference") equal to
the greater of (i) $500.00 plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such
payment, or (ii) the Adjustment Number times the per share amount of all cash
and other property to be distributed in respect of the Common Stock upon such
liquidation, dissolution or winding up of the Corporation.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series B Liquidation Preference and
the liquidation preferences of all other classes and series of stock of the
Corporation, if any, that rank on a parity with the Series B Junior
Participating Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series B
Junior Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation into or with
another corporation nor the merger or consolidation of any other corporation
into or with the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the
outstanding shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case each
share of Series B Junior Participating Preferred Stock shall at the same time
be similarly exchanged or changed in an amount per share equal to the
Adjustment Number times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged.
5
<PAGE> 6
8. No Redemption. Shares of Series B Junior Participating Preferred
Stock shall not be subject to redemption by the Company.
9. Ranking. The Series B Junior Participating Preferred Stock shall
rank junior to all other series of the Preferred Stock as to the payment of
dividends and as to the distribution of assets upon liquidation, dissolution or
winding up, unless the terms of any such series shall provide otherwise, and
shall rank senior to the Common Stock as to such matters.
10. Amendment. At any time that any shares of Series B Junior
Participating Preferred Stock are outstanding, the Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series B Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds of the outstanding
shares of Series B Junior Participating Preferred Stock, voting separately as a
class.
11. Fractional Shares. Series B Junior Participating Preferred Stock may
be issued in fractions of a share that shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series B Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 9th
day of September, 1998.
TENNECO INC.
By: /s/ Karl A. Stewart
-----------------------------------
Name: Karl A. Stewart
Title: Vice President and Secretary
-6-
<PAGE> 1
EXHIBIT 3.1(e)
CERTIFICATE OF ELIMINATION OF THE SERIES A PARTICIPATING
JUNIOR PREFERRED STOCK OF TENNECO INC.
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
Tenneco Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), in accordance with the provisions of
Section 151(g) of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. That, pursuant to Section 151 of the General Corporation Law of the
State of Delaware and authority granted in the Restated Certificate of
Incorporation of the Company, the Board of Directors of the Company, by
resolution duly adopted, authorized the issuance of a series of 3,500,000
shares of Series A Participating Junior Preferred Stock, par value $.01 per
share (the "Series A Preferred Stock"), and established the voting powers,
designations, preferences and relative, participating and other rights, and the
qualifications, limitations or restrictions thereof, of the shares of such
series and, on December 11, 1996, filed a Certificate of Designation with
respect to such Series A Preferred Stock in the office of the Secretary of
State of the State of Delaware.
2. That no shares of said Series A Preferred Stock are outstanding and
no shares thereof will be issued subject to said Certificate of Designation.
3. That the Board of Directors of the Company has adopted the
following resolutions:
WHEREAS, by resolution of the Board of Directors of the
Company and by a Certificate of Designation (the "Certificate of
Designation") filed in the office of the Secretary of State of the
State of Delaware on December 11, 1996, this Company authorized the
issuance of a series of 3,500,000 shares of Series A Participating
Junior Preferred Stock, par value $.01 per share, of the Company
(the "Series A Preferred Stock") and established the voting
powers, designations, preferences and relative, participating and
other rights, and the qualifications, limitations or restrictions
thereof, of the shares of such series; and
WHEREAS, as of the date hereof no shares of such Series A
Preferred Stock are outstanding and no shares of
<PAGE> 2
such Series A Preferred Stock will be issued subject to said
Certificate of Designation; and
WHEREAS, it is desirable that all matters set forth in the
Certificate of Designation with respect to such Series A Preferred
Stock be eliminated from the Restated Certificate of Incorporation
of the Company;
NOW, THEREFORE, BE IT AND IT HEREBY IS
RESOLVED, that all matters set forth in the Certificate of
Designation with respect to such Series A Preferred Stock be
eliminated from the Restated Certificate of Incorporation of the
Company; and it is further
RESOLVED, that the officers of the Company be, and hereby are,
authorized and directed to file a Certificate with the office of
the Secretary of State of the State of Delaware setting forth a
copy of these resolutions whereupon all matters set forth in the
Certificate of Designation with respect to such Series A Preferred
Stock shall be eliminated from the Restated Certificate of
Incorporation of the Company.
4. That, accordingly, all matters set forth in the Certificate of
Designation with respect to such Series A Preferred Stock be, and hereby are,
eliminated from the Restated Certificate of Incorporation of the Company.
-2-
<PAGE> 3
IN WITNESS WHEREOF, Tenneco Inc. has caused this Certificate to be
signed by its duly authorized officer as of this 11th day of September, 1998.
By: /s/ Karl A. Stewart
---------------------------
Name: Karl A. Stewart
Office: Vice President and Secretary
-3-
<PAGE> 1
Exhibit 4.1
- -------------------- --------------
NUMBER SHARES
NT080668
- -------------------- --------------
COMMON STOCK COMMON STOCK
SEE REVERSE SIDE [TENNECO LOGO]
FOR RIGHTS LEGEND
CUSIP 88037E 10 1
THIS CERTIFICATE IS TRANSFERABLE IN SEE REVERSE FOR CERTAIN DEFINITIONS
NEW YORK, NEW YORK
PAR VALUE $.01 PAR VALUE $.01
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
TENNECO INC.
-------------------------------------------------------------
This Certifies that
SPECIMEN
is the owner of
-------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK
of Tenneco Inc. transferable on the books of the Corporation in
person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all of
the provisions of the Certificate of Incorporation of the
Corporation (copies of which are on file with the Transfer Agent),
to all of which the holder by acceptance hereof assents. This
certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
Witness the signatures of the duly authorized officers.
/s/ Dana G. Mead DATED:
CHAIRMAN OF THE BOARD COUNTERSIGNED AND REGISTERED:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
(NEW YORK, NY)
TRANSFER AGENT
AND REGISTRAR
/s/ Karl A. Stewart BY /s/ Joseph F. Spadaford
SECRETARY AUTHORIZED SIGNATURE
<PAGE> 2
TENNECO INC.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ......... Custodian .........
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of
survivorship and not as tenants Act.........................
in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, THE DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE
CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO THE CORPORATION OR THE
TRANSFER AGENT.
For value received, _______ hereby sell, assign and transfer unto
<TABLE>
<S> <C>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
| |
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------- Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________________________
- ------------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated ______________________________
-----------------------------------------------------
</TABLE>
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
This certificate also evidences and entitles the
holder hereof to certain rights as set forth in a
Qualified Offer Plan Rights Agreement between
Tenneco Inc. (the "Company") and First Chicago
Trust Company of New York, as Rights Agent, dated
as of September 9, 1998 and as amended from time
to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference
and a copy of which is on file at the principal
executive offices of the Company. Under certain
circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by
separate certificates and will no longer be
evidenced by this certificate. The Company will
mail to the holder of this certificate a copy of
the Rights Agreement without charge after receipt
of a written request therefor. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY
PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND
WILL NO LONGER BE TRANSFERABLE.
<PAGE> 1
Exhibit 10.14
TENNECO INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended and Restated Generally Effective as of January 1, 1997)
PURPOSE
-------
The Tenneco Inc. Supplemental Executive Retirement Plan (the "Plan") is
maintained by Tenneco Inc. (the "Company") as an unfunded plan for the purpose
of providing retirement benefits with respect to certain employees that are
equal to retirement benefits lost under the Tenneco Inc. Retirement Plan (the
"Retirement Plan" or the "TRP") as a result of the imposition of the limitations
contained in the Internal Revenue Code of 1986, as amended (the "Code"). The
portion of the Plan that provides for benefits limited by Code Section 415 is
maintained as an "excess benefit plan" as described in Section 3(36) of the
Employee Retirement Income Security Act of 1974 as amended ("ERISA"). The other
benefits provided for under the Plan are only available to a "select group of
management or highly compensated employees" as determined by the Tenneco
Benefits Committee, and the portion of the Plan providing such benefits is
intended to satisfy the ERISA exemption requirements for a plan limited to such
a group.
THE PLAN
--------
1. Effective Date
--------------
The effective date of this amendment and restatement of the Plan is January
1, 1997. The benefit entitlement, if any, under the Plan or under the Tenneco
Inc. Benefit Equalization Plan (the "BEP"), which has been merged into this
Plan, of any person who separated from service prior to that date shall be
governed by the provisions of the Plan or the BEP as either was in effect from
time to time prior to that date.
2. Eligibility
-----------
An employee shall be eligible for benefits under this Plan if the employee
is a participant in the Retirement Plan or is provided a benefit under Section
11 hereof.
3. Amount of Benefit
-----------------
The benefit payable under this Plan to a Participant, or to the
Participant's Eligible Spouse, Eligible Child(ren), joint annuitant or other
beneficiary(ies), all as determined under the provisions of the Retirement Plan,
shall equal the excess, if any, of (a) over (b) where:
(a) is the benefit that would be paid under the Retirement Plan if the
provisions of the Retirement Plan were administered without regard to the
limitations imposed by the Code and, only with respect to Participants who,
at any time, were participants in the Tenneco Inc. Executive Incentive
Compensation Plan ("EICP"), if Final Average Compensation, as computed
under the Retirement Plan, were determined on the basis of compensation
paid during the three calendar years (of the five calendar year period
ending no later than the calendar year immediately preceding his or her
termination or retirement) for which such compensation is the highest, and
increased by the quotient of (i) the total of the cash bonuses, as defined
below, paid to the Participant in the three
<PAGE> 2
calendar years (during the same five calendar year period ending no later
than the calendar year immediately preceding his or her termination or
retirement) for which such total is the highest, divided by (ii) three or
such lesser number of calendar years (included in such period) in which
such bonuses were paid to the Participant; provided, that the calendar year
including his or her termination or retirement shall be included if such
event follows the payment of regular bonuses for that year; and provided,
that bonuses and salary, respectively, deferred at the election of the
Participant shall be counted only in the year that they would have been
paid absent such election, and provided further, that, effective with
respect to bonuses that relate to the period on and after January 1, 1998,
the foregoing language shall be applied to count bonuses which relate to a
calendar year as paid in that year, for example, 1998 bonuses will be
counted in 1998 notwithstanding the fact that they are actually paid in
1999; and
(b) is the benefit that is payable under the Retirement Plan.
Notwithstanding the foregoing, if, except as otherwise provided in writing,
an employee is granted credit for purposes of benefit accrual under the
Retirement Plan for service rendered prior to the time that the employee became
a participant in the Retirement Plan, such employee shall be credited with such
service under this Plan only if and to the extent determined by the Tenneco
Benefits Committee. Unless otherwise provided in writing, no benefit shall be
payable under the Plan unless a benefit also is payable under the Retirement
Plan.
Cash bonus means only cash bonuses paid under the EICP and the cash
special bonuses paid in January 1997.
4. Form of Benefit
---------------
Any benefit under this Plan shall be paid in the same form and manner as
the benefit payments made to, or with respect to, the Participant under the TRP.
Notwithstanding the preceding sentence, no benefit is payable hereunder prior to
60 days after the Participant has separated from service, unless the Tenneco
Benefits Committee so determines. Prior to the commencement of benefits but, in
no event later than 24 months after the Participant has separated from service,
and only with respect to a Participant or beneficiary who at any time was a
participant in the EICP, such Participant or beneficiary may elect, but only
with the approval of the Tenneco Benefits Committee, to receive payment of such
benefit in the form of a lump sum or annuity, provided that in cases where a
Participant has chosen a lump sum and the exact amount of a Participant's
benefit cannot be determined by the date elected for payment, a preliminary lump
sum shall be paid with respect to amounts that can be clearly ascertained then,
with the remainder to be issued in a subsequent lump sum when that amount is
exactly determined by the Tenneco Benefits Committee or its delegee. In
addition, with respect to all Plan participants, if the benefit payable from
this Plan (expressed as an age 65 life annuity) would be less than $50 per
month, the benefit payable from this Plan automatically shall be paid as a lump
sum.
-2-
<PAGE> 3
The actuarial factors set forth in the TRP shall be used to compute
benefits hereunder, provided that, for purposes of any lump sum payment that may
be payable under the Plan, the interest rate used shall be the annual rate of
interest on 30-year Treasury securities as specified by the IRS for the second
calendar month preceding the first day of the Plan Year during which the annuity
starting date occurs, and the applicable mortality table described in Rev. Rul.
95-6, 1995-1 C.B. (page 80), or in such other formal guidance as may be issued
from time to time by the IRS.
5. Unfunded Plan
-------------
This Plan shall be maintained as an unfunded non-qualified deferred
compensation plan. All benefits under this Plan shall be payable from the
general assets of Tenneco Inc. No person shall be entitled to receive any
benefits under this Plan from the funds of the Retirement Plan.
6. No Assignment
-------------
No benefit under this Plan shall be assignable or alienable or subjected,
by attachment or otherwise, to the claims of creditors of any person.
7. No Guarantee of Employment
--------------------------
This Plan shall not be construed to give any Participant the right to be
retained in the employment of Tenneco Inc. or any of its affiliates.
8. Operation and Administration
----------------------------
This Plan shall be operated under the direction of the Compensation and
Benefits Committee of the Board of Directors of Tenneco Inc. and administered by
the Tenneco Benefits Committee.
The Tenneco Benefits Committee's decision in all matters involving the
interpretation and application of this Plan shall be final and binding. The
Tenneco Benefits Committee shall establish a claims procedure which is
consistent with the claims procedure employed under the TRP.
9. Governing Law
-------------
To the extent not preempted by federal law, this Plan shall be construed,
administered and enforced in accordance with the laws of the State of Delaware.
10. Amendment and Discontinuance
----------------------------
Tenneco Inc. expects to continue this Plan indefinitely but reserves the
right, by action of its Board of Directors, to amend or discontinue it. However,
no such amendment or discontinuance shall impair or adversely affect any
benefits accrued under this Plan as of the date of such action, and no such
amendment or discontinuance shall adversely affect any benefits described in any
document referred to in Section 11 hereof without the express written consent of
the Participant covered thereby.
-3-
<PAGE> 4
11. Special Appendix
----------------
The Company may from time to time determine to provide certain persons
additional supplemental pension benefits, which may be reflected in a Special
Appendix hereto or in such other document as the Company shall determine.
References in a Special Appendix or such other document to the "Plan" are to
this Plan.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing, Tenneco Inc., a Delaware corporation, has caused these presents to be
duly executed in its name and behalf by its proper officers thereunto duly
authorized this 9th day of September, 1998.
TENNECO INC.
By: /s/ Barry R. Schuman
----------------------------------------
Its: Senior Vice President - Human Resources
---------------------------------------
-4-
<PAGE> 5
MEAD SPECIAL APPENDIX
TO THE
TENNECO INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("PLAN")
This Special Appendix sets forth certain special provisions of the Plan
with respect to the benefits of Dana G. Mead ("Mead").
1. Mead shall be entitled to monthly pension benefits in the amount
determined under Section 2 hereof commencing on the first day of the
calendar month immediately following the termination of his employment with
the Tenneco Management Company (the "Company").
2. The monthly pension benefits to which Mead shall be entitled shall be
equal to the greater of (a) or (b), where
(a) equals the benefits to which Mead would be entitled under the
Tenneco Inc. Retirement Plan (the "TRP") and this Plan, computed
using Final Average Earnings, as defined in Section 3 hereof, and
Years of Credited Service, as defined in Section 4 hereof, and
substituting the rules of Sections 1, 5 and 6 hereof for the
generally applicable rules of such plans; and
(b) equals 2.48% of Mead's Final Average Earnings, as defined in
Section 3 hereof, times his Years of Credited Service, as defined
in Section 4 hereof, but not exceeding 20 Years of Credited
Service, and substituting the rules of Sections 1, 5 and 6 hereof
for the generally applicable rules of such plans.
3. "Final Average Earnings" means the quotient of (i) Mead's Earnings, as
defined below, for the 3 calendar years in which his Earnings were the
highest in the 5 consecutive calendar year period ending prior to his
termination of employment, divided by (ii) 36. "Earnings" means regular
base salary plus Executive Incentive Compensation Plan bonus earned
(regardless of when paid) with respect to that period.
4. "Years of Credited Service" means the total of (i) 14 2/3 plus (ii)
Mead's Actual Tenneco Service, as defined below. "Actual Tenneco Service"
means the period, in whole years and fractions thereof with each month or
portion thereof counting as one-twelfth of one year, from April 1, 1992
through the date of Mead's termination of employment with the Company.
5. The benefits provided hereunder shall be paid in the joint and 50%
survivor form of annuity if Mead is married at the time benefits are to
commence -- i.e., to Mead for life and, after his death, 50% of the monthly
amount payable during Mead's life continuing to the spouse, if any, to whom
he was legally married at the date of the
-5-
<PAGE> 6
commencement of payment of benefits hereunder and to whom he was so married
on the date of his death. There shall be no reduction in the amount of the
benefits payable during Mead's life on account of payment in the joint and
50% survivor form. The benefits provided hereunder shall be paid in the
life only form of annuity if Mead is not married at the time that benefit
payments are to commence. Subject to the rules stated in the immediately
following paragraph, Mead may elect to receive such benefits in another
form which is the actuarial equivalent of the normal form of benefit
specified above for his marital status at the time in question. At Mead's
election, the Company will purchase and distribute to him an annuity
contract issued by an insurance company acceptable to Mead to provide such
benefits.
If his termination of employment is effective after he attains age 62
or earlier with the consent of the Company, Mead may elect to receive such
benefits in the form of a lump sum distribution. If a lump sum distribution
is elected, it shall be computed under the assumptions then in use with
respect to the TRP, or its successor; provided, that in no event shall the
interest assumption be greater than the Pension Benefit Guaranty
Corporation immediate annuity interest rate in effect as of January 1 of
the year in which the payment is to be made, and provided further that the
mortality table shall be no less favorable to Mead or his Beneficiary than
the 1983 group annuity table, 50% male, 50% female mix.
Mead may elect that the lump sum benefit be paid at some date certain
which is later than the date specified for benefit commencement in Section
1 hereof. Any such election shall be irrevocable and must be filed no later
than 90 days prior to the date benefits would otherwise commence hereunder.
If he makes such an election, the lump sum amount computed above shall be
credited with interest at the prime rate prevailing from time to time from
the date specified in Section 1 above until the date of actual payment.
6. If Mead dies before commencing to receive the benefits described
hereunder, his Beneficiary will receive a death benefit in a lump sum
distribution which is the present value of the benefits which he has
accrued hereunder as of the date of his death computed in accordance with
the rules set forth herein, including the interest assumption specified in
Section 5 hereof. Without limiting the generality of the foregoing, it is
specifically provided that the special alternative death benefit called for
by the TRP as in effect on December 31, 1994, shall apply if that produces
a higher benefit.
7. The benefits provided hereunder are in lieu of any benefits to which
Mead might otherwise be entitled under the TRP, Tenneco Inc. Benefit
Equalization Plan or this Plan, but shall not adversely affect his
entitlement to benefits under any other plan, fund or program maintained by
the Company, nor shall benefits provided under any other such plan fund or
program be offset against or otherwise reduce the benefits provided for
hereunder.
-6-
<PAGE> 7
STECKO SPECIAL APPENDIX
TO THE
TENNECO INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("PLAN")
This Special Appendix sets forth certain special provisions of the Plan
with respect to the benefits of Paul T. Stecko ("Stecko").
The aggregate monthly pension benefits to which Stecko shall be
entitled under the Plan and this Special Appendix shall be computed as if
his participation in the TRP had commenced on his employment commencement
date and shall be no less than the amount to which Stecko would have been
entitled if Stecko's coverage under the International Paper defined benefit
plans in effect as of December 3, 1993 had continued until Stecko's
separation from service with Tenneco (the "Company"), less any benefits
Stecko is entitled to receive from such International Paper defined benefit
plans. In the event that Stecko's employment is terminated for any reason
other than cause before November 1, 1999, he shall nevertheless be deemed
to have attained age 55 for all purposes in this Special Appendix,
including without limitation, the computation of benefits under such
International Paper plans; provided, that only the amounts actually payable
from the International Paper plans shall be used as offsets. The amount of
the benefits payable under the International Paper defined benefit plans
shall be computed as a single life annuity based on the actuarial factors
applicable to each such plan. If Stecko would not otherwise meet the
service requirements for early retirement eligibility under the Tenneco
Inc. Retirement Plan ("TRP"), this Plan and this Special Appendix
(collectively, the "Tenneco Plans"), but he would meet such service
requirements counting his years of service with International Paper, he
shall be entitled to monthly benefits hereunder which, when taken together
with monthly benefits to which he is entitled under the Tenneco Plans and
the International Paper defined benefit plans, are no less than the
benefits to which he would have been entitled (subject to the rule stated
in the first sentence above) had he met such requirements.
For purposes of determining the amount to which Stecko would have been
entitled if Stecko's coverage under the International Paper defined benefit
plans in effect as of December 3, 1993 had continued until Stecko's
separation from service with the Company (i.e., the minimum benefit
described above), all of Stecko's service with International Paper and the
Company, shall be aggregated to determine whether Stecko has met the
service requirements for early retirement eligibility under the
International Paper defined benefit plans. If Stecko dies before commencing
to receive the benefits described hereunder, his beneficiary will receive a
death benefit which is the present value of the benefits which he has
accrued hereunder as of the date of his death.
-7-
<PAGE> 8
TETZLAFF SPECIAL APPENDIX
TO THE
TENNECO INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("PLAN")
This Special Appendix sets forth certain special provisions of the Plan
with respect to the benefits of Theodore R. Tetzlaff ("Tetzlaff").
The monthly pension benefits to which Tetzlaff shall be entitled shall
be equal to the benefits to which Tetzlaff would be entitled under the Plan
if he were a participant in the Tenneco Inc. Retirement Plan ("TRP"),
computed using the following special provisions:
(a) Tetzlaff's service and participation will be regarded as beginning
July 1, 1992.
(b) Tetzlaff's retainer and bonus for each calendar year will be
prorated for each month that Tetzlaff performs services for the
Company as an officer during the calendar year to arrive at a
covered monthly compensation under the TRP formula.
(c) If Tetzlaff reaches age 55 while performing services for the
Company as an officer, Tetzlaff will be eligible for an early
retirement benefit with subsidized reduction factors parallel to
the TRP factors, even though Tetzlaff does not have the service
or participation required under the TRP provisions.
(d) Tetzlaff's guaranteed minimum annual life only benefit will be as
follows:
Age at Commencement
Of Benefits
-------------------
Age 55 $100,000 per year
Age 60 $200,000 per year
Age 65 $300,000 per year
with a prorated guaranteed minimum annual life only benefit
between the above ages.
(e) In all other respects, the provisions of the Plan shall apply.
If Tetzlaff dies before commencing to receive the benefits described
hereunder, his beneficiary will receive a death benefit which is the
present value of the benefits which he has accrued hereunder as of the date
of his death.
-8-
<PAGE> 9
DICK SPECIAL APPENDIX
TO THE
TENNECO INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("PLAN")
This Special Appendix sets forth certain special provisions of the Plan
with respect to the benefits of Stacy S. Dick ("Dick").
The monthly pension benefits to which Dick shall be entitled hereunder
shall be equal to the benefits to which Dick would be entitled under the
Plan, except that, for all purposes, including without limitation benefit
accrual, death benefits, normal retirement and eligibility for early
retirement benefits, Dick shall be credited with five (5) additional years
of service. If Dick dies before commencing to receive the benefits
described hereunder, his beneficiary will receive a death benefit which is
the present value of the benefits which he has accrued hereunder as of the
date of his death.
-9-
<PAGE> 10
BLAKELY SPECIAL APPENDIX
TO THE
TENNECO INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("PLAN")
This Special Appendix sets forth certain special provisions of the Plan
with respect to the benefits of Robert T. Blakely ("Blakely").
The monthly pension benefits to which Blakely shall be entitled
hereunder shall be equal to the benefits to which Blakely would be entitled
under the Plan, except that, if Blakely retains his position as Executive
Vice President and Chief Financial Officer of Tenneco Inc. until the
earlier of (i) December 31, 1999 or (ii) the date that the Chief Executive
Officer of Tenneco Inc. determines that his services with respect to the
strategic review announced in 1998 and related transactions are completed,
for all purposes, including without limitation benefit accrual, death
benefits, normal retirement and eligibility for early retirement benefits,
Blakely shall be deemed to have 25 years of service and 25 years of
participation. If Blakely dies before commencing to receive the benefits
described hereunder, his beneficiary will receive a death benefit which is
the present value of the benefits which he has accrued hereunder as of the
date of his death. This benefit enhancement is consistent with those
provided to other senior executives.
-10-
<PAGE> 1
Exhibit 10.22
TENNECO INC. RABBI TRUST
This Agreement is made this 28th day of August, 1998, by and between
Tenneco Inc., a Delaware corporation (the "Company") and Dana G. Mead, Theodore
R. Tetzlaff, Paul T. Stecko and Robert T. Blakely, as trustee (collectively the
"Trustee"), effective as of the date indicated below.
WHEREAS, the Company has adopted the nonqualified deferred compensation
plan(s) and supplemental pension arrangements as listed in Appendix A
(collectively the "Plans" and each a "Plan.")
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's creditors in the event of the Company's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan(s);
WHEREAS, it is the intention of the parties that this Trust shall not
affect the status of the Plan(s) as an unfunded plan maintained for the purpose
of providing deferred compensation for a select group of management or highly
compensated employees for purposes of Title I of the Employee Retirement Income
Security Act of 1974; and
WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plan(s).
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
1. Establishment Of Trust
----------------------
(a) The Company hereby initially deposits with the Trustee in trust
1,921,900 shares of Tenneco Inc. common stock, which shall become the principal
of the Trust to be held, administered and disposed of by the Trustee as provided
in this Trust Agreement.
(b) Subject to the rules explicitly set forth herein, the Trust hereby
established is irrevocable.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
<PAGE> 2
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Plan participants and general creditors as herein
set forth. Plan participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Plan(s) and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against the Company. Any assets held by the Trust will be subject to the claims
of the general creditors of the Company and any of the Company's domestic
subsidiaries.
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with the
Trustee to augment the principal to be held, administered and disposed of by the
Trustee as provided in this Trust Agreement (i) or (ii) substitute property of
equivalent value. Except as provided herein, neither the Trustee nor any Plan
participant or beneficiary shall have any right to compel such additional
deposits.
2. Payments to Plan Participants and Their Beneficiaries.
------------------------------------------------------
(a) At least annually, the Company shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable in respect of each
Plan participant (and his or her beneficiaries), that provides a formula or
other instructions acceptable to the Trustee for determining the amounts so
payable, the form in which such amount is to be paid (as provided for or
available under the Plan(s)), and the time of commencement for payment of such
amounts. To the extent that any amounts are due to an employee (or beneficiary
of an employee) of a subsidiary of the Company, and the subsidiary fails to make
such payment, the Company shall do so. Except as otherwise provided herein if
the Company has failed to make payments to the Plan participants and their
beneficiaries in accordance with such Payment Schedule the Trustee shall do so.
The Company shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan(s) and shall pay
amounts withheld to the appropriate taxing authorities.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan(s) shall be determined by the Company or such party as
it shall designate under the Plan(s), and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan(s).
Notwithstanding the foregoing, the Trustee may, without direction from the
Company, make payments to participants and beneficiaries in such manner and in
such amounts as the Trustee shall determine they are entitled to be paid under
the Plans (to the extent funded through the Trust) based on the most recent
information furnished to the Trustee by the Company and any supplemental
information furnished to the Trustee by a participant or beneficiary upon which
the Trustee may reasonably rely in making such determination.
(c) The Company may make payment of benefits directly to Plan participants
or their beneficiaries as they become due under the terms of the Plan(s). The
Company shall notify the
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<PAGE> 3
Trustee of its decision to make payment of benefits directly prior to the time
amounts are payable to participants or their beneficiaries. In addition, if the
principal of the Trust, and any earnings thereon, are not sufficient to make
payments of benefits in accordance with the terms of the Plan(s), the Company
shall make the balance of each such payment as it falls due. the Trustee shall
notify the Company where principal and earnings are not sufficient.
(d) Some or all of the Plans may be fully or partially funded under the
Tenneco Benefits Protection Trust ("BPT"). Each participant and beneficiary
shall be entitled only to the benefits called for by the Plan and shall not be
entitled to additional benefits because of the existence of multiple funding
media. The Trustee shall take care that it pays benefits only to the extent not
paid by the Company or the BPT.
(e) The Company shall cause its actuary to determine the projected benefit
obligation ("PBO") under all of the Plans as of each January 1, commencing with
January 1, 1999. To the extent that the value of the assets of the Trust as of
the January 1 in question is less than the total PBO under all of the Plans as
so determined, the Company shall contribute additional assets to the Trust with
a value equal to the difference. To the extent that the assets of the Trust
exceed 110% of the PBO, the Company may withdraw assets with a value equal to
the excess of the value of the Trust's assets over 110% of such PBO.
(f) Notwithstanding any other provision hereof, promptly after a Change
in Control (as defined in Section 13 below), the Trustee shall sell Tenneco Inc.
common stock or other assets in order to provide cash to pay benefits hereunder.
Notwithstanding any other provision hereof, Trustee may sell Tenneco Inc. common
stock in order to provide cash to pay benefits hereunder.
3. Trustee Responsibility Regarding Payments to Trust Beneficiary When The
Company Is Insolvent.
---------------------
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) In the event of Insolvency of the Company the following rules shall
apply.
(1) The Company shall inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee
shall determine whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
-3-
<PAGE> 4
(2) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to
be a creditor alleging that the Company is Insolvent, the Trustee shall
have no duty to inquire whether the Company is Insolvent. the Trustee may
in all events rely on such evidence concerning the Company's solvency as
may be furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the Company's
solvency.
(3) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the benefit
of the Company's general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Plan participants or their beneficiaries
to pursue their rights as general creditors of the Company with respect to
benefits due under the Plan(s) or otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants
or their beneficiaries in accordance with Section 2 of this Trust Agreement
only after the Trustee has determined that the Company is not Insolvent (or
is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan(s) for the
period of such discontinuance, less the aggregate amount of any payments made to
Plan participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
4. Payments to the Company.
------------------------
Except as provided in Section 1(e)(ii), 2 or 3 hereof, the Company shall
have no right or power to direct the Trustee to return to the Company or to
divert to others any of the Trust assets before all payment of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms of
the Plan(s).
5. Trustee's Powers of Investment and Management
---------------------------------------------
The Trustee shall have the following powers with respect to any and all
assets at any time held by it and constituting part of the Trust Fund:
(a) The Trust shall hold the assets of the Trust exclusively in (i) shares
of the common stock of Tenneco Inc., and any assets distributed with respect
thereto; and (ii) cash equivalents pending reinvestment in Tenneco Inc. common
stock, except to the extent that the Company determines to substitute assets of
equivalent value.
-4-
<PAGE> 5
(b) Pending reinvestment in Tenneco Inc. common stock, to invest and
reinvest cash balances in interest-bearing deposits with the Trustee, or with a
bank or similar financial institution related to the Trustee if such bank or
other institution is a fiduciary with respect to the Plan as defined in ERISA,
including but not limited to investments in time deposits, savings deposits,
certificates of deposit or time accounts which bear a reasonable interest rate;
(c) All rights associated with Tenneco Inc. common stock shall be exercised
by the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Plan participants, except that voting rights with
respect to such Trust assets will be exercised by the Tenneco Inc. Benefits
Committee. This right is exercisable by the Tenneco Inc. Benefits Committee in a
nonfiduciary capacity without the approval or consent of any person in a
fiduciary capacity.
6. Disposition of Income.
----------------------
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested in Tenneco Inc. common
stock.
7. Accounting by the Trustee.
--------------------------
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following the close of each calendar
year and within 60 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash and securities held
in the Trust at the end of such year or as of the date of such removal or
resignation as the case may be.
8. Responsibility of the Trustee.
------------------------------
(a) Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims, provided, however, that the Trustee shall
incur no liability to any person for any action taken pursuant to a direction,
request or approval given by the Company which is contemplated by, and in
conformity with, the terms of this Trust and is given in writing by the Company.
In the event of a dispute between the Company and a party, the Trustee may apply
to a court of competent jurisdiction to resolve the dispute.
-5-
<PAGE> 6
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If the Company does not pay such costs, expenses and liabilities
in a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be counsel for the
Company generally) with respect to any of its duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any of
its duties or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers conferred on the
Trustees by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(g) Any action required to be taken by the Company, or direction given by
the Company, shall be by resolution of its board of directors or by written
direction of one or more of its president, any vice president or treasurer. The
Trustee may rely upon a resolution or direction filed with the Trustee and shall
have no responsibility for any action taken by the Trustee in accordance with
any such resolution or direction.
9. Compensation and Expenses of the Trustee.
-----------------------------------------
The Company shall pay all reasonable administrative and the Trustee's fees
and expenses. If not so paid, the fees and expenses shall be paid from the
Trust. Notwithstanding the foregoing, individuals shall serve without fee but
shall be entitled to reimbursement of expenses.
10. Trustee Resignation or Removal.
-------------------------------
(a) Trustee may resign at any time by written notice to the Company, which
shall be effective 30 days after receipt of such notice unless the Company and
the Trustee agree otherwise.
(b) Trustee may be removed by the Company on 30 days notice or upon shorter
notice accepted by the Trustee.
-6-
<PAGE> 7
(c) Upon a Change in Control, as defined herein, the Trustee may not be
removed by the Company for two years.
(d) If the Trustee resigns within two years of a Change in Control, as
defined herein, the Trustee shall select a successor Trustee in accordance with
the provisions of Section 11 hereof prior to the effective date of the Trustee's
resignation or removal.
(e) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 30 days after receipt of notice
of resignation, removal or transfer, unless the Company extends the time limit.
(f) If the Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraph(s) (a), (b), (c) or (d) of this section.
11. Appointment of Successor.
-------------------------
(a) If the Trustee resigns or is removed in accordance with Section 10(a)
or (b) hereof, the Trustee may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace the Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and
the Company shall indemnify, and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event or any condition existing at the time it becomes successor
Trustee.
(c) If the Trustee resigns or is removed pursuant to the provisions of
Section 10(d) hereof and selects a successor Trustee, the Trustee may appoint as
such successor Trustee any third Party such as a bank trust department or other
party that may be granted corporate trustee powers under state law. The
appointment of a successor Trustee shall be effective when accepted in writing
by the new Trustee. The new Trustee shall have all the rights and powers of the
former Trustee, including ownership rights in Trust assets. The former Trustee
shall execute any instrument necessary or reasonably requested by the successor
Trustee to evidence the transfer.
-7-
<PAGE> 8
12. Amendment or Termination.
-------------------------
(a) This Trust Agreement may be amended by a written instrument executed by
the Trustee and the Company. Notwithstanding the foregoing, no such amendment
shall conflict with the terms of the Plan(s) or shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which Plan participants
and their beneficiaries are no longer entitled to benefits pursuant to the terms
of the Plan(s). Upon termination of the Trust any assets remaining in the Trust
shall be returned to the Company.
(c) Upon written approval of Participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan(s), the Company may
terminate this Trust prior to the time all benefit payments under the Plan(s)
have been made. All assets in the Trust at termination shall be returned to the
Company.
(d) This Trust Agreement may not be amended by the Company for two
years following a Change in Control, as defined herein.
13. Miscellaneous.
--------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) "Change in Control" shall mean the first to occur of the following
events (but no event other than the following events), except as otherwise
provided below:
(i) any person and any of their affiliates or associates becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding securities having general voting rights, and a
majority of the Incumbent Board (as hereinafter defined) does not approve the
acquisition before the acquisition occurs. Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur (i), solely because twenty-five
percent (25%) or more of the combined voting power of the Company's then
outstanding securities having general voting rights is acquired by one or more
employee benefit plans maintained by the Company; or
-8-
<PAGE> 9
(ii) members of the Incumbent Board cease to constitute a majority
of the board of directors of Tenneco Inc. (as hereinafter defined); or
(iii) the consummation of any plan of merger, consolidation or
combination between the Company and any person including becoming a subsidiary
of any other person without members of the Incumbent Board, as constituted
immediately prior to the merger, consolidation or combination constituting a
majority of the board of directors of (A) the successor corporation, or (B) if
the surviving or successor corporation is a majority-owned subsidiary of another
corporation or corporations, the ultimate parent company of the surviving or
successor corporation; or
(iv) the consummation of any sale, exchange or other disposition of
all or substantially all of the Company's assets without members of the
Incumbent Board immediately prior to any sale, exchange or disposition of all or
substantially all of the Company's assets constituting a majority of the board
of directors of (A) the corporation which holds such assets after such
disposition, or, (B) if such corporation is a majority-owned subsidiary of
another corporation or corporations, the ultimate parent company of the
successor corporation; or
(v) if any person and any of their affiliates and associates,
shall elect or have elected, during any period not exceeding 24 months, at least
25% of the members of the Tenneco Inc. board of directors, without the approval
of the Incumbent Board and such members are comprised of persons not serving as
members of the Tenneco Inc. board of directors immediately prior to the
formation of such group or the first solicitation of proxies by such
shareholder;
provided however, that the Incumbent Board may determine that
any transaction or event is not a Change in Control.
For purposes of this definition, the terms "person" and "beneficial
owner" shall have the meaning set forth in Sections 3(a) and 13(d) of the
Securities Exchange Act of 1934, as amended, and in the regulations promulgated
thereunder. If the Trustee requests in writing that the Company determine or
furnish evidence to enable the Trustee to determine whether a Change in Control
has occurred, the Company shall do so in writing as soon as practicable
following receipt of such request.
(e) "Incumbent Board" shall mean (i) the members of the Tenneco Inc. board
of directors on June 1, 1998, to the extent that they continue to serve, and
(ii) any individual who becomes a member of the Tenneco Inc. board of directors
after June 1, 1998, if his election or nomination for election as a director is
approved by a vote of at least three-quarters of the then Incumbent Board.
-9-
<PAGE> 10
14. Effective Date.
---------------
The effective date of this Trust Agreement shall be August 1, 1998.
15. Corporate Restructuring.
------------------------
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, extraordinary
dividend, spin-off, split-up, rights offering, share combination, or other
change in the corporate structure of the Company affecting the Tenneco Inc.
common stock, (other than a Change in Control), the Tenneco Inc. Benefits
Committee may, in its sole discretion, cause the transfer of all or a portion of
the Trust's assets to a comparable trust maintained by one or more of the
resulting corporate entities or otherwise cause such changes in the Trust or its
assets as it shall deem appropriate.
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Agreement to be executed on their behalf by their respective officers thereunto
duly authorized, on the day and year first above written.
TENNECO INC.
By: /s/ K.A. Stewart
-------------------------------------
Its: Vice President & Corp. Secretary
-------------------------------------
/s/ Dana G. Mead
-----------------------------------------
Dana G. Mead
/s/ Theodore R. Tetzlaff
-----------------------------------------
Theodore R. Tetzlaff
/s/ Paul T. Stecko
-----------------------------------------
Paul T. Stecko
/s/ Robert T. Blakely
-----------------------------------------
Robert T. Blakely
-10-
<PAGE> 11
Appendix A
Tenneco Inc. Deferred Compensation Plan
1997 Tenneco Inc. Board of Directors Deferred Compensation Plan
Tenneco Inc. Pilots' Supplemental Retirement Plan
Tenneco Inc. Supplemental Executive Retirement Plan ("SERP")
Supplemental Pensions for individual executives outside the SERP
-11-
<PAGE> 1
Exhibit 10.23
September 24, 1998
Mr. Robert T. Blakely
Tenneco
1275 King Street
Greenwich, CT 06831
Dear Bob:
If your employment with Tenneco Inc., any majority owned subsidiary of Tenneco
Inc. and any business entity which results from a restructuring of Tenneco Inc.
is terminated either by the Company other than Discharge for Cause or after you
have incurred a Constructive Termination as those terms are defined in the
Tenneco Inc. Change in Control Severance Benefit Plan for Key Executives (the
"Plan") as though a Change in Control had occurred, the Company will provide you
with the following, subject to applicable tax withholding and any amounts due
the Company, but conditioned upon your (and your spouse's) execution of a
separation agreement that the Company will tender including a general release
and such other documents as it may require:
- - You will be entitled to receive a pro rata adjusted target bonus for the
year in which your employment terminates.
- - You will be paid severance in an amount equal to three times your then
current annual base salary.
- - Your restricted shares will be vested and distributed to you in shares;
your outstanding performance shares will be deemed to have been earned at
target and will be paid out in shares; and your stock options will be
deemed exercisable and will remain exercisable for the lesser of (i) a
period of 5 years from your termination or (ii) the remaining period for
which the option would have been outstanding under its generally applicable
terms as granted, disregarding any rules that would have shortened such
period. You will have the same rights with respect to any stock options to
which you become entitled upon the conversion of existing Tenneco Inc.
stock options to options of the Company or another entity.
<PAGE> 2
Mr. Robert T. Blakely
September 24, 1998
Page 2
- - The Company will forgive the principal balance of the note you executed in
connection with your move from Houston to Greenwich, and accrued interest.
Depending upon the course of events, you may have rights which arise under the
Plan and the Tenneco Benefits Protection Trust (the "Trust"). To the extent that
this occurs and the rights which arise under the Plan and Trust are greater than
those described above, you will receive the benefit of those greater rights, but
the items described in this letter would count against your rights under the
Plan and Trust.
Sincerely,
/s/ Barry R. Schuman
------------------------------------------
Barry R. Schuman
Senior Vice President, Human Resources
APPROVED BY:
/s/ Dana G. Mead
-----------------------------------------
Dana G. Mead
Chairman and Chief Executive Officer
Date: September 29, 1998
<PAGE> 1
Exhibit 10.24
TENNECO BENEFITS PROTECTION TRUST
APPOINTMENT OF SUCCESSOR TRUSTEE
Pursuant to Article Twelfth of the Tenneco Benefits Protection Trust, we the
undersigned Trustees hereby appoint Mr. Paul T. Stecko as Trustee to succeed
Mr. Stacy S. Dick, effective upon Mr. Stecko's acceptance.
Dated: August 25, 1998 /s/ Dana G. Mead
------------------------------------
Dana G. Mead
/s/ Theodore R. Tetzlaff
------------------------------------
Theodore R. Tetzlaff
/s/ Robert T. Blakely
------------------------------------
Robert T. Blakely
I hereby accept appointment as a Trustee of the Tenneco Benefits Protection
Trust.
Date: September 28, 1998
------------------
/s/ Paul T. Stecko
- ------------------------
Paul Stecko
<PAGE> 1
EXHIBIT 12
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
1998 1997
----- -----
<S> <C> <C>
Net income.................................................. $ 315 $ 285
Add:
Interest............................................... 178 157
Portion of rentals representative of interest factor... 40 40
Preferred stock dividend requirements of majority-owned
subsidiaries.......................................... 22 16
Income tax expense and other taxes on income........... 151 138
Amortization of interest capitalized................... 1 1
Undistributed (earnings) losses of affiliated companies
in which less than a 50% voting interest is owned..... (3) (1)
----- -----
Earnings as defined............................... $ 704 $ 636
===== =====
Interest.................................................... $ 178 $ 157
Interest capitalized........................................ -- 1
Portion of rentals representative of interest factor........ 40 40
Preferred stock dividend requirements of majority-owned
subsidiaries on a pre-tax basis........................... 33 24
----- -----
Fixed charges as defined.......................... $ 251 $ 222
===== =====
Ratio of earnings to fixed charges.......................... 2.80 2.86
===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Tenneco Inc.
and Consolidated Subsidiaries Financial Statements and is qualified in its
entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 875
<ALLOWANCES> 0
<INVENTORY> 995
<CURRENT-ASSETS> 2,336
<PP&E> 5,640
<DEPRECIATION> 2,050
<TOTAL-ASSETS> 8,836
<CURRENT-LIABILITIES> 1,964
<BONDS> 2,623
0
0
<COMMON> 2
<OTHER-SE> 2,662
<TOTAL-LIABILITY-AND-EQUITY> 8,836
<SALES> 5,720
<TOTAL-REVENUES> 5,720
<CGS> 4,028
<TOTAL-COSTS> 4,028
<OTHER-EXPENSES> 1,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178
<INCOME-PRETAX> 490
<INCOME-TAX> 151
<INCOME-CONTINUING> 315
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 315
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.86
</TABLE>
