<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TENNECO INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
TENNECO INC
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000 TENNECO LOGO
April 1, 1998
To the Shareowners of Tenneco Inc.:
The Annual Meeting of Shareowners of the Company will be held Tuesday, May
12, 1998, at 10:30 a.m. at the Corporate Headquarters of the Company, 1275 King
Street, Greenwich, Connecticut. A Notice of the meeting, a Proxy, and a Proxy
Statement containing information about the matters to be acted upon are
enclosed.
Holders of Common Stock are entitled to vote at the Annual Meeting on the
basis of one vote for each share held.
A record of the Company's activities for the year 1997 is contained in the
Annual Report to Shareowners. We urge each shareowner who cannot attend the
Annual Meeting to please assist us in preparing for the meeting by completing,
executing, and returning your Proxy promptly.
Very truly yours,
Dana G. Mead sig
DANA G. MEAD
Chairman and Chief Executive
Officer
<PAGE> 3
TENNECO INC
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000 TENNECO LOGO
NOTICE OF
ANNUAL MEETING OF SHAREOWNERS
MAY 12, 1998
The Annual Meeting of Shareowners of Tenneco Inc. will be held at the
Corporate Headquarters of the Company, 1275 King Street, Greenwich, Connecticut,
on Tuesday, May 12, 1998, at 10:30 a.m., local time.
The purposes of the meeting are:
1. To elect four Directors for a term to expire at the 2001 Annual Meeting
of Shareowners;
2. To approve the appointment of Arthur Andersen LLP as independent public
accountants for the year 1998;
3. To act upon a shareowner proposal that may be introduced at the meeting
as set forth in the accompanying Proxy Statement; and
4. To act upon such other matters as may be properly brought before the
meeting affecting the business and affairs of the Company.
The Board of Directors knows of no other matters at this time that may be
brought before the meeting. Holders of Common Stock of record at the close of
business on March 20, 1998, are entitled to vote at the meeting. A list of these
Shareowners will be available for inspection for 10 days preceding the meeting
at the Corporate Headquarters of the Company, 1275 King Street, Greenwich,
Connecticut, and will also be available for inspection at the meeting.
Each shareowner who does not expect to attend the meeting is urged to
complete, date, and sign the enclosed Proxy and return it to the Company in the
enclosed envelope, which requires no postage if mailed in the United States.
By Order of the Board of Directors
KARL A. STEWART
Secretary
Greenwich, Connecticut
April 1, 1998
<PAGE> 4
TENNECO INC TENNECO LOGO
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000
April 1, 1998
PROXY STATEMENT
This statement is furnished in connection with the solicitation on behalf
of the Board of Directors of the Company of Proxies to be voted at the Annual
Meeting of Shareowners on May 12, 1998, for the purposes set forth in the
accompanying Notice of the meeting. Holders of Common Stock of record at the
close of business on March 20, 1998, will be entitled to vote at the Annual
Meeting. Each share is entitled to one vote. Shares represented by Proxies will
be voted at the Annual Meeting. At March 20, 1998, there were 169,782,505 shares
of Common Stock outstanding and entitled to vote. This Proxy Statement is first
being mailed to Shareowners on or about April 1, 1998. Unless the context
otherwise requires, references to the "Company" for periods prior to the
reorganization completed in December 1996 are to the company then known as
Tenneco Inc. ("Old Tenneco").
ELECTION OF DIRECTORS
(ITEM 1)
The Board of Directors presently consists of 12 members, divided into three
classes. The following four nominees (Class II), each of whom currently serves
as a director of the Company, are proposed to be elected at this Annual Meeting
to serve for a term to expire at the 2001 Annual Meeting of Shareowners and
until their successors are chosen and have qualified. Seven directors will
continue to serve as set forth below. Dr. Peter T. Flawn, currently a member of
the Board of Directors, will retire following the Annual Meeting in accordance
with the Board's normal retirement policy. The persons named as proxy voters in
the accompanying Proxy, or their substitutes, will vote for the nominees for
directors, each of whom has been designated as such by the Board of Directors.
If, for any reason not presently known, any of the nominees is not available for
election, another person or other persons who may be nominated will be voted for
at the discretion of the proxy voters. Directors are elected by the vote of a
majority of the shares, present in person or by proxy, constituting a quorum at
the meeting.
1
<PAGE> 5
Brief statements setting forth the age (at April 1, 1998), the principal
occupation, employment during the past five years, the year in which first
elected a director, and other information concerning each nominee and the
remaining directors appear below.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING OF SHAREOWNERS (CLASS
II)
<TABLE>
<S> <C>
Larry D. Brady has been President of FMC Corporation, a
LARRY BRADY PHOTO producer of chemicals and machinery for industry,
agriculture, and government, since 1993, prior to which he
served in various executive capacities with that company for
more than five years. He is also a director of FMC
Corporation and Harnischfeger Industries, Inc.
Mr. Brady is 55 and has been a Director of the Company since
January 1998 and is a member of the Compensation and
Benefits Committee.
- --------------------------------------------------------------------------------------------
M. Kathryn Eickhoff has been President of Eickhoff
KATHRYN EICKHOFF PHOTO Economics, Inc., a consulting firm, since 1987. From 1985 to
1987, she was Associate Director for Economic Policy for the
U.S. Office of Management and Budget, and prior to 1985 was
Executive Vice President and Treasurer of Townsend-Greenspan
& Co., Inc., an economic consulting firm. She is also a
director of AT&T Corp., Pharmacia & Upjohn, Inc., and Fleet
Bank, NA.
Ms. Eickhoff is 58, has been a Director of the Company since
1987, and is a member of the Executive Committee, Audit
Committee, and Nominating and Management Development
Committee. She previously served as a member of the Board of
Directors from 1982 until her resignation to join the Office
of Management and Budget in 1985.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
Dana G. Mead is Chairman and Chief Executive Officer of the Company and has
[Dana G. Mead photo] served as an executive officer of the Company since April 1992, when he
joined the Company as Chief Operating Officer. Prior to joining the
Company, Mr. Mead served as an Executive Vice President of International
Paper Company, a manufacturer of paper, pulp, and wood products, from 1988,
and served as Senior Vice President of that company from 1981. He is also a
director of Unisource Worldwide, Inc., Textron Inc., Zurich Insurance
Company, Zurich Life Insurance Company, Pfizer Inc., and Newport News
Shipbuilding Inc., a former subsidiary of the Company.
Mr. Mead is 62 and has been a Director of the Company since 1992. He is a
member and the Chairman of the Executive Committee.
- -----------------------------------------------------------------------------------------------------------
Roger B. Porter is Director of the Center for Business and Government at
[Roger B. Porter photo] Harvard University and is the IBM Professor of Business and Government. Mr.
Porter has served on the faculty at Harvard University since 1977. Mr.
Porter also held senior economic policy positions in the Ford, Reagan and
Bush White Houses, serving as special assistant to the President and
executive secretary of the Economic Policy Board from 1974 to 1977, as
deputy assistant to the President and director of the White House Office of
Policy Development from 1981 to 1985, and as assistant to the President for
economic and domestic policy from 1989 to 1993. He is also a director of
RightCHOICE Managed Care, Inc., National Life Insurance Company, and Zions
Bancorporation.
Mr. Porter is 51 and has been a Director of the Company since January 1998
and is a member of the Audit Committee.
</TABLE>
3
<PAGE> 7
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE 1999 ANNUAL MEETING OF SHAREOWNERS (CLASS III)
<TABLE>
<S> <C>
Henry U. Harris, Jr., since 1992, has been Vice Chairman
HENRY U. HARRIS JR. PHOTO Emeritus of Smith Barney Inc., an investment banking firm,
and for more than five years prior to which he served as an
executive officer of that firm.
Mr. Harris is 71 and has been a Director of the Company
since 1968. He is a member of the Executive Committee, the
Audit Committee, and the Nominating and Management
Development Committee.
- --------------------------------------------------------------------------------------------
Sir David Plastow is Chairman of the Medical Research
SIR DAVID PLASTOW PHOTO Council, which promotes and supports research and
post-graduate training in the biomedical and other sciences.
He served as Chairman of Inchcape plc, a multi-national
marketing and distribution company, from June 1992 to
December 1995 and Chairman and Chief Executive Officer of
Vickers plc, an engineering and manufacturing company
headquartered in London, from January 1987 to May 1992. He
is also a director of Lloyds TSB Group plc and FT Everard &
Sons Limited.
Sir David Plastow is 65 and has been a Director of the
Company since May 1996, and previously served as a member of
the Board of Directors from 1985 until 1992. He is a member
of the Compensation and Benefits Committee and the
Nominating and Management Development Committee.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
Clifton R. Wharton, Jr., served as Chairman and Chief Executive Officer of
CLIFTON R. WHARTON JR. PHOTO Teachers Insurance and Annuity Association and the College Retirement
Equities Fund from 1987 to 1993 and as Deputy Secretary of State, U.S.
Department of State, from January to November 1993. From 1978 to 1987, he
served as Chancellor of the State University of New York System. From 1970
to 1978, Dr. Wharton served as President of Michigan State University.
Prior to 1970 he spent 22 years working in foreign economic and
agricultural development in Latin America and Southeast Asia for the
Rockefeller family philanthropic interests. He is also a director of the
TIAA Board of Overseers, the New York Stock Exchange, Inc., and Harcourt
General, Inc.
Dr. Wharton is 71 and has been a Director of the Company since 1994. He is
a member and the Chairman of the Compensation and Benefits Committee.
</TABLE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE 2000 ANNUAL MEETING OF SHAREOWNERS (CLASS I)
<TABLE>
<S> <C>
Mark Andrews has been Chairman of Andrews Associates, Inc.,
MARK ANDREWS PHOTO a government consulting firm, since February 1987. From 1963
to 1980, he served in the U.S. House of Representatives, and
from 1980 to 1986 he served in the U.S. Senate. He is also a
Director of Union Storage Co.
Mr. Andrews is 71 and has been a Director of the Company
since 1987. He is a member of the Compensation and Benefits
Committee and the Nominating and Management Development
Committee.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
W. Michael Blumenthal was a senior advisor to Lazard Freres & Co. L.L.C.,
W. Michael Blumenthal photo an investment banking firm, from 1995 through 1996 and was a limited
partner of that firm from April 1990 through December 1994. Prior to that
time he was Chairman of Unisys Corporation, a manufacturer of business
information systems, and had been an executive officer of that company for
more than five years. Mr. Blumenthal also served as U.S. Secretary of the
Treasury from 1977 to 1979. He is also a director of Daimler-Benz
InterServices (debis) AG.
Mr. Blumenthal is 72 and has been a Director of the Company since 1985. He
is a member and the Chairman of the Nominating and Management Development
Committee.
- -----------------------------------------------------------------------------------------------------------
Belton K. Johnson photo Belton K. Johnson is engaged in investments and has pursued such interests
for more than five years.
Mr. Johnson is 68 and has been a Director of the Company since 1979. He is
a member of the Executive Committee and the Compensation and Benefits
Committee.
- -----------------------------------------------------------------------------------------------------------
William L. Weiss photo William L. Weiss has been Chairman Emeritus of Ameritech Corporation, a
telecommunications and information services company, since 1994, formerly
serving as Chairman and Chief Executive Officer of that company for more
than ten years. Mr. Weiss is a director of Abbott Laboratories, Inc.,
Merrill Lynch & Co., Inc., and The Quaker Oats Company.
Mr. Weiss is 68 and has been a Director of the Company since 1994. He is a
member of the Audit Committee.
</TABLE>
6
<PAGE> 10
STOCK OWNERSHIP
MANAGEMENT
The following table sets forth, at January 31, 1998, the number of shares
of Common Stock of the Company beneficially owned by (i) each director or
nominee for director, (ii) each of the executive officers whose names are set
forth on the Summary Compensation Table at page 11, and (iii) all executive
officers, directors, and nominees for director as a group. The table also shows
(i) the Common Stock Equivalents held by directors and Mr. Mead under the Stock
Ownership Plan and Deferred Compensation Plans, and (ii) the total number of
shares of Common Stock and Common Stock Equivalents.
<TABLE>
<CAPTION>
SHARES
OF COMMON COMMON TOTAL
STOCK OWNED STOCK SHARES AND
DIRECTORS (1)(2)(3) EQUIVALENTS(4) EQUIVALENTS
- --------- ----------- -------------- -----------
<S> <C> <C> <C>
Mark Andrews................................... 11,677 755 12,432
W. Michael Blumenthal.......................... 10,496 755 11,251
Larry D. Brady................................. -- 875 875
M. Kathryn Eickhoff............................ 7,382 755 8,137
Peter T. Flawn................................. 4,150 755 4,905
Henry U. Harris, Jr............................ 11,827 755 12,582
Belton K. Johnson.............................. 11,939 755 12,694
Dana G. Mead................................... 622,820 42,417 665,237(5)
Sir David Plastow.............................. 2,400 1,115 3,515
Roger B. Porter................................ -- 875 875
William L. Weiss............................... 4,165 755 4,920
Clifton R. Wharton, Jr......................... 4,930 755 5,685
EXECUTIVE OFFICERS
- -----------------------------------------------
Paul T. Stecko................................. 138,250 -- 138,250
Theodore R. Tetzlaff........................... 131,877 -- 131,877
Stacy S. Dick.................................. 108,290 -- 108,290
Robert T. Blakely.............................. 126,976 -- 126,976
All executive officers and directors or
nominees as a group(6)....................... 1,362,937 51,322 1,414,259
</TABLE>
- ------------
(1) Each director or nominee and executive officer has sole voting and
investment power over the shares beneficially owned (or has the right to
acquire shares as set forth in note (2) below) as set forth in this column,
except for (i) restricted shares that are held in trust for each director
and executive officer under the Company's Stock Ownership Plan, and
(Notes continued on following page)
7
<PAGE> 11
(ii) shares that executive officers of the Company have the right to acquire
pursuant to the Company's Stock Ownership Plan.
(2) Includes: (i) restricted shares held in trust under the Company's Stock
Ownership Plan; at January 31, 1998, Messrs. Mead, Stecko, Tetzlaff, Dick,
and Blakely held 21,025; 15,000; 15,645; 5,535; and 4,425 restricted shares,
respectively, under the Company's Stock Ownership Plan, and Ms. Eickhoff and
Messrs. Andrews, Blumenthal, Flawn, Harris, Johnson, Weiss, and Wharton held
3,623; 6,207; 6,843; 300; 300; 5,828; 2,315; and 2,580 restricted shares,
respectively, under the Company's Stock Ownership Plan; and (ii) shares that
are subject to options, which were granted under the Stock Ownership Plan
and are exercisable at January 31, 1998, or within 60 days of said date, for
Messrs. Mead, Stecko, Tetzlaff, Dick, and Blakely, to purchase 519,434;
100,002; 78,262; 72,845; and 73,330 shares, respectively.
(3) Less than one percent of the outstanding shares of the Company's Common
Stock.
(4) Common Stock Equivalents are distributed in shares of Common Stock of the
Company after a director ceases to serve as a director of the Company or
upon retirement of the officer, as applicable. For more information on
Common Stock Equivalents, see "Common Stock Equivalents/Options" on page 19.
(5) Since 1994, Mr. Mead has deferred a total of $1.1 million of cash incentive
compensation into Common Stock equivalent units under the Company's Deferred
Compensation Plan.
(6) Includes 959,857 shares that are subject to options that are exercisable
within 60 days of January 31, 1998, by all executive officers and directors
of the Company as a group, and includes 89,626 restricted shares that are
held in trust under the Company's Stock Ownership Plan, for all executive
officers and directors of the Company as a group.
CERTAIN SHAREOWNERS
The following table sets forth, as of March 20, 1998, the name, address,
and Common Stock ownership for each person known by the Company to be the
beneficial owner of more than
8
<PAGE> 12
five percent of the Company's outstanding Common Stock (the only class of voting
securities outstanding).
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF COMMON PERCENT OF COMMON
OF BENEFICIAL OWNER(1) STOCK OWNED(1) STOCK OUTSTANDING
---------------------- ---------------- -----------------
<S> <C> <C>
Barrow, Hanley, Mewhinney......................... 18,289,000(2) 10.7%(2)
& Strauss, Inc.
One McKinney Plaza
3232 McKinney Avenue
15th Floor
Dallas, Texas 75204-2429
Oppenheimer Capital............................... 11,455,105(3) 6.7%(3)
Oppenheimer Tower
World Financial Center
New York, New York 10281
</TABLE>
- ------------
(1) The foregoing information is based on information contained in filings made
with the Securities and Exchange Commission.
(2) Barrow, Hanley, Mewhinney & Strauss, Inc. has indicated that it has sole
voting power over 3,683,510 shares, shared voting power over 14,605,490
shares, and sole dispositive power over 18,289,000 shares.
(3) Oppenheimer Capital, a Delaware general partnership, is a registered
investment adviser under Section 203 of the Investment Advisers Act of 1940
and, as a result of its role as investment adviser, Oppenheimer Capital may
be deemed to be the beneficial owner of Common Stock of the Company.
Oppenheimer Capital has the sole power to dispose of the shares and to vote
the shares under its written guidelines established by its Management Board.
THE BOARD OF DIRECTORS
The Board of Directors of the Company is currently composed of 12 members,
consisting of 11 members who are not officers of the Company (the "Outside
Directors") and 1 member who is an officer of the Company (the "Inside
Director"). With the retirement of Dr. Flawn in May of this year, the Board will
be composed of 10 Outside Directors and 1 Inside Director. The Board of
Directors believes that the Company's ratio of Outside Directors to Inside
Directors represents a commitment to the independence of the Board, and a focus
on matters of importance to its shareowners. In addition, on an ad hoc basis,
the Board has designated, and from time to time will designate, an Outside
Director as the "lead" director with respect to special matters or discussions
affecting the Company.
9
<PAGE> 13
During 1997 the Board of Directors held ten meetings. Each director
attended more than 75% of the aggregate of all meetings of the Board of
Directors and all meetings of the committees of the Board on which the director
served.
There are four standing committees of the Board of Directors, which have
the following described responsibilities and authority.
The Audit Committee, comprised solely of Outside Directors, has the
responsibility, among other things, to (i) recommend the selection of the
Company's independent public accountants, (ii) review and approve the scope of
the independent public accountants' audit activity and extent of non-audit
services, (iii) review with management and the independent public accountants
the adequacy of the Company's basic accounting system and the effectiveness of
the Company's internal audit plan and activities, (iv) review with management
and the independent public accountants the Company's certified financial
statements and exercise general oversight of the Company's financial reporting
process, and (v) review with the Company litigation and other legal matters that
may affect the Company's financial condition and monitor compliance with the
Company's business ethics and other policies. Five meetings of the Audit
Committee were held in 1997.
The Compensation and Benefits Committee, comprised solely of Outside
Directors, has the responsibility, among other things, to (i) establish the
salary rate of officers and employees of the Company and its subsidiaries, (ii)
examine periodically the compensation structure of the Company, and (iii)
supervise the welfare and pension plans and compensation plans of the Company.
Five meetings of the Compensation and Benefits Committee were held in 1997.
The Nominating and Management Development Committee, comprised solely of
Outside Directors, has the significant corporate governance responsibilities,
among other things, to (i) review and determine the desirable balance of
experience, qualifications and expertise among members of the Board, (ii) review
possible candidates for members of the Board of Directors and recommend a slate
of nominees for election as directors at the Company's annual shareowners'
meeting, (iii) review the function and composition of the other committees of
the Board of Directors and recommend membership on such committees, and (iv)
review the qualifications and recommend candidates for election as officers of
the Company. Three meetings of the Nominating and Management Development
Committee were held in 1997.
The Executive Committee, composed of 4 Outside Directors and the Inside
Director, has, during the interval between the meetings of the Board of
Directors, the authority to exercise all the powers of the Board that may be
delegated legally to it by the Board in the management and direction of the
business and affairs of the Company. No meetings of the Executive Committee were
held in 1997.
A shareowner of the Company may nominate persons for election to the Board
of the Company if the shareowner submits such nomination, together with certain
related information
10
<PAGE> 14
required by the Company's By-Laws, in writing to the Secretary of the Company
not less than 50 days nor more than 75 days prior to the date of any annual
meeting of shareowners.
EXECUTIVE COMPENSATION
The following table sets forth the remuneration paid by the Company (i) to
the Chairman of the Board and Chief Executive Officer, and (ii) to each of the
four most highly compensated key executive officers of the Company, other than
the Chairman of the Board and Chief Executive Officer, whose salary and bonus
exceeded $100,000, for the years indicated. The table shows amounts earned by
such persons in all capacities in which they served and includes compensation
paid or accrued by Old Tenneco or by subsidiaries of Old Tenneco (including the
Company and certain subsidiaries of the Company) prior to the reorganization
completed in December 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------ ------------------------------------
AWARDS PAYOUTS
----------------------- ----------
OTHER LONG-TERM
ANNUAL RESTRICTED INCENTIVE ALL OTHER
COMPEN- STOCK PLAN COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS SATION(3) AWARDS(4) OPTIONS(5) PAYOUTS(6) SATION(7)
--------------------------- ---- --------- ----- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dana G. Mead 1997 $1,012,638 --(2) $ 332,874 $950,078(9) 192,000 -- $ 39,251
Chairman and Chief 1996 $ 990,375 $900,000 $ 815,217 -- 213,000 $2,500,000 $153,256
Executive Officer 1995 $ 957,375 $800,000 $ 310,436 -- 100,000 -- $149,972
Paul T. Stecko 1997 $ 531,767 $550,000 $ 90,539 $604,650 94,509 -- $ 8,708
Chief Operating 1996 $ 426,258 $450,000 $ 32,400 -- 120,000 $1,200,000 $ 32,767
Officer(8) 1995 $ 381,546 $300,000 $ 21,027 -- 24,000 -- $ 31,975
Theodore R. Tetzlaff 1997 $ 400,000 $600,000(9) $ 69,394 $250,116(9) 46,700 -- --
General Counsel 1996 $ 400,000 $350,000 $ 28,350 -- 93,300 $1,050,000 $ 25,782
1995 $ 400,000 $350,000 $ 14,400 -- 18,000 -- --
Stacy S. Dick 1997 $ 433,317 $530,000(9) $1,008,909 $250,116(9) 46,700 -- $ 11,366
Executive Vice President 1996 $ 412,833 $280,000 $ 414,164 -- 93,300 $1,050,000 $ 43,178
1995 $ 377,737 $280,000 $ 32,473 -- 14,000 -- $ 31,433
Robert T. Blakely 1997 $ 441,940 $480,000(9) $ 577,513 $199,957(9) 40,000 -- $ 14,693
Executive Vice President 1996 $ 433,300 $250,000 $ 404,015 -- 80,000 $ 900,000 $ 62,308
and Chief Financial Officer 1995 $ 422,760 $230,000 $ 18,838 -- 16,000 -- $ 44,571
</TABLE>
- ------------
(1) Includes base salary plus amounts paid in lieu of Company matching
contributions to the Thrift Plan.
(2) No cash bonus was paid to Mr. Mead in 1997. Mr. Mead elected to receive, in
lieu of a cash bonus, options to purchase the Company's Common Stock. See
"Option Grants in 1997" on page 14.
(3) Includes amounts attributable to (i) the value of personal benefits provided
by the Company to its executive officers, which have an aggregate value in
excess of $50,000, such as the personal use of Company owned property,
membership dues, assistance
(Notes continued on following page)
11
<PAGE> 15
provided to such persons with regard to financial, tax and estate planning,
and relocation expenses, (ii) reimbursement for taxes, and (iii) amounts
paid as dividend equivalents on performance share equivalent units under the
Company's Stock Ownership Plan ("Dividend Equivalents"). The amount of each
such personal benefit that exceeds 25% of the estimated value of the total
personal benefits provided by the Company, reimbursement for taxes, and
amounts paid as Dividend Equivalents to the individuals named in the table
was as follows: During 1997: $119,398 in relocation expenses, $60,994 for
use of Company owned property, $52,965 for reimbursement for taxes, and
$38,400 in Dividend Equivalents paid to Mr. Mead; $40,000 perquisite
allowance, $18,841 for financial planning services, and $24,000 in Dividend
Equivalents for Mr. Stecko; $40,000 perquisite allowance and $16,800 in
Dividend Equivalents for Mr. Tetzlaff; $506,090 in relocation expenses,
$348,978 for reimbursement for taxes, and $16,800 in Dividend Equivalents
paid to Mr. Dick; and $280,665 in relocation expenses, $194,510 in
reimbursement for taxes, and $14,400 in Dividend Equivalents paid to Mr.
Blakely. During 1996: $378,755 in relocation expenses, $247,105 for
reimbursement for taxes, and $67,500 in Dividend Equivalents paid to Mr.
Mead; $32,400 and $28,350 in Dividend Equivalents for Messrs. Stecko and
Tetzlaff, respectively; $68,652 for use of Company owned property, $165,499
in relocation expenses, $134,447 for reimbursement for taxes, and $28,350 in
Dividend Equivalents paid to Mr. Dick; and $257,407 in relocation expenses,
$66,356 in reimbursement for taxes, and $24,300 in Dividend Equivalents paid
to Mr. Blakely. During 1995: $137,552 for use of Tenneco owned property,
$96,605 for reimbursement for taxes, and $40,000 in Dividend Equivalents
paid to Mr. Mead; $1,827, $18,073, and $4,438 for reimbursement for taxes
and $19,200, $14,400, and $14,400 in Dividend Equivalents for Messrs.
Stecko, Dick, and Blakely, respectively; and $14,400 in Dividend Equivalents
paid to Mr. Tetzlaff.
(4) Includes the dollar value of grants of restricted stock made pursuant to the
Company's Stock Ownership Plan based on the price of the Company's Common
Stock on the date of grant. At December 31, 1997, Messrs. Mead, Stecko,
Tetzlaff, Dick, and Blakely held 53,025; 35,000; 19,535; 19,535; and 16,425
restricted shares and/or performance share equivalent units, respectively,
under such plan. The value at December 31, 1997 (based on a per
share/equivalent unit price of $39.50 on that date) of all restricted
shares/performance units held was $2,094,488 for Mr. Mead; $1,382,500 for
Mr. Stecko; $771,633 for Mr. Tetzlaff; $771,633 for Mr. Dick; and $648,788
for Mr. Blakely. Dividends/Dividend Equivalents will be paid on the
restricted shares/performance share equivalent units held by each
individual.
(5) In 1997, Mr. Mead elected to receive options to purchase shares of the
Company's Common Stock in lieu of a cash bonus, and accordingly options for
85,000 shares were granted to Mr. Mead. Mr. Stecko received 14,509 reload
options in connection with the exercise of stock options during 1997. The
remaining number of options granted in 1997 to
(Notes continued on following page)
12
<PAGE> 16
Messrs. Mead and Stecko, together with all options awarded to Messrs.
Tetzlaff, Dick, and Blakely represent the final one-third of a three-year
award. See "Option Grants in 1997" on page 14 for additional information
concerning option grants in 1997. For 1996 the number of options does not
include options previously granted by Old Tenneco (the "Previously Granted
Options") and converted (the "Converted Options") into options to purchase
shares of the Company's Common Stock. For 1995 the number of options
reflects unconverted Previously Granted Options.
(6) For 1996 the amounts attributed to LTIP Payouts represent the value of
performance share equivalent units for Old Tenneco that were vested and
distributed as shares of Old Tenneco common stock on November 1, 1996,
pursuant to the reorganization. The value stated is the average of the high
and low trading prices of a share of Old Tenneco common stock on November 1,
1996, the date the performance restrictions were removed. Messrs. Mead,
Stecko, Tetzlaff, Dick, and Blakely received 50,000; 24,000; 21,000; 21,000;
and 18,000 shares of Old Tenneco common stock, respectively, as a result of
the reorganization (of such amount, certain shares were acquired by the
Company in satisfaction of tax obligations and the remainder of such shares,
now Common Stock of the Company, are held by the named individual). Under
current guidelines for stock ownership, Mr. Mead is required to own shares
of the Company's Common Stock equal to seven times his salary; and Messrs.
Stecko, Tetzlaff, Dick, and Blakely are required to own shares equal to four
times their respective salaries.
(7) Includes amounts attributable during 1997 to benefit plans of the Company as
follows:
(a) The amounts contributed pursuant to the Thrift Plan for the accounts of
Messrs. Mead, Stecko, Dick, and Blakely were $5,937; $4,749; $5,937;
and $9,500, respectively.
(b) The dollar values paid by the Company for insurance premiums under the
Company's group life insurance plan for Messrs. Mead, Stecko, Dick, and
Blakely were $33,314; $3,959; $5,429; and $5,193, respectively.
(8) Mr. Stecko was elected as Chief Operating Officer of the Company on January
21, 1997, and prior to such time served as President and Chief Executive
Officer of Tenneco Packaging Inc., holding such office since December 1993.
With his appointment as Chief Operating Officer of the Company, the
packaging and automotive parts businesses of the Company report to Mr.
Stecko.
(9) Includes a special one-time award of 21,025 restricted shares to Mr. Mead;
$250,000 and 5,535 restricted shares to Messrs. Tetzlaff and Dick; and
$200,000 and 4,425 restricted shares to Mr. Blakely, to reflect their
significant contributions related to the successful completion of Tenneco's
restructuring.
------------------------
13
<PAGE> 17
OPTION GRANTS IN 1997
The following table sets forth the number of stock options that were
granted by the Company during 1997 to the persons named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
% OF TOTAL
OPTIONS OPTIONS
GRANTED GRANTED TO
(NO. OF EMPLOYEES EXERCISE OR
SHARES) IN FISCAL BASE PRICE EXPIRATION GRANT DATE
NAME (1) YEAR PER SHARE(2) DATE PRESENT VALUE(3)
---- ------- ---------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C>
Dana G. Mead........... 85,000(4) 3.0% $44.31 12/2/2017 $1,211,250
107,000(5) 3.8% $40.06 5/1/2017 $1,507,630
Paul T. Stecko......... 14,509(6) 0.5% $47.28 1/10/2005 $ 133,483
80,000(5) 2.8% $40.06 5/1/2017 $1,127,200
Theodore R. Tetzlaff... 46,700(5) 1.7% $40.06 5/1/2017 $ 658,003
Stacy S. Dick.......... 46,700(5) 1.7% $40.06 5/1/2017 $ 658,003
Robert T. Blakely...... 40,000(5) 1.4% $40.06 5/1/2017 $ 563,600
</TABLE>
- ------------
(1) The options reported in this column and in the Summary Compensation Table
consist of Non-Qualified Options granted under the Company's Stock Ownership
Plan. The options become fully exercisable on the fourth anniversary of the
grant, subject, however, to partial earlier vesting in increments of one
third in the event that certain stock price performance objectives are
achieved prior to the fourth anniversary of the grant. In July 1997, the
stock price performance objectives were satisfied with respect to the
options described in note (5) below and one third of such options became
exercisable. The options provide that a grantee who delivers shares of
Common Stock to pay the option exercise price will be granted, upon such
delivery and without further action by the Company, an additional option to
purchase the number of shares so delivered. These "reload" options are
granted at 100% of the fair market value (as defined in the plan) on the
date they are granted, become exercisable six months from that date and
expire coincident with the options they replace. Grantees are limited to 10
reload options and the automatic grant of such reload options is limited to
twice during any one calendar year.
(2) All options were granted at 100% of the fair market value on the date of
grant.
(3) The Black-Scholes model was used to determine the grant date present value
of the stock options. This method requires the use of certain assumptions
that affect the value of the option. The assumptions used in this model are
the volatility of the Company's stock price,
(Notes continued on following page)
14
<PAGE> 18
an estimate of the risk-free interest rate, and expected dividend rate. For
purposes of this model the following assumptions were used:
<TABLE>
<CAPTION>
EXPIRATION RISK FREE EXPECTED
DATE VOLATILITY INTEREST RATE DIVIDEND RATE OPTION LIFE(1/2)
---------- ---------- ------------- ------------- -----------------
<C> <C> <C> <C> <S>
5/1/2017 28.19% 6.73% 2.98% 10 Years
12/2/2017 25.54% 5.89% 2.72% 10 Years
1/10/2005 21.65% 6.06% 2.55% 3.5 Years
</TABLE>
No adjustments were made for risk of forfeiture of the stock options. This
model assumed that the 20 year options are exercised on the tenth
anniversary and that the seven year option is exercised at 3 1/2 years.
There is no assurance that these assumptions will prove true in the future.
The actual value of the options depends on the market price of the Common
Stock at the date of exercise, which may vary from the theoretical value
indicated in the table.
(4) Mr. Mead elected to receive options to purchase shares of the Company's
Common Stock in lieu of a 1997 cash bonus, and accordingly options to
purchase 85,000 shares were granted to Mr. Mead. The share price would have
to exceed $52.84 (or an increase of approximately 20% from the option price)
for Mr. Mead's options to approximate the value of the forgone cash bonus.
(5) Represents options granted in May 1997 as the final one-third of a
three-year award.
(6) Represents reload options described in footnote (1) above.
OPTIONS EXERCISED IN 1997 AND 1997 YEAR-END VALUES
The following table sets forth information concerning options exercised
during 1997 and options held at December 31, 1997, by the persons named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
TOTAL NO. OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OF OPTIONS HELD AT IN-THE-MONEY OPTIONS HELD
COMMON STOCK DECEMBER 31, 1997 AT DECEMBER 31, 1997
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dana G. Mead......... -- -- 383,995 601,514 $199,008 $99,490
Paul T. Stecko....... 16,784* $192,317 60,726 228,088 -- $23,879
Theodore R.
Tetzlaff........... -- -- 59,687 154,617 $ 35,819 $17,910
Stacy S. Dick........ -- -- 53,883 156,939 $ 27,859 $13,930
Robert T. Blakely.... -- -- 55,529 136,076 $ 31,839 $15,920
</TABLE>
- ------------
* Represents the actual number of shares received after payment of applicable
taxes.
15
<PAGE> 19
LONG-TERM INCENTIVE PLANS
PERFORMANCE SHARE EQUIVALENT UNIT AWARDS IN LAST FISCAL YEAR
The following table sets forth information concerning performance based
awards made during 1997 to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS UNTIL NON-STOCK PRICE BASED PLANS(1)
OR OTHER MATURATION OR ---------------------------------------
NAME RIGHTS(1)(2) PAYOUT(3) THRESHOLD(4) TARGET(4) MAXIMUM(4)
---- ------------- -------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Dana G. Mead........... 32,000 4 Years 25% 100% 150%
Paul T. Stecko......... 20,000 4 Years 25% 100% 150%
Theodore R. Tetzlaff... 14,000 4 Years 25% 100% 150%
Stacy S. Dick.......... 14,000 4 Years 25% 100% 150%
Robert T. Blakely...... 12,000 4 Years 25% 100% 150%
</TABLE>
- ------------
(1) In January 1997, the persons named in the Summary Compensation Table were
awarded performance share equivalent units under the Stock Ownership Plan.
Estimated Future Payouts are based on achievement of specified goals based
on Economic Value Added (EVA(R), a registered trademark of Stern Stewart &
Co.), which is defined as after-tax operating profit minus the actual cost
of capital. During 1997, EVA(R) improved more than $150,000,000 over 1996
levels which represents achievement of 37.5% of the four-year performance
goal applicable to the award. Messrs. Mead, Stecko, Tetzlaff, Dick, and
Blakely each were provisionally credited with 150% of their performance goal
for 1997, and 12,000; 7,500; 5,250; 5,250; and 4,500 shares were credited to
their respective Plan accounts, subject to adjustment, for payout at the end
of the performance cycle. The performance targets may be adjusted by the
Compensation and Benefits Committee of the Board of Directors to reflect the
effects of any corporate restructurings to the extent allowed by Section
162(m) of the Internal Revenue Code of 1986, as amended, and the regulations
applicable thereto.
(2) Each performance share equivalent unit represents one share of the Company's
Common Stock. The number of performance share equivalent units listed in
this column represents the target number of performance share equivalent
units that may be earned under the award.
(3) Generally, performance share equivalent units are earned at a rate of 25%
per year based on achievement of annual EVA(R) goals; however, a provisional
credit of 37.5% of shares, or 150% of the performance goal, was credited for
1997 due to EVA(R) improvement in excess of the performance goal.
(Notes continued on following page)
16
<PAGE> 20
(4) Represents maximum performance share equivalent units earned where the goals
achieved are consistently within the indicated performance range on an
individual year and accumulated four-year basis. The final performance
equivalent units earned will be based on the higher of performance share
equivalent units earned on an individual year basis or performance share
equivalent units earned on an accumulated four-year basis.
PENSION PLAN TABLE
The following table sets forth the aggregate estimated annual benefits
payable upon normal retirement to persons in specified remuneration and years of
credited participation classifications.
<TABLE>
<CAPTION>
YEARS OF CREDITED PARTICIPATION
-------------------------------------------
REMUNERATION 15 20 25 30
- ------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$600,000 $141,400 $188,600 $235,700 $ 282,900
700,000 165,000 220,000 275,000 330,000
800,000 188,600 251,400 314,300 377,100
900,000 212,100 282,900 353,600 424,300
1,000,000 235,700 314,300 392,900 471,400
1,200,000 282,900 377,100 471,400 565,700
1,400,000 330,000 440,000 550,000 660,000
1,600,000 377,100 502,900 628,600 754,300
1,800,000 424,300 565,700 707,100 848,600
2,000,000 471,400 628,600 785,700 942,900
2,200,000 518,600 691,400 864,300 1,037,100
</TABLE>
- ------------
NOTES:
1. The benefits set forth above are computed as a straight life annuity and are
based on years of credited participation and the employee's average
compensation (salary and bonus); such benefits are not subject to any
deduction for Social Security or other offset amounts. The years of credited
participation for Messrs. Mead, Stecko, Dick, and Blakely are 21, 4, 10, and
16, respectively (see the "Summary Compensation Table" on page 11 for salary
and bonus information for Messrs. Mead, Stecko, Dick, and Blakely).
2. Mr. Mead is entitled to the greater of benefits determined as described
above or under an alternative formula designed to replicate the plans
maintained by a former employer. Pursuant to the employment agreement with
Mr. Stecko described under the heading "Employment Contracts and Termination
of Employment and Change-in-Control Arrangements", the Company has agreed
that his total pension payments from the plans of the Company and his former
employer will at least equal the amount he would have received had he
continued to be covered under the pension plan maintained by his former
employer.
(Notes continued on following page)
17
<PAGE> 21
3. The Company provides Mr. Tetzlaff with an individual pension benefit. It is
based on Mr. Tetzlaff's salary and bonus and also provides for guaranteed
graduated minimum annual benefits of $100,000 per year beginning in 1998,
$200,000 per year beginning in 2003, and $300,000 per year beginning in 2008
(see the "Summary Compensation Table" on page 11 for salary and bonus
information for Mr. Tetzlaff).
------------------------
COMPENSATION OF DIRECTORS
FEE RESTRUCTURING. In January 1998, the Board of Directors made substantial
changes to the compensation and fee structure for Outside Directors. The purpose
of these changes is to more closely align the interests of the Outside Directors
with those of the Company's shareowners generally. The Board restructured the
prior cash and restricted stock compensation program with the following mix of
stock based securities which are tied more closely to the performance of the
Company's common stock:
- Paying 60% of the Outside Directors' retainer fee in stock-settled stock
equivalent units (as described below);
- Granting Directors annual options to purchase the Company's Common Stock,
with the number of options granted annually being adjusted to reflect
changes in the market price of the Company's Common Stock.
- Adopting an Outside Directors' Deferred Compensation Plan that offers
cash or stock-settled stock equivalent unit investment options.
In 1996, the Board also eliminated the Outside Directors' Retirement Plan.
COMPENSATION UNDER NEW FEE STRUCTURE. Under the new structure each Outside
Director is paid a retainer fee of $47,000 per annum for service on the Board of
Directors. Beginning in 1998, 60% ($28,200) of the fee is paid in the form of
stock-settled Common Stock Equivalents (the "Directors' Stock Equivalents") and
40% ($18,800) is paid in cash. Outside Directors also receive cash attendance
fees and committee chair and membership fees, and reimbursement of their
expenses for attending meetings of the Board of Directors. Outside Directors
receive $1,500 for each meeting of the Board of Directors attended, and each
Outside Director who serves as a Chairman of the Audit, Compensation and
Benefits, or Nominating and Management Development Committees is paid a fee of
$7,000 per Chairmanship. Outside Directors who serve as members of such
committees are paid $4,000 per committee membership. Members of the Executive
Committee receive $1,500 plus expenses for each meeting of that committee
attended.
18
<PAGE> 22
COMMON STOCK EQUIVALENTS/OPTIONS. For 1998, in payment of 60% of the
retainer fee, each Outside Director received approximately 755 Directors' Stock
Equivalents, with applicable dividend equivalents being reinvested as additional
Common Stock Equivalents. Directors' Stock Equivalents are payable in shares of
the Company's Common Stock after an Outside Director ceases to serve as a
Director of the Company. Final distribution of such shares may be made either in
a lump sum or in installments over a period of years. The Directors' Stock
Equivalents are issued at 100% of the fair market value on the date of the
grant. Each Outside Director receives an annual grant of options ("Directors
Options") to purchase shares of the Company's Common Stock as additional
incentive compensation for service on the Board of Directors. Beginning with the
grants made in January 1998 to purchase 1,000 shares of the Company's Common
Stock, the annual grant of Directors Options will be adjusted to reflect changes
in the market value of shares of the Company's Common Stock. Directors Options
are granted at 100% of fair market value on the day the option is granted with a
term of ten years and fully vest six months from the grant date. Once vested,
the Directors Options are exercisable at any time during the option term.
DIRECTORS' DEFERRED COMPENSATION PLAN. The Company has a voluntary deferred
compensation plan for Outside Directors. Pursuant to the plan, an Outside
Director may elect, prior to the commencement of the next calendar year, to have
up to 40% ($18,800) of his or her retainer fee and all or a portion of his or
her meeting fees credited to a deferred compensation account. Payment of
deferred fees, together with interest and/or earnings, may be deferred until the
earliest of (i) the year next following the date upon which he or she ceases to
be a director of the Company, or (ii) the year selected by the director for
commencement of payment of the deferred amount. The plan provides Outside
Directors with various investment options which include stock equivalent units
of the Company's Common Stock, which may be paid out in either cash or shares of
the Company's Common Stock.
1997 PAYMENTS UNDER PRIOR RETAINER FEE ARRANGEMENT. During 1997, each
Outside Director received under the prior compensation plan a cash retainer fee
of $32,000 and 300 restricted shares of the Company's Common Stock. The Outside
Directors also received the attendance and committee chair and membership fees
and reimbursement of their expenses for attending meetings of the board of
directors, as described above.
DISCONTINUED RETIREMENT PLAN. In 1996, the Board eliminated the Outside
Directors' retirement plan, which provided retirement benefits based on years of
service and the aggregate amount of director and committee fees being received
at the time of retirement. Annually, in satisfaction of residual obligations of
the Company under the discontinued retirement plan, Ms. Eickhoff and Messrs.
Andrews, Blumenthal, Weiss, and Wharton each receive 340 restricted shares of
Common Stock. Such restricted shares may not be sold, transferred, assigned,
pledged, or otherwise encumbered and are subject to forfeiture should the
director cease to serve on the Board prior to the expiration of the restricted
period that ends upon such director's
19
<PAGE> 23
normal retirement from the Board, unless such director is disabled, dies, or the
Compensation and Benefits Committee of the Board, at its discretion, determines
otherwise. During such restricted period, holders of restricted shares are
entitled to vote the shares and receive dividends.
------------------------
The report of the Compensation and Benefits Committee and the performance
graph that appear immediately below are not deemed to be soliciting material or
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 or the Securities Exchange Act of 1934 or incorporated by reference in
any document so filed.
TENNECO INC. COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The executive compensation philosophy, policies, plans, and programs of the
Company are under the supervision of the Compensation and Benefits Committee
(the "Committee"), which is composed of the directors named below, none of whom
is an officer or employee of the Company. The Committee has furnished the
following report on executive compensation:
Compensation Philosophy
The basic philosophy underlying Tenneco's executive compensation policies,
plans, and programs is that executive and shareowner financial interests should
be aligned as closely as possible, and the compensation package should be based
on delivering pay in line with performance.
Accordingly, the executive compensation program for the Company's Chief
Executive Officer ("CEO") and the other executives named in this proxy statement
("Named Executives"), as well as other executives of the Company, has been
structured to:
-- Reinforce a results-oriented management culture with executive pay that
varies according to overall corporate, division, and individual
performance against aggressive goals.
-- Focus on annual and long-term business results that lead to improvement
in shareowner value.
-- De-emphasize fixed compensation in the form of base salary and place
greater emphasis on variable performance-based and long-term
compensation.
-- Provide incentives, in the form of substantial long-term reward
potential, for high performing senior executives to remain employees of
the Company.
-- Align the interests of the Company's executives and shareowners by
accelerating the acquisition and requiring the retention of Tenneco
shares by senior executives.
-- Provide plans that are simple and easy to describe and understand.
20
<PAGE> 24
Based on these objectives, the executive compensation program has been
designed to generate compensation from several sources: salaries, annual cash
incentive awards, stock ownership opportunities, and other benefits typically
offered to executives by major corporations.
The Company's policy is to provide total compensation to its executives
based on performance that is competitive and at market levels, for companies of
comparable size, when financial and qualitative targets are met. Tenneco's
compensation plans provide that as an executive's level of responsibility
increases, (i) a greater portion of his/her potential total compensation is
based on performance (both individual and corporate), and a lesser portion is
comprised of salary, causing potentially greater variability in the individual's
total compensation from year-to-year, and (ii) the mix of compensation for that
executive shifts to a greater portion being derived from compensation plans that
result in stock ownership.
In designing and administering the components of the executive compensation
program, the Committee strives to balance short and long-term incentive
objectives and to employ prudent judgment when establishing performance
criteria, evaluating performance, and determining actual incentive payments.
Total executive compensation has two major components: annual cash
compensation comprised primarily of salary and bonus; and long-term incentives
comprised of performance shares, restricted stock and stock options. The
following is a description of each of the components of the executive
compensation program along with a discussion of the decisions and action taken
by the Committee with regard to 1997 compensation; there also follows a
discussion regarding the CEO's compensation.
Annual Cash Compensation Program
An executive's annual cash compensation consists of a base salary plus
amounts paid in lieu of Company matching contributions to the Thrift Plan and
bonuses under the Company's Executive Incentive Compensation Plan. Each year the
Committee reviews with the CEO and the senior human resources executive of the
Company an annual salary plan for the Company's executives and other key
management personnel (excluding the CEO), following which the Committee approves
that plan with changes that the Committee deems appropriate. The salary plan
that is developed is based in part on competitive market data and on assessments
of past and anticipated future performance. The Committee employs competitive
market data for directional and guideline purposes in combination with
corporate, divisional, and individual performance results. The competitive
market data used by the Committee includes several of the companies comprising
the Peer Group on the Performance Graph, which follows this report. However,
their inclusion in this data is a function of their participation in the various
nationally recognized compensation surveys in which the Company participates,
rather than an alignment of companies in similar industry groups. Salary levels
are structured within a range of reputable survey data for comparable companies
without regard to the performance of the companies surveyed. The range is used
to allow judgments as to the quality of Tenneco's performance and
21
<PAGE> 25
individual executive performance. The Committee also reviews, with the
assistance of the senior human resources executive and an outside consultant,
and sets the salary of the CEO based on similar information and criteria and the
Committee's assessment of his past performance and its expectations as to his
future contribution in leading the Company.
Annual performance goals are established under the Executive Incentive
Compensation Plan at the beginning of each year for purposes of determining
incentive awards for that year. At the conclusion of each year, the Committee
approves incentive award payments to executives based on the degree of
achievement of the goals established at the beginning of that year and on
judgments of individual performance. Using net income as a starting point, each
division receives incentive compensation funds based on judgmental
considerations including the degree of difficulty in meeting targets,
contribution to overall corporate performance, working capital management,
environmental and safety performance, quality initiatives, equal employment
opportunities performance, and leadership. The Committee does not place a
greater value on any particular one of these considerations; rather the
performance against such goals is considered as part of the overall information
considered by the Committee. The Committee makes individual awards based upon
its evaluation of the individual's contribution to the overall performance
results of his/her division.
The CEO, the Named Executives, and other senior executives of the Company,
its subsidiaries, and divisions may receive performance units under the 1996
Stock Ownership Plan. The performance units will permit these executives to earn
cash bonuses based upon the attainment of specified goals relating to earnings
per share from continuing operations or shareowner returns.
Long-Term Incentives -- Stock Awards
The Company's long-term stock incentive plan (1996 Stock Ownership Plan) is
designed to align a significant portion of the executive compensation plan with
shareowner interests. This plan permits the granting of a variety of long-term
awards including stock options, restricted stock, and performance shares. Shares
of stock are awarded based on an analysis of competitive levels of stock awards
and an assessment of individual performance. As an individual's level of
responsibility increases, a greater portion of variable performance related
compensation will be in the form of stock. For example, at the senior officer
level 50-55 percent of total compensation is in the form of stock options and
performance shares, while at lower levels 25-30 percent of the total is in
stock. In addition, the Company maintains requirements or guidelines for stock
ownership, depending on an individual's organization level, for executives of
the Company and its subsidiaries. The chairman and CEO is required to hold stock
equal to seven times salary and other senior officers three to four times
salary.
In conjunction with Tenneco's restructuring in December 1996, the Company
made a worldwide award of 100 stock options (or cash based option equivalents)
to all employees who
22
<PAGE> 26
did not participate in the Executive Option Program. This special option award
to approximately 44,000 employees was made in order for all Tenneco employees to
be able to share in the success of the "new" Tenneco and to ensure that the
interests of the entire Company were linked as closely as possible to the
interests of our shareowners.
Performance Considerations
The Committee determined that the level of the Company's performance during
1997 represented significant achievements. Factors considered by the Committee
included the following achievements and improvements:
FINANCIAL PERFORMANCE
- Tenneco's earnings from continuing operations increased from $1.28 per
diluted share in 1996 to $2.11 per diluted share in 1997, a 65 percent
increase, while improving Economic Value Added (EVA(R)(1)) by over $150
million over 1996 levels.
- Tenneco Automotive extended to 17 its record of consecutive quarter over
quarter revenue increases. Tenneco's Specialty Packaging business
recorded its thirteenth consecutive quarter over quarter of increasing
revenues.
- Tenneco Automotive's annual operating income increased by $94 million or
30 percent over 1996 levels before special charges of $64 million in the
fourth quarter of 1996. Specialty Packaging's operating income increased
by $65 million or 27 percent over the prior year. For both businesses,
operating income represented a record for the specific quarter during
each quarter of the year.
- Tenneco's efforts to continuously improve through the identification and
elimination of cost of quality throughout the organization reduced
failure costs, such as rework, scrap, and defects, by $235 million,
contributing $155 million to operating income or $0.54 to earnings per
share.
- Tenneco Packaging is ahead of schedule in its two-year $75 million Mill
Cost Reduction program and has achieved $40 million of savings in 1997.
Reductions in variable and fixed costs through process improvements and
headcount reductions are generating annual, ongoing savings that are
expected to total nearly $100 million upon completion.
- Tenneco completed public offerings of $600 million of long-term debt. In
combination with the recapitalization accomplished in late 1996, Tenneco
has reduced its long-term interest
- ---------------
1) EVA(R) is after-tax operating profit minus the annual cost of capital. By
increasing EVA(R), management believes it will build value for shareowners.
EVA(R) is a registered trademark of Stern Stewart & Co.
23
<PAGE> 27
rates, significantly lowered its exposure to short-term interest rates,
and lengthened its debt maturity profile through the year 2027.
- Tenneco refinanced two paper mills for $875 million resulting in lower
annual lease expense of about $15 million; more importantly, the new
leases give Tenneco ownership of the mills for tax purposes and are
expected to provide tax benefits which will have a cash flow benefit of
$100 million over the first two years of the leases and of $250 million
over the full five years of the leases. The transaction created a one
time accounting benefit of $38 million in the first quarter.
STRATEGIC INITIATIVES
- Tenneco continued the strategic redeployment and expansion of its asset
base during 1997. These strategic redeployment initiatives continued
Tenneco's efforts to reduce sensitivity to cyclicality of its businesses
while expanding Tenneco's presence in higher growth/higher margin
businesses and demonstrating Tenneco's commitment to follow the customer.
These redeployment actions help position Tenneco to increase shareowner
value:
-- Tenneco Packaging acquired the protective and flexible packaging
operations of NV Koninklijke KNP BT. Due to Tenneco Packaging's
ability to secure exclusive negotiations with KNP, the acquisition was
completed at 7 x EBIT (or 0.7 x revenue). This acquisition was at the
right price, an excellent strategic fit, and immediately contributed
to net income.
-- Tenneco Automotive acquired the operations of MICHEL, a Polish-based
manufacturer of replacement market exhaust systems for passenger cars,
and Autocan, a Mexican catalytic converter and exhaust pipe
manufacturer. Tenneco Automotive's global modular chassis alliance
with ITT Automotive teamed with Benteler Automotive, one of the
world's largest producers of chassis systems, to enhance its
relationships with vehicle manufacturers on a worldwide basis. Tenneco
Automotive also established a joint venture with Armstrong Holdings
Limited, a subsidiary of Metair Investments Limited, to manufacture
and market ride control products for automobiles and light commercial
vehicles in South Africa.
- Tenneco Automotive in 1997 made significant progress in transforming its
worldwide organization from a product-based to a customer-focused
structure. The restructuring of the North American aftermarket business
unit was completed while the restructuring of European operations was
accelerated. More than $80 million in annual savings is expected from the
Automotive reorganization and rationalization.
24
<PAGE> 28
ENVIRONMENTAL/HEALTH/SAFETY
- Tenneco moved closer to world class levels in the areas of environment,
health, and safety. Focusing on the welfare of Tenneco employees, overall
company-wide injury rates were reduced by approximately 15 percent for
the second consecutive year from an already low base...one of the lowest
in its industries. Tenneco's emphasis on environmental stewardship
reduced the total number of reportable releases/significant events by
approximately 75% over the prior year. Specific accomplishments in the
Health, Safety and Environmental area include:
- OSHA VPP-STAR certification received at the Paragould, Cozad and
Anderson facilities (Automotive) and 4(th) recertification at the Temple
facility (Specialty Packaging).
- One million workhours without a lost time accident achieved at four
Automotive facilities. Two plants achieved one million hours, one plant
two million hours and one plant three million hours at Specialty
Packaging. Two plants achieved one million hours at Paperboard
Packaging.
- ISO 14000 certification received at six Automotive facilities and one
Protective Packaging facility, all located in Europe.
- 89 percent of all Tenneco facilities operated the entire calendar year
of 1997 without a notice of an environmental violation, permit
exceedence or reportable release.
INNOVATIONS & AWARDS
- Tenneco in 1997 continued to demonstrate its ability to launch innovative
value-added products, including Tenneco Automotive's all-new Quiet
Flow(TM) premium muffler and Safe Tech SensaTrac(R) shock absorber lines.
Tenneco Packaging has found wide acceptance for its MealMaster(TM) rigid
container line while the new FastPak(TM) supermarket deli bag using
OneZip(R) closure is resulting in the addition of capacity.
- Tenneco was recognized by Industry Week magazine as one of the 100
best-managed companies in the world, and Tenneco Automotive's Paragould,
Arkansas manufacturing facility was named one of the Ten Best Plants in
America. This is the second consecutive year that Tenneco was selected by
Industry Week for both of these prestigious awards. Tenneco Automotive
operations were selected for two of five finalist nominations for the
coveted 1996 PACE Awards for innovative manufacturing.
Despite these many significant accomplishments set forth above, Tenneco's
stock performance has been disappointing relative to the broader stock market in
recent periods. The Committee believes that there are several reasons for this.
The most significant event took place at the end of 1996 with the emergence of
new Tenneco from a complex period of major restructuring, exiting four
industrial segments in three years, and concentrating on global
25
<PAGE> 29
manufacturing components in automotive parts and packaging. The new identity,
enhanced focus and considerable potential of the new Tenneco are not yet, in our
opinion, fully understood and appreciated by the market. In other similar
restructurings, there has been a lag before full market understanding of the new
entity.
The Committee believes that the restructuring changes implemented in 1996
and 1997 were sound and correct, enhancing future corporate growth. The
Committee expects that in 1998 demonstrated earnings performance, no longer
complicated by the past restructuring transactions, will overcome the
uncertainties about Tenneco's markets, products, performance and potential.
CEO and Key Executive Compensation
The Committee's assessment is that the Company, under the leadership of its
CEO, and the initiatives and programs he put in place have produced significant
improvements in Tenneco's overall performance including the factors set forth
above, which were specifically considered by the Committee in formulating his
compensation.
In January 1997, the CEO received an award of restricted stock to reflect
his significant contributions related to the planning and implementation of
Tenneco's restructuring. Over the years preceding completion of the
restructuring, Mr. Mead's contributions included his tenure as CEO and Chairman
of Case Corporation, Chairman of Albright & Wilson, and his management of the
Newport News Shipbuilding transition (Mr. Mead still serves as a director of
that company at the request of its investors and lenders). Messrs. Tetzlaff,
Dick and Blakely also received awards of restricted stock as well as special
cash awards at the beginning of the year to reflect their significant
contributions related to the successful completion of the restructurings. In
January 1997, the CEO also received a grant of performance shares in amounts
consistent with awards given to other senior executives and reflecting the
Committee's judgment based on its evaluation of Mr. Mead's contribution to the
Company. In May 1997, Mr. Mead was awarded options to purchase 107,000 shares of
common stock in Tenneco, representing the final one-third of a three year award.
In December 1997, Mr. Mead elected to receive options to purchase shares of
the Company's Common Stock in lieu of a cash bonus for 1997, and accordingly
options for 85,000 shares were granted to Mr. Mead. The Committee included a
premium in this option award that reflects the Committee's determination of the
risk associated with this type of award in lieu of a cash bonus award. Tenneco
shares will have to appreciate by at least 20% for Mr. Mead to realize the
original cash value of this award. Average bonuses for Tenneco officers were
below target levels in 1997.
Effective January 1, 1998, Mr. Mead's base salary was increased from
$970,000 to $980,000. The amount of his increase was consistent with the salary
increases for other senior
26
<PAGE> 30
corporate executives in the Company but was below the average merit increase
budget for other executives and managers, both in the market and at Tenneco. The
amount of Mr. Mead's increase was based on the Company's belief that CEO
compensation should primarily consist of performance-based incentives.
$1 Million Tax Limitation
The Internal Revenue Code of 1986, as amended, imposes a $1 million limit
on the amount that a publicly-traded corporation may deduct for compensation
paid to the CEO or a Named Executive who is employed on the last day of the
year; provided, however, "performance-based compensation" is excluded from this
$1 million limitation.
The 1996 Stock Ownership Plan incorporates the applicable requirements for
"performance-based compensation" with respect to certain types of awards.
Compensation and Benefits Committee
Clifton R. Wharton, Jr.--Chairman
Mark Andrews
Belton K. Johnson
Sir David Plastow
27
<PAGE> 31
PERFORMANCE GRAPH
The following performance graph compares the Cumulative Total Return (as
defined below for the following graph) on a $100 investment on December 31,
1992, in shares of common stock of Old Tenneco with (i) the Standard & Poor's
500 Stock Index and (ii) an industry peer group that includes representative
companies from the industries in which the Company's automotive and packaging
divisions compete.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Tenneco Inc. S&P 500 Peer Group
<S> <C> <C> <C>
12/1992 100 100 100
12/1993 135.05 110.08 114.87
12/1994 112.83 111.53 111.68
12/1995 136.39 153.45 127.42
12/1996 149.71 188.68 156.52
12/1997 134.73 251.62 180.84
</TABLE>
BASE-DECEMBER 31, 1992=100
- ------------
NOTES:
1. "Cumulative Total Return" of Old Tenneco is based on share price appreciation
plus dividends for the five years from December 31, 1992, through December
31, 1997 (assuming the reinvestment of dividends over such period and the
reinvestment of the value of the Newport News Shipbuilding Inc. and El Paso
shares received as part of the 1996 reorganization, into shares of the
Company's Common Stock).
2. The Peer Group, constructed by the Company and comprised of the following
companies (which are competitors of the Company's automotive and packaging
divisions), is based on market capitalization weighted Cumulative Total
Return of the companies comprising the Automotive Parts Portfolio and the
Packaging/Forest & Paper Products Portfolio, respectively.
(Notes continued on following page)
28
<PAGE> 32
Each portfolio is then weighted to reflect Tenneco's revenues within such
industry for each year.
Automotive Parts Portfolio: Allied Signal Inc., Arvin Industries, Inc.,
Cooper Industries, Inc., Dana Corporation, Echlin Inc., ITT Industries,
Inc., Magna International Inc., and TRW Inc.; and Packaging/Forest & Paper
Products Portfolio: AEP Industries Inc., Bemis Company, Inc., First Brands
Corporation, Great Pacific Enterprises Inc., Georgia-Pacific Corporation,
International Paper Company, Fort James Corp., Jefferson Smurfit Corporation,
Sonoco Products Company, Stone Container Corporation, The Carlisle Companies
Inc., and Temple-Inland Inc.
3. The stock performance shown on this graph is not necessarily indicative of
future performance of the Company's Common Stock.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has an agreement with Mr. Mead for his employment with the
Company providing for the payment to Mr. Mead of a salary of not less than
$575,000 per year (with such increases as determined by the Compensation and
Benefits Committee of the Board). Also, the Company has agreed that in the event
Mr. Mead's employment is terminated for any reason other than for cause, death,
or permanent disability, the Company will pay to Mr. Mead an amount equal to
three times his annual salary plus $300,000. In the event of Mr. Mead's death
prior to retirement, all restrictions remaining on any outstanding awards under
the Company's Stock Ownership Plan will lapse, and the shares will be
distributed to his estate or his beneficiary, as so designated.
The Company has an agreement with Mr. Dick for his employment with the
Company providing for the payment to Mr. Dick of a salary of not less than
$325,000 per year (with such increases as determined by the Compensation and
Benefits Committee of the Board). Also, the Company has agreed that in the event
Mr. Dick's employment is terminated for any reason other than for cause, death,
or permanent disability, the Company will pay to Mr. Dick an amount equal to his
annual salary.
The Company has an agreement with Mr. Stecko for his employment with
Tenneco Packaging Inc. providing for the payment to Mr. Stecko of a salary of
not less than $320,000 per year (with such increases as determined by the
Compensation and Benefits Committee of the Board). Also, the Company has agreed
that, in the event Mr. Stecko's employment is terminated for any reason other
than for cause, death, or permanent disability, the Company will pay to Mr.
Stecko an amount equal to three times his base salary and will purchase his home
in accordance with the Company's home purchase program. In the event Mr.
Stecko's employment is terminated within three years of the date of a change in
control of Tenneco Packaging Inc., the Company will pay Mr. Stecko an amount
equal to three times his base salary.
29
<PAGE> 33
The Company has established a Benefits Protection Program (the "Program")
to enable the Company to continue to attract, retain, and motivate highly
qualified officers and employees by eliminating (to the maximum practicable
extent) any concern on the part of such individuals that their job security or
benefit entitlements will be jeopardized by a "Change-in-Control" of the Company
(as such term is defined in the Program). The Program is designed to achieve
this purpose through (i) the establishment of a severance plan for the benefit
of certain employees and officers whose position is terminated under certain
circumstances following such Change-in-Control and (ii) the establishment of a
trust fund designed to ensure the payment of benefits accrued under certain
plans. Under the Program, Messrs. Mead, Stecko, Tetzlaff, Dick, and Blakely
would have become entitled to receive payments from the Company in the amount of
$4,611,000; $2,859,000; $2,499,000; $2,349,000, and $2,214,000, respectively,
had their position been terminated on December 31, 1997, and, in addition,
restricted shares held in the name of such individuals would have automatically
reverted to the Company, and the Company would have been obliged to pay such
individuals the fair market value thereof all as provided by such plans. The
performance share equivalent units would also have been fully vested and paid.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During fiscal year 1997, certain executive officers of the Company were
indebted to the Company. Such indebtedness was incurred in connection with
relocation of such persons and all amounts outstanding are secured by a
subordinated mortgage note, which accrues interest at the rate of 3% per year on
the unpaid balance and matures at the earlier of the individual's termination of
employment or the year 2026. Principal is payable in full at maturity and the
payment of interest has been deferred for 1997. The Company has provided low
interest loans in the past in connection with executive relocations. The
following sets forth the approximate aggregate amount outstanding as of December
31, 1997 (and is the largest aggregate amount outstanding during 1997); Dana G.
Mead, $412,659; John Castellani, $401,450; Stacy S. Dick, $420,044; Robert T.
Blakely, $418,626; Barry R. Schuman, $425,352; and Karl A. Stewart, $425,582.
During fiscal year 1997, the Company and its subsidiaries paid the firm
Eickhoff Economics, Inc., of which Ms. Eickhoff is the sole owner, approximately
$25,000 for financial consulting services; and paid the law firm of Jenner &
Block, of which Theodore R. Tetzlaff, General Counsel of the Company, is a
partner, approximately $13.7 million for legal services (pursuant to an
agreement with the Company, Mr. Tetzlaff has agreed to devote whatever time is
necessary to attend to the responsibilities of General Counsel of the Company
and will not receive from Jenner & Block any part of the fees paid by the
Company to that firm during such period he serves as General Counsel). Such
payments were for transactions in the ordinary course of business.
30
<PAGE> 34
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Andrews, Brady, Johnson, Plastow, and Wharton are members of the
Compensation and Benefits Committee of the Board of Directors (the "Committee").
All five members of the Committee are Outside Directors, none of whom has any
direct or indirect material interest in or relationship with the Company or any
of its subsidiaries, other than stock ownership, as discussed above, and as
relates to his position as a Director. During 1997, none of the executive
officers of the Company served on the board of directors or compensation
committee of any entity whose officers served either on the Board of Directors
of the Company or on the Committee.
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL.
Financial statements of the Company and its consolidated subsidiaries are
included in the Company's Annual Report furnished to all shareowners. Upon
recommendation of the Audit Committee of the Board of Directors, the Board of
Directors has appointed Arthur Andersen LLP as independent public accountants
for the Company to examine its consolidated financial statements for the year
ending December 31, 1998, and has determined that it would be desirable to
request that the shareowners approve the appointment. The vote of a majority of
the shares, present in person or by proxy, constituting a quorum at the meeting
is required to approve the appointment. If the shareowners should not approve
the appointment, the Audit Committee and the Board would reconsider the
appointment. Arthur Andersen LLP also acted as the Company's principal
accountants for the fiscal year ended December 31, 1997. Representatives of
Arthur Andersen LLP are expected to be present at the Annual Meeting and will
have the opportunity to make a statement if they desire to do so and are also
expected to be available to respond to appropriate questions.
SHAREOWNER PROPOSAL
(ITEM 3)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS SHAREOWNER PROPOSAL.
The Company has been informed that J. F. Quilter, Trustee, 500 Westridge
Dr., Portola Valley, CA 94028-7721, the holder of 1,550 shares of Common Stock,
intends to submit a proposal for action at the Annual Meeting of Shareowners.
The vote of a majority of the shares, present in person or by proxy,
constituting a quorum at the meeting is required to approve the shareowner
proposal. The Board of Directors is opposed to this proposal.
31
<PAGE> 35
SHAREOWNER PROPOSAL.
"WHEREAS, the usual practice for annual stockholder meetings is to include
a statement to the effect that 'if no direction is made the proxy will be voted
for the nominations made and positions held by the management'.
"This clouds the voting results as to votes for directors and auditors,
does not reflect the desires of voting stockholders and skews the voting
results. In a political election it would be tantamount to counting votes of
those who do not vote or abstain as being in favor of the incumbent.
"THEREFORE it is resolved that the shareholders recommend that the Board of
Directors take the necessary steps to cause proxy balloting on items contained
in the notice of the annual shareholders meeting to be tabulated as in favor,
opposed and returned unmarked ballots with the decision being determined by the
count of in favor and opposed."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS SHAREOWNER PROPOSAL.
The Board of Directors believes that the proposal is not in the best
interests of the Company and its Shareowners and, accordingly, recommends that
Shareowners vote AGAINST the proposal.
Historically the Company's proxy statements and proxy cards have provided
Shareowners with the ability to provide a proxy in accordance with the
applicable laws of the State of Delaware and the federal proxy rules.
Shareowners are not required to mark proxies for a matter described in the
Company's proxy statements in order to have their proxies counted in voting in
connection with such matter, so long as their proxies are properly signed. For
more than fifty years, the federal proxy rules promulgated by the Securities and
Exchange Commission (the "SEC") have explicitly recognized and permitted this
practice, and the Company follows the format permitted by the SEC. Accordingly,
each of the Company's proxy cards indicates in bold-face that:
"THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2
AND AGAINST ITEM 3."
This procedure is described in a number of places in the proxy card. In his
proposal, the proponent states that the procedure "does not reflect the desires
of the voting stockholders and skews the voting results." Your Board disagrees
with this statement and believes that Shareowners are aware of the effect of
their actions. The Board of Directors has confidence that when Shareowners sign
and return their proxy cards they intend for their votes to be cast in the
manner set forth on their proxy card, irrespective of whether the vote was
directed by marking a box, or by leaving a box unmarked thereby directing the
proxy to vote in accordance with management's recommendation - as is clearly set
forth on the proxy card. In short, your Board believes that this custom is a
procedure consistently adhered to by substantially all other public companies,
that it reflects the desires of the voting Shareowners, and that it correctly
reflects the voting results.
32
<PAGE> 36
The Board is not aware of any valid reason to adopt the procedure outlined
in the shareowner proposal and believes that Shareowners fully understand the
voting process as it now exists.
The Board of Directors urges a vote AGAINST the shareowner proposal (Item
3).
OTHER MATTERS
The Board of Directors is not aware of any other matters that may properly
come before the Annual Meeting. However, should any such matters come before the
Annual Meeting, it is the intention of the persons named in the enclosed form of
Proxy to vote all proxies (unless otherwise directed by Shareowners) in
accordance with their judgment on such matters.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTE
The Company's By-Laws require a majority of the shares authorized to vote
at the Annual Meeting of Shareowners be present, in person or by proxy, to
establish a quorum. Shares abstaining with regard to a matter to be presented to
the Shareowners and shares for which voting power has been withheld, such as
broker non-votes, constitute part of the quorum present with respect to such
matter. Consequently, the number of shares representing the quorum present for
the meeting is the same as the number of shares present for action on a
particular proposal.
SOLICITATION OF PROXIES AND VOTING
A Proxy may be revoked by notice in writing to the Secretary at any time
prior to the exercise thereof.
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers, and
employees, personally or by telephone, telecopy, or telegram. Proxy cards and
material also will be distributed to beneficial owners of stock through brokers,
custodians, nominees, and other like parties, and the Company expects to
reimburse such parties for their charges and expenses. Georgeson & Co. Inc., New
York, New York, has been retained to assist the Company in the solicitation of
proxies at a fee estimated not to exceed $25,000.
33
<PAGE> 37
SUBMISSION OF SHAREOWNER PROPOSALS
Any proposal to be presented by a shareowner at the Company's 1999 Annual
Meeting of Shareowners must be received by the Company by December 2, 1998, so
that it may be considered by the Company for inclusion in its proxy statement
and form of proxy relating to that meeting.
KARL A. STEWART
Vice President and Secretary
------------------------
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO
KARL A. STEWART, VICE PRESIDENT AND SECRETARY, TENNECO INC., 1275 KING STREET,
GREENWICH, CONNECTICUT 06831-2946.
34
<PAGE> 38
NOTICE OF ANNUAL
MEETING AND
PROXY STATEMENT
-------------------------------------
ANNUAL MEETING
OF SHAREOWNERS
MAY 12, 1998
TENNECO INC
1275 KING STREET, GREENWICH,
CONNECTICUT 06831-2946
TENNECO LOGO
<PAGE> 39
TENNECO INC
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000 [TENNECO LOGO]
April 1, 1998
Dear Benefit Plan Participant:
The Annual Meeting of Shareowners of Tenneco Inc. is scheduled to be held
in Greenwich, Connecticut, at 10:30 a.m., on Tuesday, May 12, 1998. A copy of
the Notice and Proxy Statement, which is being sent to all registered
shareowners in connection with the Annual Meeting is enclosed for your
information.
Also enclosed with this letter is a form of proxy card, which designates
the number of shares held in your benefit plan account. By executing this proxy
card you instruct the benefit plan trustee (the "Trustee") how to vote the
shares of Tenneco Inc. stock in your account which you are entitled to vote. The
Trustee will vote all shares eligible to be voted by benefit plan participants
in accordance with their instructions.
If you return your form of proxy executed but without furnishing voting
instructions, the eligible shares in your account will be voted by the Trustee,
as holder of record of the shares in your account, FOR the election of the
nominees for Directors named in the Proxy Statement, FOR the approval of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the year 1998, AGAINST the shareowner proposal, and as
recommended by Management on all other matters to be considered at the Annual
Meeting.
If you do not return your executed form of proxy to the Trustee, then your
shares can be voted by the Trustee only in accordance with the requirements of
your benefit plan, which may or may not reflect your views.
Your vote is important. Please send your executed form of proxy card with
your voting instructions at your earliest opportunity. For your convenience, a
return envelope is enclosed.
YOUR BENEFITS COMMITTEE
<PAGE> 40
[TENNECO LOGO]
TENNECO INC
ANNUAL MEETING OF SHAREOWNERS MAY 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint D.G. MEAD, W.L. WEISS, and K.A.
P STEWART, and any of them, with full power of substitution, as Proxies to
vote, as directed on the reverse side of this card, or, if not so directed,
R in accordance with the Board of Directors' recommendations, all shares of
Tenneco Inc. held of record by the undersigned at the close of business on
O March 20, 1998, and entitled to vote at the Annual Meeting of Shareowners
of Tenneco Inc. to be held at 10:30 a.m., May 12, 1998, at the Corporate
X Headquarters of Tenneco Inc., 1275 King Street, Greenwich, Connecticut, or
at any adjournment thereof, and to vote, in their discretion, upon such
Y other matters as may properly come before the Annual Meeting.
Election of Directors-Nominees:
Larry D. Brady
M. Kathryn Eickhoff
Dana G. Mead
Roger B. Porter
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxies cannot vote your
shares unless you sign and return this card.
<PAGE> 41
[ 0410
[X] Please mark your
votes as in this
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2
AND AGAINST ITEM 3.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2 AND AGAINST ITEM 3 THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
THE SHAREOWNER PROPOSAL (ITEM 3)
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of [ ] [ ] [ ] 3. Shareowner Proposal [ ] [ ] [ ]
Directors Independent Approval of
(see reverse) Accountants Proposal Concerning
For, except vote withheld from the for year 1998 Voting of Proxies
following nominee(s): -------------------------------------------
4. In the discretion of the Proxies named
- -------------------------------------------- herein, the Proxies are authorized to
vote upon other matters as may properly
come before the meeting.
- ------------------------------------------------------------------------------------------------------------------------------------
The signer hereby revokes all proxies
heretofore given by the signer to vote
at said meeting or any adjournments
thereof.
NOTE: Please sign exactly as name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee, or
guardian, please give full title
as such.
----------------------------------------
----------------------------------------
SIGNATURE DATE
</TABLE>
