<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, 1999
To the Shareowners of Tenneco Inc.:
The Annual Meeting of Shareowners of the Company will be held Tuesday, May
11, 1999, 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 1998 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 either
completing, executing, and returning your Proxy promptly or using our new
telephone or internet voting procedures.
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 11, 1999
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 11, 1999, at 10:30 a.m., local time.
The purposes of the meeting are:
1. To elect two Directors for a term to expire at the 2002 Annual Meeting
of Shareowners;
2. To approve the appointment of Arthur Andersen LLP as independent public
accountants for the year 1999;
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 19, 1999, 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
either 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, or utilize our new telephone or internet voting procedures.
By Order of the Board of Directors
KARL A. STEWART
Secretary
Greenwich, Connecticut
April 1, 1999
<PAGE> 4
TENNECO INC [TENNECO LOGO]
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000
April 1, 1999
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 11, 1999, 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 19, 1999, 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 19, 1999, there were 169,991,634 shares
of Common Stock outstanding and entitled to vote. This Proxy Statement is first
being mailed to Shareowners on or about April 1, 1999. 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.
ELECTION OF DIRECTORS
(ITEM 1)
The Board of Directors presently consists of 12 members, divided into three
classes. The following two nominees (Class III), 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 2002 Annual Meeting of Shareowners and
until their successors are chosen and have qualified. Eight directors will
continue to serve as set forth below. Messrs. Henry U. Harris, Jr. and Clifton
R. Wharton, Jr., currently members 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, 1999), 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 2002 ANNUAL MEETING OF SHAREOWNERS (CLASS
III)
<TABLE>
<S> <C>
Sir David Plastow was 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,
from 1990 to 1998. 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 66 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; the Nominating
and Management Development Committee; and the Three-year
Independent Director Evaluation Committee.
- --------------------------------------------------------------------------------------------
Paul T. Stecko is President and Chief Operating Officer of
[PAUL T. STECKO PHOTO] the Company. Mr. Stecko has served as an executive officer
of the Company since January 1, 1997 when he was elected
Chief Operating Officer; thereafter, on November 16, 1998,
he was elected as a Director and President of the Company.
He also served as the President and Chief Executive Officer
of Tenneco Packaging Inc., a wholly-owned subsidiary of the
Company, from December 1993 until January 1997. Prior to
that time, Mr. Stecko served as an executive officer of
International Paper Corporation for three years and a
Division Manufacturing Manager for two years. He is also a
director of State Farm Mutual Insurance Company.
Mr. Stecko is 54 and has been a Director of the Company
since November 1998.
</TABLE>
2
<PAGE> 6
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 72 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.
- --------------------------------------------------------------------------------------------
W. Michael Blumenthal was a senior advisor to Lazard Freres
[W. MICHAEL BLUMENTHAL PHOTO] & Co. L.L.C., an investment banking firm, from 1995 through
1996 and was a limited partner of that firm from April 1990
through December 1994. Prior to that time, he was Chairman
of Unisys Corporation, a manufacturer of business
information systems, and had been an executive officer of
that company for more than five years. Mr. Blumenthal also
served as U.S. Secretary of the Treasury from 1977 to 1979.
He is also a director of DaimlerChrysler Services (debis)
AG.
Mr. Blumenthal is 73 and has been a Director of the Company
since 1985. He is a member of the Executive Committee and a
member and the Chairman of the Nominating and Management
Development Committee.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
Belton K. Johnson is engaged in investments and has pursued such interests
[BELTON K. JOHNSON PHOTO] for more than five years.
Mr. Johnson is 69 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 has been Chairman Emeritus of Ameritech Corporation, a
[WILLIAM L. WEISS PHOTO] 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 69 and has been a Director of the Company since 1994. He is a
member and the Chairman of the Audit Committee and the Three-year
Independent Director Evaluation Committee.
</TABLE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
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 D. 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 56 and has been a Director of the Company since
January 1998 and is a member of the Compensation and
Benefits Committee and the Three-year Independent Director
Evaluation Committee.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
M. Kathryn Eickhoff has been President of Eickhoff Economics, Inc., a
[M. KATHRYN EICKHOFF PHOTO] 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 59, 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.
- -----------------------------------------------------------------------------------------------------------
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 Textron Inc., Zurich Allied AG and Pfizer Inc.
Mr. Mead is 63 and has been a Director of the Company since 1992. He is a
member and the Chairman of the Executive Committee.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
Roger B. Porter is Director of the Center for Business and
[ROGER B. PORTER PHOTO] Government at 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 52 and has been a Director of the Company
since January 1998 and is a member of the Audit Committee
and the Three-year Independent Director Evaluation
Committee.
</TABLE>
6
<PAGE> 10
STOCK OWNERSHIP
MANAGEMENT
The following table sets forth, at January 31, 1999, 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 12; 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 executive officers 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................................... 13,098 1,565 14,663
W. Michael Blumenthal.......................... 11,845 1,565 13,410
Larry D. Brady................................. 1,000 2,684 3,684
M. Kathryn Eickhoff............................ 8,725 1,565 10,290
Henry U. Harris, Jr............................ 12,827 1,565 14,392
Belton K. Johnson.............................. 12,939 1,565 14,504
Dana G. Mead................................... 765,486 43,779 809,265(5)
Sir David Plastow.............................. 3,400 2,493 5,893
Roger B. Porter................................ 1,000 2,684 3,684
Paul T. Stecko................................. 180,634 -- 180,634
William L. Weiss............................... 5,505 1,565 7,070
Clifton R. Wharton, Jr......................... 6,270 1,565 7,835
EXECUTIVE OFFICERS
- -----------------------------------------------
Theodore R. Tetzlaff........................... 148,376 -- 148,376
Robert T. Blakely.............................. 154,535 -- 154,535
John J. Castellani............................. 70,961 -- 70,961
All executive officers and directors or
nominees as a group(6)....................... 1,437,553 62,598 1,500,151
</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, 1999, Messrs. Mead, Stecko, Tetzlaff,
Blakely, and Castellani held 66,025; 40,000; 20,535; 19,425; and 10,000
restricted shares, respectively, and Ms. Eickhoff and Messrs. Andrews,
Blumenthal, Harris, Johnson, Weiss, and Wharton held 3,963; 6,547; 7,183;
300; 5,828; 680; and 2,580 restricted shares, respectively; and (ii) shares
that are subject to options, which were granted under the Stock Ownership
Plan and are exercisable at January 31, 1999, or within 60 days of said
date, for Messrs. Mead, Stecko, Tetzlaff, Blakely and Castellani, to
purchase 616,176; 115,481; 89,871; 84,939; and 52,808 shares respectively,
and 1,000 shares for each of Ms. Eickhoff and Messrs. Andrews, Blumenthal,
Brady, Harris, Johnson, Plastow, Porter, Weiss and Wharton.
(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, except that certain Common
Stock Equivalents credited under the Outside Directors' Deferred
Compensation Plan may be distributed in cash. For more information on Common
Stock Equivalents, see "Common Stock Equivalents/Options" and "Directors'
Deferred Compensation Plan" on page 17.
(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 991,185 shares that are subject to options that are exercisable
within 60 days of January 31, 1999, by all executive officers and directors
of the Company as a group, and includes 183,066 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 19, 1999, the name, address,
and Common Stock ownership for each person known by the Company to be the
beneficial owner of more than five
8
<PAGE> 12
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(1)
----------------------- ---------------- --------------------
<S> <C> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc. ...... 21,206,280(2) 12.47%(2)
One McKinney Plaza
3232 McKinney Avenue
15th Floor
Dallas, Texas 75204-2429
Morgan Stanley Dean Witter & Co. ............... 9,748,992(3) 5.73%(3)
1585 Broadway
New York, New York 10036
Delaware Management Holdings, Inc. ............. 9,676,821(4) 5.69%(4)
2005 Market Street
Philadelphia, Pennsylvania 19103
</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 5,104,460 shares, shared voting power over 16,101,820
shares, and sole dispositive power over 21,206,280 shares. Barrow, Hanley
also advised the Company that it is a registered investment advisor and
these shares are held on behalf of various clients. These shares include
16,365,800 shares (9.62%) held on behalf of the Vanguard Windsor II Fund,
The Vanguard Group, 455 Devon Park Drive, Wayne, Pennsylvania 19087-1815.
(3) Morgan Stanley Dean Witter & Co. has indicated that it has shared voting
power over 9,599,905 shares, and shared dispositive power over 9,748,992
shares.
(4) Delaware Management Holdings, Inc. has indicated that it has sole voting
power over 9,189,721 shares, shared voting power over 487,100 shares, and
sole dispositive power over 9,676,821 shares.
THE BOARD OF DIRECTORS
The Board of Directors of the Company is currently composed of 12 members,
consisting of 10 members who are not officers of the Company (the "Outside
Directors") and 2 members who are officers of the Company (the "Inside
Directors"). With the retirement of Messrs. Harris and Wharton in May of this
year, the Board will be composed of 8 Outside Directors and 2 Inside Directors.
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
9
<PAGE> 13
from time to time will designate, an Outside Director as the "lead" director
with respect to special matters or discussions affecting the Company.
During 1998, the Board of Directors held nine 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 five 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. Four meetings of the Audit
Committee were held in 1998.
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.
One meeting of the Compensation and Benefits Committee was held in 1998.
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 membership on the Board of Directors and recommend a
slate of nominees for election as directors at the Company's Annual Meeting of
Shareowners; (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 1998.
The Executive Committee, composed of 4 Outside Directors and 1 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 1998.
10
<PAGE> 14
The Three-year Independent Director Evaluation Committee, comprised solely
of Outside Directors, has the responsibility, among other things, to review the
Company's Qualified Offer Rights Plan (adopted in September 1998) at least every
three years and, if it deems it appropriate, recommend that the full Board
modify or terminate such Plan. No meetings of the Three-year Independent
Director Evaluation Committee were held in 1998.
A Shareowner of the Company may nominate persons for election to the Board
of the Company if the Shareowner submits such nomination, together with certain
related information required by the Company's By-Laws, in writing to the
Secretary of the Company not less than 50 days nor more than 75 days prior to
the date of any Annual Meeting of Shareowners; provided, however, that if less
than 65 days' notice or prior public disclosure of the meeting date is given or
made to Shareowners, notice of the matter must be received not later than the
close of business on the 15th day following the date of notice or public
disclosure of the meeting date, whichever occurs first.
11
<PAGE> 15
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 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................... 1998 $1,029,617 $540,000 $ 362,191 $1,521,450 -- -- $ 39,959
Chairman and Chief 1997 $1,012,638 --(2) $ 332,874 $ 950,078(8) 192,000 -- $ 39,251
Executive Officer 1996 $ 990,375 $900,000 $ 815,217 -- 213,000 $2,500,000 $153,256
Paul T. Stecko................. 1998 $ 592,063 $400,000 $ 365,501 $ 845,250 -- -- $ 10,869
Director, President 1997 $ 531,767 $550,000 $ 90,539 $ 604,650 94,509 -- $ 8,708
and Chief Operating 1996 $ 426,258 $450,000 $ 32,400 -- 120,000 $1,200,000 $ 32,767
Officer
Theodore R. Tetzlaff........... 1998 $ 400,000 $240,000 $ 107,608 $ 507,150 -- -- --
General Counsel 1997 $ 400,000 $600,000(8) $ 69,394 $ 250,116(8) 46,700 -- --
1996 $ 400,000 $350,000 $ 28,350 -- 93,300 $1,050,000 $ 25,782
Robert T. Blakely.............. 1998 $ 445,760 $220,000 $ 134,544 $ 507,150 -- -- $ 15,254
Executive Vice 1997 $ 441,940 $480,000(8) $ 577,513 $ 199,957(8) 40,000 -- $ 14,693
President and 1996 $ 433,300 $250,000 $ 404,015 -- 80,000 $ 900,000 $ 62,308
Chief Financial Officer
John J. Castellani............. 1998 $ 321,367 $110,000 $ 199,530 $ 338,100 -- -- $ 13,113
Executive Vice 1997 $ 311,816 $300,000(8) $ 145,239 -- 40,000 -- $ 12,547
President 1996 $ 276,975 $180,000 $ 11,595 -- 40,000 $ 350,000 $ 31,971
</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.
(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 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
(Notes continued on following page)
12
<PAGE> 16
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 1998: $49,000 for
relocation expenses, $92,150 for use of Company-owned property, $76,886 in
reimbursement for taxes, and $80,400 in Dividend Equivalents paid to Mr.
Mead; $144,456 for relocation expenses, $92,951 in reimbursement for taxes
and $52,800 in Dividend Equivalents for Mr. Stecko; $40,000 perquisite
allowance, $34,008 for use of Company-owned property and $33,600 in Dividend
Equivalents for Mr. Tetzlaff; $40,000 perquisite allowance, $21,100 for
relocation expenses, $5,140 in reimbursement for taxes, and $30,000 in
Dividend Equivalents paid to Mr. Blakely; and $94,569 for relocation
expenses, $33,556 in reimbursement for taxes, and $20,400 in Dividend
Equivalents paid to Mr. Castellani. During 1997: $119,398 for relocation
expenses, $60,994 for use of Company-owned property, $52,965 in
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; $280,665 for
relocation expenses, $194,510 in reimbursement for taxes, and $14,400 in
Dividend Equivalents paid to Mr. Blakely; and $30,000 perquisite allowance,
$67,806 for relocation expenses, $25,557 in reimbursement for taxes, and
$9,600 in Dividend Equivalents paid to Mr. Castellani. During 1996: $378,755
for relocation expenses, $247,105 in 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; $257,407 for
relocation expenses, $66,356 in reimbursement for taxes, and $24,300 in
Dividend Equivalents paid to Mr. Blakely; and $2,145 in reimbursement for
taxes, and $9,450 in Dividend Equivalents paid to Mr. Castellani.
(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, 1998, Messrs. Mead, Stecko,
Tetzlaff, and Blakely held restricted shares and/or performance share
equivalent units, respectively, under such plan. The value at December 31,
1998 (based on a per share/equivalent unit price of $34.063 on that date) of
all restricted shares/performance units held was $4,531,231 for Mr. Mead;
$2,861,292 for Mr. Stecko; $1,653,248 for Mr. Tetzlaff; $1,513,249 for Mr.
Blakely and $919,701 for Mr. Castellani. 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 Messrs. Mead and Stecko,
together with all options awarded to Messrs. Tetzlaff, Blakely and
Castellani represent the final one-third of a three-year award. For 1996,
the number of
(Notes continued on following page)
13
<PAGE> 17
options does not include options previously granted by the company then
known as Tenneco Inc. ("Old Tenneco") and converted into options to purchase
shares of the Company's Common Stock.
(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, Blakely and Castellani received 50,000; 24,000; 21,000;
18,000 and 7,000 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).
(7) Includes amounts attributable during 1998 to benefit plans of the Company as
follows:
(a) The amounts contributed pursuant to the Thrift Plan for the accounts of
Messrs. Mead, Stecko, Blakely and Castellani were $6,250; $6,250;
$10,000 and $6,250, respectively.
(b) The dollar values paid by the Company for insurance premiums under the
Company's group life insurance plan for Messrs. Mead, Stecko, Blakely
and Castellani were $33,709; $4,619; $5,254 and $6,863, respectively.
(8) Includes a special one-time award of 21,025 restricted shares to Mr. Mead;
$250,000 and 5,535 restricted shares to Mr. Tetzlaff; $200,000 and 4,425
restricted shares to Mr. Blakely; and $100,000 to Mr. Castellani, to reflect
their significant contributions related to the successful completion of
Tenneco's restructuring in December 1996.
OPTIONS EXERCISED IN 1998 AND 1998 YEAR-END VALUES
The following table sets forth the number of stock options held at December
31, 1998, by the persons named in the Summary Compensation Table. No options to
acquire shares of the Company's Common Stock were exercised during 1998.
<TABLE>
<CAPTION>
TOTAL NO. OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS HELD
DECEMBER 31, 1998 AT DECEMBER 31, 1998
----------------------------- -----------------------------
EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Dana G. Mead.......................... 519,434 466,075 -- --
Paul T. Stecko........................ 100,002 188,812 -- --
Theodore R. Tetzlaff.................. 78,262 136,042 -- --
Robert T. Blakely..................... 73,330 118,275 -- --
John J. Castellani.................... 45,068 74,406 -- --
</TABLE>
14
<PAGE> 18
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 1998 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........... 35,000 4 Years 25% 100% 150%
Paul T. Stecko......... 24,000 4 Years 25% 100% 150%
Theodore R. Tetzlaff... 14,000 4 Years 25% 100% 150%
Robert T. Blakely...... 13,000 4 Years 25% 100% 150%
John J. Castellani..... 9,000 4 Years 25% 100% 150%
</TABLE>
- ------------
(1) In January 1998, 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: (i) Economic Value Added (EVA(R), a registered trademark of Stern
Stewart & Co.), which is defined as after-tax operating profit minus the
annual cost of capital, for 1998; and (ii) earnings per share for following
years. 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) Performance share equivalent units are earned at a rate of 25% per year
based on achievement of annual EVA(R) goals for 1998 and earnings per share
goals for following years.
(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.
15
<PAGE> 19
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, Blakely, and Castellani are 22, 21,
17, and 20 respectively (see the Summary Compensation Table on page 12 for
salary and bonus information for Messrs. Mead, Stecko, Blakely and
Castellani).
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 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.
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 starting at $100,000 per year.
4. Pursuant to the Tenneco Inc. Supplemental Executive Retirement Plan, Mr.
Blakely will, under certain circumstances, be deemed to have 25 years of
credited participation for purposes of computing benefits under the Tenneco
Inc. Supplemental Executive Retirement Plan.
(Notes continued on following page)
16
<PAGE> 20
5. Pursuant to the agreement with Mr. Castellani described under the heading
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements," the Company has agreed, that under certain circumstances, Mr.
Castellani will be deemed to have 20 years of credited participation for
purposes of computing benefits under the Tenneco Inc. Supplemental Executive
Retirement Plan.
------------------------
COMPENSATION OF DIRECTORS
FEE 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 and the Three-year Independent Director Evaluation
Committee receive $1,500 plus expenses for each meeting of that committee
attended.
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
17
<PAGE> 21
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 earlier 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.
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 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.
18
<PAGE> 22
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.
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.
19
<PAGE> 23
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. In determining
competitive compensation for each of the components of executive compensation
described below, Tenneco analyzes data from several independent compensation
surveys. 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. 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 1998 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 Committee also
reviews, with the assistance of the senior human
20
<PAGE> 24
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. Base salaries for Tenneco's executive officers were increased by
1.0% for 1998, which was significantly below the projected industry average of
4.0-5.0% for executives. Tenneco uses a lower base salary budget for executives
as an offset of increased "at risk" compensation in the form of competitive
annual incentive and long-term stock awards.
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, cash flow and EVA(R)(1)
objectives as a starting point, each business unit receives incentive
compensation funds based on judgmental considerations including the degree of
difficulty in meeting targets, contribution to overall corporate performance,
environmental and safety performance, quality initiatives, equal employment
opportunities performance, and technology 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 business unit.
The 1998 Executive Incentive Compensation Plan payouts were 37% lower than
the 1997 Executive Incentive Compensation payouts. This significant reduction
was a direct result of the 1998 fiscal performance for the Company.
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
- ---------------
1) EVA(R) is after-tax operating profit minus the annual cost of capital. EVA(R)
is a registered trademark of Stern Stewart & Co.
21
<PAGE> 25
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.
A special 1998 grant of restricted stock is shown in the Summary
Compensation Table on page 12 of this Proxy Statement. This special award is
specifically tied to the retention of these key executives through the execution
of the major strategic actions which were announced in July 1998. The
independent executive compensation consultant advised the Committee that grants
of this size and form are commonly used in such restructuring situations. The
vesting restrictions are aligned with this retention goal. The Committee
approved this grant in recognition of the importance of retaining this group of
executive officers through the restructuring process so as to maximize
shareholder value.
Performance Considerations
The Committee determined that, although weakened by the results of the
North American automotive aftermarket, nonetheless the level of the Company's
performance during 1998 represented many noteworthy achievements. Factors
considered by the Committee included the following achievements and
improvements:
FINANCIAL PERFORMANCE
- Tenneco revenues increased by $377 million or 5.2%.
- Tenneco's 1998 operating income was $741 million before restructuring
charges in 1998, compared to $764 million in 1997. Although consolidated
operating income declined compared to 1997, the automotive original
equipment, paperboard packaging and specialty packaging business units
all registered operating income growth. Difficult automotive aftermarket
conditions, including consolidation of customers and high customer
inventory levels, more than offset the growth in the other business
units.
- Automotive's original equipment business registered an operating income
gain, before restructuring charges, of 21 percent on the strength of
placing products on new automotive platforms, particularly in the fast
selling light truck/sport utility vehicle markets.
- The specialty packaging business had an operating income increase before
restructuring charges of 12 percent from the integration of acquisitions,
including the protective and flexible packaging businesses of KNP BT and
the Richter protective packaging business, and on strong product sales
volumes.
22
<PAGE> 26
- Operating income in the paperboard packaging business increased 135
percent before restructuring charges as pricing improved somewhat over
the 1997 period and volume shipments increased.
- Tenneco's specialty packaging revenues grew by 9.1% and paperboard
revenues grew by 9.7% from 1997 to 1998, reflecting both the acquisition
integration in the specialty packaging business and the favorable price
and volume changes in the paperboard packaging business.
- Earnings per share from continuing operations before restructuring
charges were $1.89 in 1998, down from $2.11 in 1997, despite the
operating income improvements in the automotive original equipment,
specialty and paperboard packaging business units. The lower operating
income from the automotive aftermarket business primarily combined with
higher costs related to Tenneco's data center consolidation effort and
higher financing costs taken together more than offset the positive
results from the other businesses.
- Tenneco continued to improve results through the identification and
elimination of cost of quality such as rework, scrap and defects,
throughout the organization.
- Tenneco initiated aggressive programs to restructure the Automotive
aftermarket business and reduce overhead and manufacturing costs
throughout Tenneco. These actions are expected to result in at least $135
million in annual cost savings.
STRATEGIC INITIATIVES
- Tenneco emphasized effective integration in 1998 of recent acquisitions.
The KNP BT plastic packaging division acquired in April 1997 added $472
million to sales and $54 million to earnings during 1998. Acquisitions
made during the year were focused on creating high impact through brand
and product extensions. In March, Tenneco Packaging acquired Richter
Manufacturing, a supplier of protective packaging in the western U.S.
With 1997 sales of approximately $61 million, Richter gives Tenneco's
protective packaging business both brand and product extension
coast-to-coast. In September Tenneco Packaging acquired Champion
International's ovenable paperboard tray facility in Belvidere, Illinois,
which expands Tenneco's existing Pressware(R) dual ovenable paperboard
product line.
- Tenneco initiated a major effort to improve its competitive position
through reductions in overhead expenses as well as consolidating
manufacturing and distribution operations, primarily in automotive parts,
and to a lesser degree, packaging. Tenneco took a pre-tax charge of $100
million in the fourth quarter in conjunction with this cost-reduction
program and expects to create annual savings of at least $135 million
with 80% expected to occur in 1999. The savings include restructuring
automotive aftermarket manufacturing and distribution, packaging
restructuring and staff and related cost reductions across all
23
<PAGE> 27
businesses. Additionally, a 33% reduction in Corporate headcount was
achieved in 1998, with a 36% reduction in the Greenwich Corporate office.
- Tenneco continued to intensify its review of strategic alternatives to
unlock the value in its businesses, to include among the options the
separation of its automotive and packaging businesses. The Company
announced, on January 26, 1999, that it had reached a definitive
agreement to sell its containerboard business to a joint venture with
Madison Dearborn Partners.
- From late 1996 through 1998, the containerboard mill system has realized
over $80 million in annual cost savings through mill modernization,
reduced headcount, improved productivity and raw material cost
reductions. Another $20 million in annual savings are expected to be
achieved in 1999.
- Volume growth was 5.5% for corrugated versus an industry shipment growth
of 1.4%.
ENVIRONMENT/HEALTH/SAFETY
- Tenneco continued its drive toward world-class performance 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% for the third consecutive year. Tenneco's emphasis on
environmental stewardship resulted in the payment of no fines for 1998;
however, we had a slight increase in the number of permit exceedences as
compared to 1997. As part of Tenneco's environmental responsibilities,
paperboard participates in the Sustainable Forestry Initiative (SFI)
which ensures the long-term health and conservation of the forestry
resources through activities including forest replantations and the
protection of water streams.
INNOVATIONS AND AWARDS
- Tenneco was recognized by Industry Week as one of the 100 Best-Managed
companies in the world for demonstrating superior, consistent management
performance. Tenneco was one of only 64 companies that have made the list
each of the past three years.
- Tenneco Automotive continued development of advanced technologies to
maintain and expand its strong record of 44 scheduled vehicle launches
featuring Tenneco products in 1998. Advances in 1998 included: OEM
advanced technology agreements with General Motors on the "Next
Generation Vehicle" (ride control), Ford on its "Hybrid Vehicle"
(catalysis), Chrysler on the "Prowler" (electronic exhaust), and Porsche
on the "Colorado" (thin-wall air gap manifolds). A record of successful
innovations helped win the largest ever single order in Tenneco
Automotive history with the award of the exhaust systems business for
GM's new mid-sized Epsilon platform.
24
<PAGE> 28
- Tenneco Automotive's Aberdeen, Mississippi ride control facility was
selected as one of Industry Week's top 25 Best Plants in America for 1998
for the third year in a row.
- Tenneco Automotive was awarded the prestigious Chrysler Technology Role
Model Award for the 1998 model year. In a category with more than 11,000
company suppliers, Tenneco Automotive was one of only nine supplier Role
Model Award recipients this year.
- Tenneco Packaging developed a number of innovative products and processes
to increase growth in higher margin businesses. In Paperboard Packaging,
the Counce Mill initiated annual production of 60,000 tons of mottled
white linerboard using a new, industry-leading process, and the Waco
facility began production of clay-coated linerboard for use by folding
carton divisions as substitutes for higher-priced bleached board.
Specialty Packaging began commercial testing of Active Tech(TM) modified
atmospheric packaging for meat in three installations, successfully
commercialized its first product using the new SlideRite(TM) bag closure
system for Kimberly Clark's HUGGIES(R) Supreme Care baby wipes,
introduced MediZip(TM) medical and laboratory bags using SlideRite(TM)
technology and launched a number of other new products including a new
McDonald's breakfast package.
- Paperboard Packaging's Folding Carton Group received FDA approval and
began commercialization of a new product, RepelKote(TM) as a natural,
anti-infestation barrier coating that repels insects from dry food
packaging.
CEO and Key Executive Compensation
As in the past, in determining the overall level of Mr. Mead's compensation
and each component thereof, the Committee took into consideration information
provided by an independent compensation consultant. As reported in the Summary
Compensation Table on page 12 of this Proxy Statement, Mr. Mead's base salary
increased from $970,000 to $980,000 effective January 1, 1998, representing a 1%
increase. Mr. Mead's base salary is below the 50(th) percentile of base salary
paid to chief executive officers at the surveyed companies. Effective January 1,
1999, Mr. Mead's salary remained at $980,000, reflecting the Committee's belief
that CEO compensation should primarily consist of performance-based incentives.
The Committee approved a 1998 annual incentive award of $540,000 for Mr.
Mead, which was also significantly below the 50(th) percentile of annual
incentive awards paid to chief executive officers at the surveyed companies. 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.
In January 1998, the CEO 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. Mr. Mead also received a special grant
25
<PAGE> 29
of restricted stock in September 1998. This award is specifically tied to Mr.
Mead's retention through the execution of the major strategic actions, which
were announced in July 1998.
Average 1998 bonuses for Tenneco officers were approximately 50% below the
1998 target levels as a result of 1998 fiscal performance.
$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
Larry D. Brady
Belton K. Johnson
Sir David Plastow
26
<PAGE> 30
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,
1993, in shares of common stock of Old Tenneco with: (i) the Standard & Poor's
500 Stock Index; and (ii) an industry peer group that includes representative
companies from the industries in which the Company's automotive and packaging
divisions compete.
Performance Graph
<TABLE>
<CAPTION>
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98
<S> <C> <C> <C> <C> <C> <C>
Tenneco Inc. $100.00 $ 83.55 $100.99 $110.86 $ 99.76 $ 88.81
S&P 500 $100.00 $101.32 $139.40 $171.40 $228.58 $293.91
Revenue-weighted
Composite $100.00 $ 97.23 $110.84 $136.22 $157.28 $169.06
</TABLE>
BASE-DECEMBER 31, 1993=100
Since the stock distributions to Tenneco Shareowners in December 1996 as
part of the Company's reorganization, the combined equity appreciation of the
Newport News Shipbuilding, Inc. and El Paso Natural Gas Company shares is
approximately 75% through December 31, 1998.
- ------------
NOTES:
1. "Cumulative Total Return" of Old Tenneco is based on share price appreciation
plus dividends for the five years from December 31, 1993, through December
31, 1998 (assuming the reinvestment of dividends over such period and the
reinvestment of the value of the
(Notes continued on following page)
27
<PAGE> 31
Newport News Shipbuilding Inc. and El Paso Natural Gas Company 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. Each portfolio is
then weighted to reflect Tenneco's revenues within such industry for each
year. Such portfolios are re-weighted on a quarterly basis for corporate
actions such as divestitures, acquisitions, mergers and bankruptcies.
Accordingly, the Automotive Parts Portfolio included Echlin Inc. and ITT
Industries Inc. through the third quarter of 1998; and the Packaging/Forest &
Paper Products Portfolio included Jefferson Smurfit Corporation and Stone
Container Corporation through the fourth quarter of 1998.
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. 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. Stecko for his employment with the
Company 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
28
<PAGE> 32
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, the Company
will pay Mr. Stecko an amount equal to three times his base salary.
On January 26, 1999, the Company announced that it had entered into an
agreement to contribute the containerboard assets of its Paperboard Packaging
business into a new joint venture with Madison Dearborn Partners, in exchange
for cash and debt assumption totaling approximately $2 billion, assumption of
the containerboard business liabilities and a 45% common equity interest in the
joint venture. The joint venture entity (to be called Packaging Corporation of
America (PCA)) will be headed by Paul T. Stecko, who will serve as its chairman
and chief executive officer. The transaction is subject to customary closing
conditions. Upon closing of the transaction, Mr. Stecko will resign his position
as President and Chief Operating Officer of the Company, but will continue to
serve as a Director of the Company. Payments related to his severance will
include: (i) a modified lump sum benefit, approximately $1.2 million greater
than his current benefit, under the Supplemental Executive Retirement Plan; (ii)
treatment of his resignation as an event qualifying him for the payment of the
severance amount under his employment contract described above; (iii) a payment
of $1.5 million; and (iv) the vesting of performance shares and restricted stock
and a prorated bonus for 1999.
Mr. Stecko will receive a compensation package from PCA which is designed
to reflect Mr. Stecko's leadership position within PCA. It is expected that Mr.
Stecko will receive a salary and bonus of not less than $1.1 million and certain
other customary benefits such as health insurance, stock options and pension
plan participation. Mr. Stecko will also receive a sign-on bonus and
company-arranged bank financing of up to approximately $2.5 million, which,
pursuant to a letter agreement between PCA and Mr. Stecko, must be used to
acquire PCA common stock as part of a management equity incentive plan.
The Company has an agreement with each of Messrs. Blakely and Castellani in
the event of termination arising from the restructuring of the Company providing
for the payment of an amount equal to three times his then current annual base
salary, a pro rata adjusted target bonus for the year in which such termination
occurs, and the vesting and distribution of his restricted stock and performance
shares (which will be deemed to have been earned at target). Additionally, Mr.
Blakely's and Mr. Castellani's stock options will be deemed exercisable and will
remain so for the lesser of 5 years or the remaining period of such option, and
the Company will forgive the principal balance of the notes executed in
connection with relocations to Connecticut, together with any accrued and unpaid
interest on such note.
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
29
<PAGE> 33
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, Blakely and Castellani
would have become entitled to receive payments from the Company in the amount of
$4,380,000; $3,110,000; $2,390,000; $2,216,000; and $1,523,000, respectively,
had their position been terminated on December 31, 1998, 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 1998, 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 1998. 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, 1998 (and is the largest aggregate amount outstanding during 1998): Dana G.
Mead, $424,723; John J. Castellani, $413,446; Robert T. Blakely, $430,608; and
Karl A. Stewart, $437,512.
During fiscal year 1998, 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 (which services will not be provided
in 1999); and paid the law firm of Jenner & Block, of which Theodore R.
Tetzlaff, General Counsel of the Company, is a partner, approximately $13.5
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. For a description of matters relating to the
Paperboard Packaging transaction, see "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements" above.
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
30
<PAGE> 34
discussed above, and as relates to his position as a Director. During 1998, 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, 1999, 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, 1998. 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 the New York City Fire Department
Pension Fund, c/o Alan G. Hevesi, Comptroller, City of New York, Office of the
Comptroller, 1 Centre Street, New York, NY, 10007-2341, the holder of 95,608
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.
"Submitted on behalf of the New York City Fire Department Pension fund by
Alan G. Hevesi, Comptroller of the City of New York.
"BE IT RESOLVED, that the stockholders of Tenneco Inc. request that the
Board of Directors take the necessary steps to declassify the Board of Directors
and establish annual elections of directors, whereby directors would be elected
annually and not by classes. This policy would take effect immediately, and be
applicable to the re-election of any incumbent director whose term, under the
current classified system, subsequently expires.
"SUPPORTING STATEMENT"
"We believe that the ability to elect directors is the single most
important use of the shareholder franchise. Accordingly, directors should be
accountable to shareholders on an annual basis. The election of directors by
classes, for three-year terms, in our opinion, minimizes accountability and
precludes the full exercise of the rights of shareholders to approve or
disapprove annually the performance of a director or directors.
"In addition, since only one-third of the Board of Directors is elected
annually, we believe that classified boards could frustrate, to the detriment of
long-term shareholder interests, the efforts of a bidder to acquire control or a
challenger to engage successfully in a proxy contest."
"We urge your support for the proposal which requests the Board of
Directors to take the necessary steps to repeal the classified board and
establish that all directors be elected annually."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE SHAREOWNER PROPOSAL.
The classification of the Board of Directors was approved by the Company's
Shareowners at the 1985 Annual Meeting of Shareowners and accordingly, is
required by the Company's Certificate of Incorporation. Your Board believes that
a classified board structure with approximately one-third of the Board being
elected annually for a three-year term continues to be beneficial to the
Shareowners for the following reasons:
- A classified board enhances the stability of your Board of Directors and
the policies formulated by the Board. This permits more effective
long-term strategic planning, since a majority of the directors at any
one time will have prior experience as directors of the Company.
- A classified board also helps the Company attract and retain highly
qualified individuals who are willing to invest the time and dedication
necessary to learn and understand the Company, its operations, and its
competitive environment.
32
<PAGE> 36
- Your Board believes that the continuity and quality of leadership
resulting from the classified board create long-term value for the
Company's Shareowners.
- A classified board permits your Board to more effectively represent the
interests of all Shareowners, including responding to circumstances
created by demands or actions by a minority Shareowner or group.
For example, this structure would encourage persons seeking to acquire
the Company to enter into arms-length negotiations with your Board, and
it gives the Board the time needed to consider such proposals and help
ensure that the best value will be obtained in any transaction
involving the Company.
- All 50 States, including Delaware, and the New York Stock Exchange
("NYSE") expressly recognize the establishment of a classified board of
directors and your Company has followed the procedures prescribed by
Delaware law and the rules of the NYSE.
- Your Board is not alone in its belief that a classified board offers
numerous advantages; in fact, in a study of more than 1,900 public
companies, a clear majority were found to have classified board
structures.
Your Board does not believe that classification in any manner affects its
accountability to the Company's Shareowners or would lead to the entrenchment of
Tenneco's management, especially in light of the fact that only two out of
twelve members of the Board are officers of the Company. Evidence supporting
this belief may also be found in the Board's actions over the last seven years.
In 1991, the Board made one of the toughest decisions a corporate board can face
by bringing in a new management team to lead Tenneco out of crisis. In 1996, the
Board implemented a major reorganization of the Company which included the
spin-off of the shipbuilding business and the merger of the energy business.
Since that time your Board has continued to lead the Company toward the
completion of its comprehensive long-term plan to enhance Shareowner value.
Under the corporate law of the State of Delaware, the state in which the
Company is incorporated, the action recommended in the shareowner's proposal
could be taken only if: (i) the Board of Directors recommended an amendment to
the Company's Restated Certificate of Incorporation and directed that the
amendment be submitted to a vote of the Company's Shareowners; and (ii) the
amendment is approved at a future meeting of Shareowners. Therefore, a vote in
favor of this shareowner proposal is only an advisory recommendation to the
Board of Directors that it take steps to initiate such an amendment. The Board
of Directors has not recommended, and does not recommend, such an amendment.
The Board of Directors urges a vote AGAINST the shareowner proposal (Item
3).
33
<PAGE> 37
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. Votes withheld (for the election of directors) have the
effect of a vote "against," and abstentions and broker non-votes have the effect
of "no" votes.
SOLICITATION OF PROXIES AND VOTING
Shareowners may specify their choices by marking the appropriate boxes on
the proxy card. Shares will be voted in accordance with such instructions.
However, it is not necessary to mark any boxes to vote in accordance with the
Board of Directors' recommendations; merely sign, date and return the proxy card
in the envelope provided.
Alternatively, in lieu of returning signed proxy cards, Shareowners can
vote their shares over the internet or by calling a specially designated
telephone number which appears on the proxy cards. These new internet and
telephone voting procedures are designed to authenticate Shareowners'
identities, allow Shareowners to provide their voting instructions and confirm
the proper recording of those instructions. Specific instructions for
Shareowners who wish to use the internet or telephone voting procedures are set
forth on the enclosed proxy card.
A proxy may be revoked at any time prior to the voting at the meeting by
submitting a later dated proxy (including a proxy via the internet or telephone)
or by giving timely written notice of such revocation to the Secretary of the
Company.
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
34
<PAGE> 38
York, has been retained to assist the Company in the solicitation of proxies at
a fee estimated not to exceed $25,000.
SUBMISSION OF SHAREOWNER PROPOSALS
Shareowner Proposals -- Inclusion in Company Proxy Statement
For a Shareowner proposal to be considered by the Company for inclusion in
the Company's proxy statement and form of proxy relating to the 2000 Annual
Meeting of Shareowners, the proposal must be received by the Company by December
3, 1999.
Other Shareowner Proposals -- Discretionary Voting Authority and By-Law
Requirements
With respect to Shareowner proposals not included in the Company's proxy
statement and form of proxy, the Company may utilize discretionary authority
conferred by proxy in voting on any such proposals if, among other situations,
the Shareowner does not give timely notice of the matter to the Company by the
date determined under the Company's By-Laws for the submission of business by
Shareowners. The Company's By-Laws state that to be timely, notice and certain
related information must be received at the principal executive offices not less
than 50 and no more than 75 days prior to the date of the meeting; provided,
however, that if less than 65 days' notice or prior public disclosure of the
meeting date is given or made to Shareowners, notice of the matter must be
received not later than the close of business on the 15th day following the date
of notice or public disclosure of the meeting date, whichever occurs first. It
is currently expected that the 2000 Annual Meeting of Shareowners will be held
on May 9, 2000. Therefore, to be timely under the Company's By-Laws, a proposal
not included by or at the direction of the Board must be received not earlier
than February 24, 2000 nor later than March 20, 2000. A press release announcing
such date and other details relating to such Annual Meeting will be issued in
January 2000.
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, 1998, 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.
35
<PAGE> 39
NOTICE OF ANNUAL
MEETING AND
PROXY STATEMENT
-------------------------------------
ANNUAL MEETING
OF SHAREOWNERS
MAY 11, 1999
TENNECO INC
1275 KING STREET, GREENWICH,
CONNECTICUT 06831-2946
TENNECO LOGO
<PAGE> 40
TENNECO INC
1275 KING STREET
GREENWICH, CONNECTICUT 06831-2946
(203) 863-1000 [TENNECO LOGO]
April 1, 1999
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 11, 1999. 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 1999, 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> 41
P
R [TENNECO LOGO]
O
X
Y
TENNECO INC.
ANNUAL MEETING OF SHAREOWNERS MAY 11, 1999
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. STEWART, and
any of them, with full power of substitution, as Proxies to vote, as directed on
the reverse side of this card, or, if not so directed, in accordance with the
Board of Directors' recommendations, all shares of Tenneco Inc. held of record
by the undersigned at the close of business on March 19, 1999, and entitled to
vote at the Annual Meeting of Shareowners of Tenneco Inc. to be held at 10:30
a.m., May 11, 1999, at the Corporate Headquarters of Tenneco Inc., 1275 King
Street, Greenwich, Connecticut, or at any adjournment thereof, and to vote, in
their discretion, upon such other matters as may properly come before the Annual
Meeting.
Election of Directors-Nominees:
01) Sir David Plastow
02) Paul T. Stecko
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.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL -
[TENNECO LOGO]
TENNECO INC.
Annual Meeting of Shareowners
May 11, 1999
10:30 a.m.
1275 King Street
Greenwich, CT 06831
<PAGE> 42
/X/ Please mark your
votes as in this [0410
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>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of 2. Approval of 3. Shareowner Proposal
Directors / / / / Independent / / / / / / concerning / / / / / /
(see reverse) Accountants Classified Board
for year 1999
For, except vote withheld from the following nominee:
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
- ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL -
</TABLE>
TENNECO INC.
Dear Shareowner:
Tenneco Inc. encourages you to take advantage of new and convenient ways by
which you can vote your shares. You can vote your shares electronically through
the internet or the telephone. This eliminates the need to return the proxy
card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the internet:
- Log on to the internet and go to the web site
http://www.eproxyvote.com/ten
2. To vote over the telephone:
- On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683)
24 hours a day, 7 days a week
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
